Can social media help make microfinance sustainable?

Microfinance agencies provide loans to small businesspeople who often can’t meet the strict credit terms of large banks. Either these entrepreneurs don’t have the capital or the cash to back the loan. Or as the large banks argue, their credit needs are too small.

With banks out of the picture, microlending agencies step into the role usually held by the imperfect combination of relatives and often predatory money lenders. Microlending is most often associated with the developing world, but agencies have begun working in industrialized countries.

The Grameen Bank, the world’s first microfinance institution, was born in Bangladesh in 1983 by Mohammed Yunus, an economics professor who launched it to help alleviate rural poverty by providing much needed funds to entrepreneurs to grow their businesses. Not only would the poor repay these loans, Yunus argued, but the Grameen Bank’s lending style would become a sound investment. In 2006, Yunus won the Nobel Peace Prize for his efforts. By 2008 Grameen Bank had lent $7.6 billion.

As the internet age hit, microlenders began looking for ways to replicate the Grameen Bank's success online. With the rise of social networking, especially peer-to-peer media, these lenders found their answer. The question, however, remains: Will social media help create a sustainable market for microfinance?

It’s just one of the debates occurring during a Sept. 23-24 Harvard University conference, Can technologies help reduce poverty in developing countries?

One of the first microlenders to have an impact over the internet is the US-based Kiva, which began a few years after a couple traveled to East Africa in 2004. Kiva claims to be the world’s first “person-to-person micro-lending website.”

Here’s a good description of how Kiva works, from Tales From Beyond the Glimpse, a blog from Austria.

In Kiva's website you can lend to someone across the globe who needs a loan for their business – like raising goats, selling vegetables at market or making bricks. Each loan has a picture of the entrepreneur, a description of their business and how they plan to use the loan so you know exactly how your money is being spent – and you get updates letting you know how the entrepreneur is going.

The best part is, when the entrepreneur pays back their loan you get your money back or use it for another loan (I like this idea because you can give a small loan once and use the same amount over and over)- and Kiva's loans are managed by microfinance institutions on the ground who have a lot of experience doing this, so I suppose you can trust that your money is being handled responsibly.

I made a loan to Adjo Solomé in Togo. I liked her immediately because she's working with a sewing machine!

I love the internet because you can do things like this directly now.

Kiva allows a potential lender to browse profiles of people needing finance. If a entrepreneur is selected and a loan made, Kiva then allocates the funds to one of its microfianance partners, an agency working on the ground. The recipient will then repay the loan, usually at interest. (The use of interest is controversial, but common, within microfinance.) Kiva's site allows lenders to follow the money throughout the loan process, keeping tabs on repayment and other personal updates. This has caught on to other lending sites.

What helps drives these sites isn't just the loans; it's the methods used to make the funds available. “Social networks are important,” writes Jon Camfield in his self-titled blog. “Trust — more commonly called social capital in this situation — is the strength and number of interpersonal connections. Facebook, Twitter, MySpace and the like are convenient ways to map out these connections (within a connected group of people), but hardly replace them.”

This is by no means new in development theory, and is often portrayed as either the keystone to successful development or a red herring (and to be fair, it's probably both).
Social Networks also provide a second important role. Beyond increasing trust to enable all sorts of transactions, and providing back-channels to smooth those along, they also improve (if not outright cause) technology diffusion. Spread throughout a network will be innovators, experimenters and early adopters who create, tweak and test new ideas, and then begin to spread them by word of mouth as well as through successful implementations.

The marriage of microlending and social media works two ways. First it allows a disparate group of people, perhaps the entrepreneurs, to communicate and become organized. Secondly, it allows them to reach out and relay their message with the larger world. Microlending organizations have latched on to this, leveraging technology to make sure potential lenders can put a face to recipients’ stories. Perhaps these personal bonds originate from the Grameen Bank, which began lending funds on the basis of trust and used peer pressure to insure the loans were repaid. Or, perhaps microlenders online use interpersonal connections as a bulwark against compassion fatigue.

Here’s an example of the personal touch from an interview in the blog China Philanthropy with Casey Wilson, the co-founder of Wokai, a microfinance site that has been called the Facebook for Farmers. Here Wilson relates a positive experience she's witnessed from microfinance.

On a micro level—one of my favorites is this woman from Sichuan who is 24 years old. When she was 18 she and her husband got married and were basically put into indentured servitude. His family put them in debt for living with them so they worked I the city for 4 years to pay off the debt and she was able to save up a little money when they moved back to Sichuan to start up a duck industry.
She bought a number of ducks. She started the business, and then 3 months in all of her ducks died. It turns out, at the same time she found out about our field partner. She went to them and got support and money to restart her duck business. I’m so impressed with her A—That she is so young and persevered through so much adversity and B—looking to see where she is with microfinance and where she would be without it. If our partner had not been there to help her she would have been left with nothing, her only options would have been to go back to the city, and she would never had the tools to lift herself from poverty. Stories like that are really inspiring to me.

