You may have heard about Kiva already. It is a micro-credit lending organization. I am all up for it, in terms of helping people to rise above poverty by lending them money to kick start their business, to help them earn their livelyhood. It is a great concept and it will definitely work better then free money given to people.
What I do not like about Kiva, is that it keeps money with itself before it returns to the lenders.
Here is an example:
Say, a farmer in Indonesia needs to buy a water pump and he needs $100 for it. Using Kiva's model, it will take about 4 donors giving $25 each. Assuming that on a donor sign up every workday, and say it starts on 1st January 20008. This is how money piles up.
|Date||Money||Money Contributed till date||Money with Kiva/Day||Event|
|1-Jan-2008||$25||$25||0||1st Donor contributes|
|2-Jan-2008||$25||$50||$25||2nd Donor contributes|
|3-Jan-2008||$25||$75||$75||3rd Donor Contributes|
|4-Jan-2008||$25||$100||$150||4th Donor Contributes|
|7-Jan-2008||0||$100||$450||Money Disbursed to Lender|
That way, Kiva would have held money and would have earned interest for $450 for one day (by totaling up daily balances)
Now assuming that the farmer pays back the money from 1st March 2008 on a monthly basis, following scenario occurs at Kiva.
|Date||Money||Money Returned Till date||Money with Farmer/Month||Money with Kiva/Month||Event|
|7-Jan-2008||0||0||0||0||Money lent to farmer|
|1-Feb-2008||0||0||$100 (charged for full month for simplified calculation)||0||No payment for first month|
As per above table, the farmer would have received the credit for $450 in total. The $150 that Kiva had in its balance may be allowing Kiva to sustain. But I think the model that Kiva has, should remain lean and sustain with money/interest from first table. There are too many poor people who need help, that $150 credit will go a long way to help another person.