Park it! Your Money, That Is.

Many Americans are feeling the recession pinch—especially those of you who landed here the way I did—via the layoff express.

It is possible that you have had to cut back, or even eliminate your charitable giving as a result. Our charitable gifts certainly landed on the chopping block for examination, but ultimately, we decided to keep them up. There will always be others worse off than us.

If you feel like you need to cut back your giving, but you don’t want to stop helping the needy entirely, you might consider “parking” some money with a microfinance organization like Kiva.org, Wokai or Ebay’s Microplace.

These microfinance organizations lend to the poorest of the poor, and put your money to work. Over time the borrowers pay you back (without interest, except in the case of Microplace, which has some interest-paying loans).

These microloans are a nice way of setting money aside for a rainy day, but they aren’t perfect.

Microloans, internationally are at risk of currency devaluation, also, like all loans, they run the risk of default. It is important to read the Web site of the microfinance organization you’re using for details and their repayment history. I’ve never had any difficulty with my microloans being repaid, but I’m sure that if I did more lending, sooner or later, someone would default. I put my money in loans just $25 at a time.

Another thing to consider, is that usually your money is locked up for a determined amount of time—the term of the loan. Month-to-month, only the repaid amount is available to you, so make sure you’re choosing a loan term that fits when you think you’ll need access to your money again.

All of that aside, Microfinance isn’t new. Large-scale microfinance was really championed by Muhammad Yunyus, of Bangladesh decades ago. His book “Banker to the Poor” illustrates how these tiny loans (usually under $100 USD) are lifting people out of poverty worldwide.

If you’re not able to give in the economic climate right now, I encourage you to research lending to see if it might be right for you. I’m a lender at Kiva, and would be happy to answer specific questions about my experiences. Also, I lend at Lending Club, which is an interest-earning loan, but it doesn’t usually support charitable activities, as it focuses on domestic borrowers with specific needs (i.e. medical bills, new business startup, etc).