How to Choose a Microfinance Investment

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By meganmacdon
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A loan recipient at work.

Savvy investors understand the importance of careful research before they make an investment of any kind. With socially responsible investing this practice is just as important. One fairly new type of socially responsible investing involves the practice of microfinance that enables loans to individuals and groups around the world working to break the cycle of poverty. There are many microfinance organizations that provide charitable loans like the Grameen Foundation, but for those people who would like to put their money to good use and earn a return, Microplace.com is a great option. Read on to see how to go about selecting a microfinance investment that can provide you with a financial return while enabling micro loans to people in need.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

A desire to help people in need
A computer

Step 1

Identify the geographic region or country you want to help. You can refine your search for groups by focusing on a specific geographic region. MicroPlace.com currently works with lending organizations in Africa, Latin America, the Middle East, North America, Eurasia, India and Southeast Asia. Review some of the lending organizations and the types of businesses they support to find the perfect fit.
Step 2

If you're not set on a specific region to help, determine the cause you'd like your investment to address. The options available on MicroPlace.com will get you thinking about the following questions: Are you worried about environmental issues? If so, you can choose for your investment to enable loans promoting "Green" causes. You can also choose to enable loans to people living in rural areas, or to those involved in producing Fair Trade products and food. A final category of investments address empowering women specifically. There are many articles about women's abilities to use personal loans for the betterment of their families and communities as a whole (check out this one on empowering women through microfinance: http://www.microcreditsummit.org/papers/empowering_final.doc).
Step 3

Decide the terms of your investment. This includes the rate of return you'd like (between 1-6%) and the time frame in which you would like to be repaid. The options for repayment range from a few days up to five years.
Step 4

Make an investment! You can choose to invest as little as $20, or the given amount that will enable a full loan for 1 participating borrower (this varies depending on the loan), or any amount you choose. You will also be offered the investment prospectus to read, along with additional information about the firm or non-profit that will serve as the channel for your investment. Carefully review all information provided so you can feel confident moving forward with your investment.
Step 5

Sit back and enjoy watching your money work while making a lasting contribution to an individual or small business. You can expect quarterly interest payments and at maturity, you will receive your original investment amount back. No matter how big or small your investment is you can feel great about earning a return and fighting poverty at the same time!