Microfinance is the provision of credit services to low-income clients who do not have access to traditional banking services. Microfinance clients are the entrepreneurial poor who need money to put up or to run their small businesses or enterprises. Microfinance institutions have come up with different methodologies and innovations in delivering their services. The creative use of the internet to promote microfinance fueled the development of Wokai.org, an organization based in China.
Through its website, Wokai.org links prospective loan contributors to recipients. First, field-based microfinance institutions (MFIs) screen loan applicants and post loan requests online. A website visitor (prospective loan contributor) browses the loan requests, selects a recipient to support, and makes a monetary contribution to Wokai.org. The field-based MFI distributes the contribution to the selected recipient. The contributor is able to monitor the progress of the latter's business and loan repayments. Once the borrower has fully repaid his or her loan, the contributor may choose to contribute anew to the same recipient or to a new one.
One of the advantages I see in Wokai.org's internet-based lending scheme is the elimination of geographical boundaries between prospective loan contributors and recipients. Through the internet, Wokai is able to tap the resources of individuals in different parts of the world in order to help low-income entrepreneurs in China. Through regular updates online, contributors are able to know how their contributions are being used. The possibility of the contributor's continued support of the recipient's business also incentivizes proper utilization and prompt payment of the loan. On the other hand, because contributions are purely voluntary and do not have fixed amounts, it would appear that there is no assurance that loan applicants or recipients will immediately obtain the loans they requested.
In any case, Wokai.org is a good example of how the internet is changing and affecting not only businesses or commercial enterprises, but also development interventions.
C M Prado, Entry # 7
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