Social Media and Microfinancing

The growing business use of social media may be just the beginning of a shift in the way worldwide commerce is conducted. By its very nature, social media encourages individuals to collaborate and help each other. Why shouldn’t this ability extend to assistance with business ventures?

This is the principle behind microfinancing – a concept that facilitates money-lending to business owners who might not be able to get bank loans. As John Liebhardt discusses in his blog on Global Voices Online, we can thank social media for bringing microfinancing to the Internet.

The microfinancing model is perhaps best explained by looking at such sites as Kiva.org, Wokai.org, and Babyloan.org. All of these sites are similar in that their primary goal is to help tiny entrepreneurs, primarily in developing countries, connect with investors who are willing to loan them money.

The social networking aspect of these microlenders is significant. Basically a lender is anyone who wants to help a person start or grow a business. Lenders browse budding business owners and pick one or more of interest to them. Lenders can lend even a modest amount of money to the individuals and, eventually, get paid back. Their motivation is simple: they are helping someone less fortunate than them start or grow a small business.

Kiva (a Swahili word meaning “unity” or “agreement”) started in late 2005 and was the first peer-to-peer microlending website. Forbes says “Kiva mixes the entrepreneurial daring of Google with the do-gooder ethos of Bono, lead singer of the rock band U2.” Kiva currently has about 574,000 lenders who have loaned more than $95 million to over 239,000 entrepreneurs in 184 countries. Kiva recently opened up its program to small business owners in the United States.

Kiva’s institutional supporters include the Clinton Global Initiative, The Kellogg Foundation, and The Rockefeller Foundation. Their corporate partners include American Express, Ernst & Young, Google and Intel.

Microfinancing is even becoming segmented. Wokai, referenced earlier, specializes in facilitating loans between online lenders and recipients only in rural China. Babyloan is the first French website to operate in a similar fashion to Kiva. eBay liked the microfinance idea so much that they bought MicroPlace.com, a business not unlike Kiva.

Clearly, microfinance is not just some far-out, idealistic dream that won’t amount to anything. Big companies and organizations are getting very interested in the idea. And to think it all started because of social media.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

2 Responses to Social Media and Microfinancing

  1. Hey Barry!

    I genuinely appreciate your efforts in spreading awareness about such a noble & more effective subject for entrepreneurs. Its really credible & powerful to give details of all the possible options for your readers to take full advantage of, right?

  2. Barry Silverstein says:

    Thanks Chris. It's always valuable to discover the many ways the Internet is helping microbusinesses.