Millennials doing microfinance and microphilanthropy

Millennials are big on microfinance, and microphilanthropy.

Microfinance is most simply thought of as providing — and managing — small loans or financial services to poor individuals or small communities who otherwise wouldn’t ever get on a regular bank’s radar screen.

Microphilanthropy is similar — philanthropy aimed at helping meet the needs of poor individuals or small organizations that otherwise might get the attention of many large non-profit, humanitarian organizations.

There’s a crisis of confidence in microfinance right now, usually, inaccurately, personified in the recent trials and tribulations of the Nobel Peace Prize-winning economist Muhammad Yunus.

The real crisis is not so much about Yunus as it is due to the rising commercialization and emphasis on profits in this financial scheme. Yunus has criticized some microfinance organizations for acting like “loan sharks,” for losing their focus on the true mission of microfinance — to help people get themselves out of the cycle of poverty.

Here are a few young people in Seattle who remain focused on the true mission.

1) Using tech-industry know-how to help the smallest needs: Nadia and Adnan Mahmud.

The Mahmuds are two impressive and almost accidental microphilanthropists. Their organization is called Jolkona, Bengali for “drop of water,” and until this past March was being run on laptops out of the Mahmud’s kitchen and assorted Seattle coffee houses.

Adnan and Nadia Mahmud, of Jolkona

Jolkona was created, I’m not kidding here, partly because Nadia didn’t want to walk back to her dorm room at UCLA and partly because Adnan didn’t want to deal with a lot of email. I’ll get to that in a second, but first let’s talk about what Jolkona does.

In a nutshell, Jolkona helps fund those kinds of projects or individual needs that are so small that the cost to administer them at most large non-profit organizations would be more than the amount of money needed. Jolkona also provides direct feedback so donors can see how their support makes a difference.

Adnan discovered this problem upon visiting his family in Bangladesh, witnessing the poverty and then looking for some way he could direct his donation to a specific problem. He discovered there was no such program.

“We didn’t want to set up a new organization,” said Nadia, who had studied business and finance at UCLA with a traditional career plan. All that changed years ago after she decided to jump on a shuttle bus (rather than walk back to her dorm) that took her to south central Los Angeles for a tutoring session.

“That experience changed me,” she said. After seeing poverty up close, Nadia, now 28, shifted her focus and began working with inner-city kids to improve their educational prospects, financial knowledge and other basic skills.

Adnan, 33, works at Microsoft. He experienced his life-mission-shift after the trip to Bangladesh. He had run across a father with his dead child unable to bury the child, for lack of a small amount of money. Adnan decided to begin donating what he could to Bangladesh, but wanted to be able to direct his donation and see the impact.

“We looked and looked but never found any organization that would do this,” he said. When his friends and colleagues wanted to be able to do the same thing, Adnan decided to create a website for them to donate to organizations because “I didn’t want to deal with a lot of emails.”

But the demand for this service kept growing until the two decided they had to actually create their own non-profit organization. Jolkona was launched to “make it easy for you to give directly to low-cost, high-impact philanthropic opportunities around the world.”

Jolkona now has raised something like $100,000 to fund more than 100 projects in 40 countries.

2) Goodbye Amazon, Hello Mongolia: Bringing student loans to new places

Another Millennials Seattle organization working to defeat poverty is Vittana. I caught up with a former-ski-bum-turned-aid-worker, Ryan Madison, 27, who was heading off to Mongolia soon and having a quick chat with his boss, Vittana CEO Kushal Chakrabarti, 28.

Vittana's Ryan Madison chats with CEO Kushal Chakrabarti

Vittana is a non-profit organization based on the premise that education is the most powerful tool against poverty. Vittana was created by Chakrabarti and a colleague at Amazon, Brett Witt (who has since moved to DC), to provide microfinance loans for students who just needed a bit more assistance to complete their education.

Like many Millennials, Chakrabarti said he decided to leave Amazon and launch Vittana in 2008 because he was interested in doing more than just making money. He said he changed career paths (taking a “factor of five” pay cut) because he wanted to do something more meaningful and decided supporting education in low-income communities through microfinance loans had great promise.

“When we started, we got laughed out of meetings,” said Chakrabarti, a computer scientist and artificial intelligence expert who led the team handling the personalized recommendations software for Amazon.

Most experts in microfinance, he said, figured that students in low or middle-income communities would be unlikely to repay their loans and unlikely to finish school. As the child of immigrant parents (also Bengali … I’m beginning to detect a trend here), Chakrabarti said he knew how valued education is in poor countries. He figured careful selection of students would actually be a good bet.

“So far, we’ve got 99 percent repayment of our loans,” he noted. Vittana has provided something like 1,000 student loans now, at about $700 each (usually enough for a year’s tuition), in eight countries.

“We focus on countries that are on the cusp of emerging economically, where there are job possibilities but which can have drop-out rates of 60 to 70 percent,” Chakrabarti said.

Madison is a new recruit to Vittana and, by now, is in Ulaanbaatar, the capitol city of Mongolia, where he will spend a year helping to improve the administration of the Seattle organization’s nascent student loan program. He moved to Seattle initially to work for a ski and snowboard company (and to spend time in the mountains), but he too began to long for working at something more meaningful.

When he heard about the Vittana fellowship in Mongolia, Madison said he was ecstatic.

“I mean, I knew almost nothing about Mongolia,” he said enthusiastically. The chance to go experience a different culture and provide young people there with new educational opportunities sounded to him like the best possible way for him to shift gears — to find a meaningful new path.

3) Leveraging UW business school in Ghana

Sammie Rayner, a Spokane native, was studying in the UW business school two years ago, but looking for a less traditional career path. Rayner said she was inspired by Yunus and the story of his pioneering work in microfinance.

Sammie Rayner, founder of Lumana

“I noticed that very little microfinance was being done in Africa,” she said. With the help of friends and others, she raised $5,000 and traveled to a village in Ghana known as Atorkor looking to establish a fledgling microcredit program aimed at improving the economic welfare of the rural community.

“I was just blown away at how I was received there,” Rayner said. “They wanted this program very much and worked hard to help me set it up, including working with advisers there on setting up business plans.”

She incorporated Lumana as a bonafide microfinance organization in 2009 and now has 250 clients with repayment rates of 95 percent. Rayner said she spends about four months a year in Ghana and is planning to expand activities there as much as possible.

“Our initial goal was delivering microcredit loans and helping with financial literacy,” she said. Given the success of Lumana, Rayner said she hopes to garner more financial support and expand the program’s line of financial services as well as bring in more students and young volunteers — so they can have the same transformative experience that she did.

“For me, this has become a very personal experience,” Rayner said. “It’s not just a job.”

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About Author

Tom Paulson

Tom Paulson is founder and lead journalist at Humanosphere. Prior to operating this online news site, he reported on science,  medicine, health policy, aid and development for the Seattle Post-Intelligencer. Contact him at tom[at]humanosphere.org, follow him on Twitter @tompaulson and/or send a comment below.

  • Jake

    Great series Tom. Now if we can just get them to vote, we might stand a chance against our selfish generational colleagues (Baby Boomers)!

  • http://socialchangecollaboratory.org nancy

    Microfinance and microphilanthropy may help small non-profits or individuals with getting the stuff they need– transactional support– but they are only part of the solution to poverty. Ending poverty will also take an investment in transformational change, which often takes place on the margins of projects and the “stuff” of poverty alleviation.

  • Gjseeber

    the solution is to reshape the financial industry, go mobile, remove the costs of banking to the poor and subsidise this by offering loyalty programmes and employing targeted retailing, airtime top ups, increased mobile traffic etc to absorb these costs.