Note from the editor: For Earth Day 2019, the team at VFG is celebrating with a week full of activities and consciousness around what it means to care about the environment. While our wheelhouse is in investments that focus on having a positive impact in the world, we are also a team of people who live our personal lives congruent with our professional ones. This week we’ll feature a series of blog posts dedicated to Earth Week.
Earth Week Feature: Mircolending is a small way to make a big impact
Mircolending is the practice of loaning amounts of money at low interest rates. There is usually little or no financial gain for lenders, who are typically individuals rather than credit unions. Although loaning small amounts doesn’t sound like much, a collective effort of making many small loans can fund a larger loan request. For instance, let’s suppose there is a request for 500 USD to buy solar lights so that families in a village can have light at night. This permits children to study even after dark, as well as enabling other household activities to continue without the use of burning wood or candles for light. The developed world takes light for granted, but in rural areas the introduction of renewable energy can improve off-the-grid living conditions. As an added bonus, solar lights are sustainable sources of energy, making a loan to acquire them an environmentally conscious loan in addition to a socially conscious one. If everyone gave just a few dollars toward the loan request, the aggregate of the loaned amounts can fulfill the recipients’ requested loan. There might be interest that must be paid by the recipient group, but it is typically a low amount that is used to facilitate the work of the loaning agency, such as administering the loan and performing oversight of its use. The end result is a line of credit being offered to groups and small businesses that otherwise would have had no access to loans. The capital raised can then serve an existing need, making a meaningful impact for the recipient(s).
There are several online platforms for microlending, making it easy to find companies and groups seeking a loan. Examples of environmentally conscious loans include loaning money to companies that use recycled materials to manufacture their products, or to individuals and groups seeking to use solar panels to power homes and schools. Other examples include helping beneficiaries buy solar powered water heating systems; funding the acquisition of a biodigester to transform biogas from animal wastes into renewable fuel; and funding the purchase of fuel-efficient stoves.
And because these are loans and not donations, repaid funds can be re-loaned to new causes, allowing you to renew your commitment to a more sustainable planet every time. However, donating is still invaluable: the loan sharing platforms are often non-profits which facilitate the transactions either by themselves or by working with other non-profit in partnerships. Their work makes it possible to make a microloan in the first place, so remember to donate to support their mission as well.
Author: Tina McGill
Tina has a Bachelor of Science in Environmental and Forest Biology. She is a dedicated member of the Vanderbilt Team with a passion for the Environment.