Micro-loan experts Wokai launch in Shanghai
It started in 2006 with a US$300 loan to an impoverished woman in Sichuan. Two young Americans studying in Tsinghua observed first-hand how such a small sum of money allowed Mrs. Wei to open a food stall and how she soon started earning a stable income with which she could pay for her child’s education and healthcare. Having seen the relative ease with which the loan was paid back and its life-changing capabilities, Courtney McColgan and Casey Wilson made it their calling to provide similar opportunities to others in some of China’s most poverty-stricken areas. Wokai was born.
In the number-crunching world of banking, people with few possessions offer little insurance should they fail to pay back a loan. Throw in a rural location, lack of financial training and the modest amount of money a bank will recoup from small loans, and you’re left with the bottom line that lending to the impoverished is deemed a risk not worth taking. This leaves a sizeable chunk of the Chinese population with no chance to borrow money to improve their living standards.
Opening a branch in Shanghai this month, Wokai utilizes the practice of microfinance. Pioneered by Muhammed Yunus in 1980s Bangladesh and India (work for which he won the Nobel Peace Prize) it is the awarding of micro-sized loans to people who would otherwise have no access to capital, so that they can start their own businesses.
Wokai raise money via their accessible website (www.wokai.org) where they put people from around the world in touch with rural dwellers from Yilong County in Sichuan Province and Chifeng County in Inner Mongolia. Aspiring recipients can post profiles of themselves which include information like name, background, how much money they need and what they will spend it on.
Money donated then goes through Wokai’s field partners, experienced microfinancing institutions that use the benefit of local knowledge to determine the most viable options for a loan. As well as helping recipients post their profile, they also train them in running a small business and money management.
So far 297 people worldwide have benefited from this process. The typical recipient is a woman earning less than US$1.25 a day and the most popular use is for agricultural projects. But there are no limits – one entrepreneur bought a phone and charged her village to use it. They are also remarkably successful; to date 98.4 percent of loans have been paid back on time. Lehman Brothers, eat your heart out.
Only around 10 profiles are on the website at any one time, to ensure that each of the candidates is worthwhile and that they receive sufficient exposure to raise the full amount. Regulations in place in China prevent money that has entered the country from leaving it, which is why money is donated by individuals rather than loaned. Once it is repaid by the initial borrower, the donator decides who the loan should help next. In this way each donation keeps giving, assisting an unlimited number of people over time.
The Shanghai chapter is their sixth, following on from Beijing, Hong Kong, San Francisco, Seattle and New York, all of which raise awareness and funds for their two microfinance projects. Erica Chain, one of the founding members of the Shanghai branch, credits the website’s success to its ease of use. “You can pick your applicant, sit back and watch as your loan gets repaid.” The success has translated into 896 worldwide contributors and over US$150,000 raised in loans.
Wokai’s appeal lies in the personal experience it offers donors and the fact it makes economic sense. The loans are providing jobs, skills and opportunities to people in China’s poorest regions. Wokai is hoping to raise US$1 million by 2011 and to have helped 2,000 borrowers, and is setting its sights on more of China’s rural regions this year. The chance to change someone’s life is just a click away.
Wokai are celebrating the launch of the Shanghai Chapter and their new 2.0 website (www.wokai.org) with a party at Maya at 6pm on Wednesday, April 7. Admission is RMB120 which gets you a drink and canapes (Maya donate RMB100 of it to Wokai)