How To Get The Biggest Bang For Your Charitable Giving Buck

• Tweet

Six months ago I stood admiring the Taj Mahal and thanking the holy cows that my driver and I arrived in one piece to see the magnificent monument. Although the Taj is only 200km from Delhi, the drive takes six nail-biting, phantom-braking hours.

Our route back through the countryside was lined with thousands of villagers walking beside the road carrying crates of water on their head, scrap metal and baskets containing who knows what. I lost count of the number of near misses we had barely avoiding catastrophe.

Around dusk we turned a corner and were confronted by a horrifying sight: a family riding three-deep on a motorcycle had crashed. The parents had been thrown from the bike and lay motionless on the road. They may have been dead, or at the very least seriously injured. Their toddler, who was moments before cocooned between them, was now lying screaming on the side of the road.

Despite my protests my driver wouldn’t stop. He explained that if he did, we were at risk of being run over ourselves, or being blamed (read, blackmailed) for the crash. As we drove away from the accident, past the lines of poor rural labourers, I felt helpless.

There was no ambulance coming to their aid.

Economy’s harsh reality

This was the harsh reality of being born at the bottom of the economic ladder. In contrast I sat in an air-conditioned hire car (doors locked) staring out the window at the masses and thanking God, Buddha and the occasional holy cow that I was not one of them.

My trip around the world is now just a memory. I’m back at home, back at work, busy making a buck. Here I am confronting the harsh realities of Western life traffic jams, an internet server that intermittently goes on the blink, and infuriatingly long queues at the post office.

Yet every now and again, the picture of that child standing by the road jolts into my mind, triggered in recent weeks by the horrific images on the nightly news from the earthquake in China and the unfolding tragedy in Burma.

After touring the world and seeing widespread poverty, I began to investigate how to get the best bang for my charitable buck.

Get your money’s worth

The international community can generally be counted on to provide substantial emergency relief aid even if politics gets in the way of the people, as it sadly has in Burma. Yet just like the Asian tsunami, it will be years before those worst affected can get back to where they were before disaster hit. Helping rebuild lives is where the charities spend their time and donations.

Over the past 20 years, hundreds of billions of dollars in foreign aid has been pumped into the African continent, which has done little to end the misery. Helping people help themselves rather than giving them handouts will yield more sustainable advances over the long-term. That’s why I have long favoured microlending – very small loans provided to the world’s poorest people to start their own small businesses.

Microlending made easy

In many developing countries personal services constitutes the bulk of trade – small roadside vendors selling food or sewing handmade garments. With a tiny loan for a basic sewing machine or food supplies, these businesses have the chance to grow and generate income that can be used by a family to meet their most basic needs – food, shelter and education.

The pioneer of micro-credit, Muhammad Yunus, received the Nobel Peace Prize in 2006 for the decades he spent harnessing the power of capitalism to help the world’s poorest people lift themselves out of poverty. In 2008 young internet entrepreneurs Matt and Jessica Flannery won a prestigious webby award for creating the eBay of micro-finance, www.kiva.org.

With Kiva which means “unity” in Swahili – you can become an international (micro) financier and change an entrepreneur’s life in a developing country for as little as $25.

The website works in collaboration with 67 microfinance institutions around the world that recommend the borrowers and administer the microloans. Kiva screens each of these institutions and posts a rating based on their repayment history.

The process is amazingly simple: you browse the profiles of potential borrowers, each of whom has a photo and a description of what they will use the money for. When you find a borrower you like, you pay via PayPal – just like on eBay.

See your loan in action

I’ve made loans to Ama, a mother of two from Tongo who borrowed $75 to purchase palm nuts in bulk so that she can produce red-oil. Marsida, a middle-aged women who lives in a rented room in Denpasar with her family, borrowed $125 to fund a cake stand. In Azerbaijan (which I had to look up on Wikipedia) I’ve also lent a farmer some money to buy a couple of calves.

With these loans now established I receive regular repayments (usually once a month until the loan is repaid), and regular updates on how the business is faring. Lending to some of the poorest people on the planet isn’t as risky as you may think – the repayment rate stands at an impressive 99.73 per cent. Once the loan is repaid you are free to do with it as you wish most however, will choose to reloan it to another entrepreneur, and start the cycle again.

The beauty of Kiva is that it operates as a peer-to-peer transaction, which means that every cent of your money goes directly to the borrower. There is a voluntary option of donating an extra 10 per cent of the loan amount to the not-for-profit Kiva Foundation to keep the website running and people employed.

Compare this to a report last month by consumer group Choice. It found that as much as 30 per cent of the money raised by bigger charities was eaten up in overheads – staffing costs, advertising and the like.

Kiva is the internet generations’ answer to charity. It has become a movement that harnesses the power of technology, social networks and transparency. My travels through Asia have shown me first hand that the poor don’t need pity, they need opportunity. If you’ve got $25 sitting in a bank account earning you bugger all, head over to Kiva and change someone’s life. It’s the only way that I know you can buy happiness.

Tread your own path!

Photo: flickr.com/photos/vgm8383/2211028845/

Follow @scottpape on Twitter

No related posts.