Monday, June 15, 2009

Microfinance Loans Meet Higher Education...

These days, loans are not easy to come by. In a New York Times article, “I’m Going to Harvard. Will You Sponsor Me?” writer Allen Salkin tells of three Harvard graduates, Joshua Kushner, Nimay Mehta and Tanug Parikh who set out to minimize the financial burden faced by Harvard students through their development of a direct donor-to-student loan site called Unithrive. Unithrive provides interest free loans, donated by generous alumni, to “cash-strapped” students. Inspired by the model, Unithrive provides student photographs and biographies to donors who can search for and match up with a student, making the donation process more personal and rewarding. (Kiva is a person-to-person micro-lending website, that allows individuals to lend to entrepreneurs around the world, specifically in developing countries.)

According to the article, Unithrive, like Kiva, uses crowd-financing. In other words, multiple lenders are pooled together to meet an individual’s total request, therefore donating amounts as small as $50 up to the full amount. Currently Unithrive has a maximum request of $2,000, but they are hoping to raise this maximum in the future.

The article reveals justified skepticism about the success of Unithrive’s repayment rate. Kiva’s repayment rate is high because farmers in developing countries don’t have many other credit options. How true is this for Harvard graduates?

Interestingly, Unithrive’s loans are not purely for academics. One student, Ricky Kuperman wanted a loan so he could visit Japan, the birthplace of karate, in the summer of 2010. Kuperman told his interviewer that the loan would allow him to “stay in shape and make getting cast in films or in dance projects that much more possible.” He also noted that if he did not get the loan he would have to work longer next summer or during the academic year. Whether or not donors will be as likely to spend money on foreign excursions as they would towards a students tuition is unclear, but Unithrive is willing to provide the opportunity for needs inside and outside the classroom.

In a Prendismo lecture series, Kiva co-founder, Jessica Flannery discusses her company and explains more about micro financing and how Kiva is expanding internationally in many developing nations. In the following clip, Flannery describes how a loan via Kiva goes directly to an entrepreneur.

"These are real individuals, not marketing material." - Jessica Flannery, Co-Founder, Kiva

In the next clip Flannery talks about why Kiva works. This is true for Unithrive as well. Both organizations are providing lenders and borrowers with a personal experience and this drives people to these organizations.

"We've watched and people who have no identity, no record of identity or paperwork get Kiva because the loan officer explains it to them." - Jessica Flannery, Co-Founder, Kiva

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