New eBay Site Attempts To Aid The Poor

    October 25, 2007

Want to help someone and simultaneously give your finances a tiny boost?  Through a new site known as MicroPlace, eBay may allow you to do so.

Although there are intermediaries, MicroPlace will essentially loan users’ money to people in Latin America, Africa, and Asia.  These people can then, according to the company, “use the loans to start or expand small businesses and lift themselves out of poverty.”  And when the loan comes due, the user will collect a small amount of interest.

It’s at this point that some onlookers have raised a proverbial eyebrow, though.  Selfless individuals could opt for a service called Kiva, which performs the same function without charging the borrowers any interest.  On the other hand, people who are interested in the financial return would do better to simply stick their money in a savings account or CD (the highest interest rate I saw at MicroPlace was 3.0 percent per year).

There’s also the matter of financial returns for MicroPlace’s intermediaries.  Read/WriteWeb’s Josh Catone stated, “The microfinance lenders they work with typically charge between 18% and 60% interest on loans, according to the site.”

And Benjamin DiGregorio then replied, “I’ll admit I don’t know too much about the finance/loans space, but I’m wondering if this sounds alarming to anyone else.  It seems unlikely that a microloan with a 60% interest rate will do much good to the developing world.  Aren’t those types of lending practices discouraged (or even illegal) in the US?”

eBay may get an “A” for effort on this one, but to grade MicroPlace itself, we’ll probably have to delve rather deeper into the alphabet.