Online auction giant eBay has launched a micro-lending website that let people invest in entrepreneurs in poor communities around the world and get a return on their money.
Unlike micro-finance organisations that make interest-free loans to people in developing countries, Microplace.com offers investors profits for funding folks trying to build better lives, said founder Tracey Turner.
"You are actually investing in the world's working poor," Turner said. "And for the first time you get a return on investment. You can take the profit and invest in more people in a virtuous cycle."
Turner's vision of MicroPlace began taking shape in 2005, after she lived for a time with a Kenyan family comprised of a single mother caring for three children. The Kenyan woman bought a sewing machine with $100 she borrowed and started an in-home business making school uniforms for local children. The woman paid the debt and managed to send one of her sons to college in the US.
"When you are out in the field talking to these women whose lives are transformed because of $30 or $10 , then you are part of the movement forever," Turner said.
California-based eBay bought Turner's business plan in June 2006 and the website launched October 24 of this year. Website visitors can browse investors by country, seeing pictures of people seeking loans and reading about their business goals.
MicroPlace connects investors with micro-finance organizations in the various countries. MicroPlace scrutinizes the organisations to check their legitimacy. "Our job is to vet," Turner said. "We do a lot of research."
Turner said rates of return are modest but that investors at the website see value in addressing global poverty. Lenders shoulder the risk that loans will not be repaid.
"The eye-opening thing for everyone is that repayment rates by the working poor remain unbelievably high, north of 98 per cent," Turner said.
Thousands of people visit the website daily and hundreds of thousands of dollars in loans have already been issued, according to MicroPlace. In keeping with the holidays, some have made gifts of loans by issuing in names of others.
"What gets me out of bed in the morning is the idea that when you invest in a person it really honors them and enhances their dignity as a human being," Turner said. "Which is different than a hand out." MicroPlace gets fees from microfinance organisations that get money through the website. Money is moved through online financial-transactions firm PayPal, which eBay owns. "I think it is important everyone from the investor to the person making baskets in a village makes a profit," Turner said. "The beauty and magic of micro-finance is that it is scalable."
EBay has promised that any profits made by MicroPlace would be invested in other initiatives for social good, according to Turner. EBay founder Pierre Omidyar and his wife have channeled hundreds of millions of dollars into microloans through their own foundation.