billh wrote:Interesting video...I've heard about the micropayment systems a few times before...however, what jumped out at me was the interest rate.
20 to 30%?!
How is that compounded? What are the terms of the loan? Even simple interest would rack up quite a bit of money. I think the whole "responsibility and accountability" argument (as opposed the "free handouts" if you really want to give them that label) is intriguing and would have some benefits. But I can't imagine the overhead on such loans costs 20 to 30%. If the operation is as efficient as you say it is, and some of the implementation is passed of to other non-profit organizations, why such a high rate? What, just because it is below 300% that the local loan sharks offer, it is a better deal?
Are you actually teaching these people how to stay out of debt on top of this? Is there any financial educational process that goes with this? Or are you just handing out loans and in a sense "conditioning" them to become dependent on credit/loans in the future? You can talk about empowerment all you want, and building businesses, but if you do not teach them anything about money in the process, the cause is potentially lost. Many first time businesses fail for lack of financial education. Or are you saying they are already educated in terms of the marketplace and this offers them just enough of a lift to get out of poverty?
Sounds like a credit card to me... Maybe if they don't hold a balance after a month they won't have to pay interest?
A summary of the lending rules the company uses would be of interest.