The new French site Babyloan works on much the same manner as Kiva and Wokai, linking donors to entrepreneurs. But it is the first site to specifically target European donors.

It also has visions of building a social community. The Traveling Spouse, a blogger based mostly in France, reports:

Babyloan are hoping to develop the site into a social community, so that lenders can meet others and share experiences, even electing representatives to the board of directors.

By the reaction to this site, it has struck a chord with more than a few bloggers.

From Emmanuel Brunet, who lives and blogs in Paris.

Moi j'ai sélectionné Asfandiyor, Nishon, Gulchehra et Oygul, mes nouveaux amis du Tadjikistan.
Ils cherchaient 810 euros sur 9 mois pour acheter du bétail et ainsi produire du fromage, de la viande et probablement faciliter les activités agricoles. Dans 9 mois, ils nous remboursent les sommes données, sans taux d'intêret. C'est simple, ce n'est pas contraignant puisque l'argent n'est jamais perdu et ça donne un vrai coup de pouce.
L'argent remboursé pourra alors être injecté dans d'autres projets ou vous être rendu directement.
En quelques jours, les amis du Tadjikistan ont trouvé les 810 euros nécessaires à l'achat de bétail, grâce à d'autres participants de France et de Suisse.

C'est peut-être ça le développement (monétaire) durable… !

I have selected Asfandiyor, Nishon, Gulchehra and Oygul, my new friends of Tajikistan. They wanted 810 euros for 9 months to buy livestock to produce cheese, meat and probably facilitate agricultural activities. In 9 months, they'll repay the sum without interest. It's simple, it is not binding because the money is never lost and it gives a real boost. The money paid will then be injected into other projects or be delivered directly to you.
Within days, my friends from Tajikistan have found the necessary 810 euros for the purchase of cattle, thanks to other participants from France and Switzerland.
Perhaps this is (monetarily) sustainable development.

From the blog Les Enfants du Web.

L’intérêt est bien évidemment de suivre l’avancée du projet. Et on se dit qu’avec se genre de service notre argent arrive effectivement au destinataire…

J’ai donc décidé d’aider le projet de Chanthol Vorn, une cambodgienne qui veut développer sa petite épicerie ! Je contribue à hauteur de 20€ sur les 210€ nécessaire.

Je trouve le concept hyper intéressant mais le site en lui-même mériterait une interface un peu plus sympa. Que se soit au niveau des graphismes et de l’ergonomie, une version 2 n’est vraiment pas du luxe.

The interest is obviously to follow the progress of the project. And they said that with such a service our money actually reaches the recipient…
So I decided to help the project of Chanthol Vorn, a Cambodian who wants to expand her small grocery store! I contribute 20 € of the necessary 210 €.
I find the concept interesting but the website deserves a little nicer interface. Whether in terms of graphics and usability, version 2 is really not a luxury.

From Domi, who blogs at Mood-for:

Mmes Houessou et Gandaho veulent monter une petite boutique à Cotonou au Bénin pour nourrir leurs 4 enfants correctement. Elles ont déjà 340 euros sur les 460 dont elles ont besoin pour l’ouverture de la boutique. Je leur en ai prêté 30 et elles me le rendront dans 10 mois car, le saviez vous, les utilisateurs du micro-crédit remboursent mieux que la plupart des emprunteurs… Mes 30 euros, je pourrai ainsi les prêter à d’autres bientôt. C’est simple et efficace, c’est le micro-crédit à portée de chacun d’entre nous. Ca nous permet d’être utile.

Mrs Houessou and Mrs. Gandaho want to start a small shop in Cotonou, Benin to feed their four children properly. They already have 340 euros of the 460 they need to open the shop. I've loaned them 30 and they will return it to me in 10 months because you knew it, users of micro-credit repay more than most borrowers … My 30 euros, and I can lend it to others soon. It's simple and effective, this micro-credit reaches each of us. It allows us to be useful.

The sites for Kiva, Wokai and Babyloan are full of functionality, great graphics and heart-warming photos. A participant in these projects cannot help but feeling part of a community. Interfaces also make sure the loan-making transparent. With all the technology supporting these sites, however, one blogger wonders whether these schemes will pass the sustainability test that often separates good development project from just good ideas.

David Costa, who blogs at out of Zürich, Switzerland:

my primary interest is looking at microfinance as an investment opportunity too and not as a donation.
Even in the case of Kiva the borrower has to pay interests but, at least, unless there is a default, the investor can re-use his capital or withdrawn it.
I am sure that donation and grants to not for profit institution like Wokai are important but from an investment standpoint these are not as scalable.
In the case of kiva there are more options: you can lend 4000$ and receive, if needed, part or all your investment back. In the case of wokai I can only donate
to their organisation – how they use the money is not really important from an investor standpoint. It is really not an investment.


  • Very informative article – I think in St. Lucia and in Barbados, microfinance does work for some but unfortunately, the risk of lending to those whom the banks won’t lend to is usually offset by the use of very high interest rates.

    This is very difficult for some entrepreneurs to handle and on top of that, the support in real planning is most often not there; I know of times when the agency has required a Business Plan, offered to do it, charged heavily for it and then it’s a canned plan – nothing that relates to practical ways the entrepreneur can follow.

    I believe the organizations offering this much needed type of finance should pay for their admin through their own sources of funding and not from the recipients repayments. Proper support is vital to the schemes. My feeling from my limited experience in these two islands is that our agencies have themselves to undergo philosophical changes, perhaps training and then they will better be able to be part of this wonderful system.

    • Rekha

      I recently joined Kiva. I like the idea of microfinance, but I too was surprised by the high interest rates. Perhaps these could be waived in social media situations where people are simply happy to help on a one-to-one level and earning interest is secondary.

  • Dear John I learned a lot. I will let others know about these sites.

  • Amy


    Love the conversation. There’s actually a pretty snazzy microfinance twub on twitter called #mifimon- it’s also on facebook as a fan page. I’ve found this to be a fascinating way to connect with great minds in the field. Orgs like Accion, Opportunity International and Grameen often contribute to this conversation. It’s great for the microfinance guru as well as someone just interested in learning more.

    Great way to network as well…

    I believe the next one is on Monday from 12pm-2pm CST.

    I did a write up on it on

    Would love to hear your thoughts!


  • Great summary of the world of microfinance. I gave several Kiva “gift certificates” to friends and family for christmas and for the most part they seem to be having fun choosing who to invest in. The only complaint I got was that once they started choosing how to spend their 25$ they found too many worthy recipients and had to buy more credits for the site ;)

    Note that Kiva also encourages you to make a donation directly to them when you buy credit (i.e. please give us 5$ as a donation while you buy 25$ worth of investment credits), so they are still dependent on direct donations for their own overhead. Ideally most of this could be handled by foundations etc, while individuals get the fun task of choosing people.

  • Thanks for the article on microlending. Wanted you to be aware of a new microgrant program, also powered by social media, to seed grassroots activities to fight/adapt to climate change, call Brighter Planet’s Project Fund. Take a look at the for more info. Please help spread the word about the availabiity of this new monthly microgrant program in the US.

  • John, great first post on this topic. I wonder if you found any microfinance projects that support access to communications or information – support for communities to buy phones, set up cell towers, internet access points or telecenters – on other words, projects that look at ICTs from an operational point of view, rather than a functional point of view?

  • John,

    very interesting article that shows how the Net can mobilise people on social entreoreneurship and microfinance. As you mention, social media can become a powerful way to mobilise people for projects and brings a lot to microfinance sustainability.
    I am the cofounder of Veecus (, a website that allows people to make small loans to microentrepreneurs.

    We have tried to push this logic even further by preparing a fundraiser tool through which lenders can easily reach the people they know and with whom they want to share a microentrepreneur’s project.

    When it will be launched, this feature is only in French, but the English version will come soon.

    See you,

  • Please find below a comment left by the founder of Babyloan service (mentionned in this post) on Global Voices in French.
    “Je suis Arnaud le fondateur de Babyloan.
    merci de votre article très bien fait
    Je suis admiratif de ce qu’à fait kiva, il faut le rappeler et aucun d’entre nsou ne serait là sans eux.
    nous entretenons de très bonnes relations avec eux sur le terrain notamment
    ce que nous faisons et qui parait sympa de prime abord et un boulot complexe difficile , il nous faut gérer le développement de sites complexes, la communication grand public et les relations terrain…pas simple
    Mais passionnant, nous sommes une équipe de 7 personnes pour développer le site, que des passionnés, un vrai bonheur
    quand nous allons sur le terrain le top , c’est la rencontre avec les bénéficiaires, leurs sourires et leurs remerciements, tellement fiers de montrer qu’ils peuvent s’en sortir par eux même, c’est énorme!
    c’est vrai pour le nord – nord les internautes le demandent et souhaitent pouvoir parrainer des bénéficiaires de micro crédit en France
    mais la loi bancaire pour des site de peer to peer directs (sans passer par la case banque, je parraine mais c’est une banque qui prête en fait) ne le permet pas.
    Les ressources des associations de micro finance sont en effet limitées légalement en France à de la dette bancaire, elle n’ont donc pas aux prêts solidaires des internautes
    nous avons de fait et avec l’ADIE de Maria Nowak déposé un projet de loi pour faire bouger les choses et permettre en peer to peer direct de parrainer des bénéficiaires français sur babyloan
    We cross fingers!!!

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