Microbank project teaches lessons in applied philanthropy, capitalism

By Emily Richmond

Saturday, May 30, 2009 | 2 a.m.

A 27-year-old single mother in Peru needed cash to keep her modest neighborhood grocery store stocked. But the $325 loan Rosa needed was too small for traditional financial institutions to consider worthwhile.

Fortunately for Rosa, the Meadows Microbank — launched by students at the Las Vegas private school — was interested. In November Meadows students agreed to lend her the money to buy milk, rice and sugar. The loan was repaid in full by March — one month before it was due.

Justin Blau, who graduates from the Meadows this year, launched the microbank in 2008 with the help of fellow students. After raising $25,000 in seed money, the group has lent nearly $5,000 through Kiva.org, a microfinance cooperative.

The Meadows students plan to lend another $5,000 through Kiva and place about $15,000 with another micro-financing organization, MicroPlace.com, said Nick Young, who will take over for Blau as chief executive of the school’s microbank for the 2009-10 academic year.

The students set their lending standards, including that no more than 15 percent of the bank’s capital be in a single country, and that no loans are made through microfinance institutions that have a default rate greater than 5 percent. The default rate is significantly higher for U.S. microloans, so the students have opted for less risky international lending.

The microbank’s balance at the end of the academic year is expected to be about $30,000.

Young said Kiva was the right avenue for the microbank because it allows the students to choose the recipients and track their progress.

Kiva has close to 500,000 lenders, including investment clubs, families, charitable groups and dozens of schools. Some are “really capitalist-minded” and looking for a return on their investment, while others are more interested in the philanthropic aspect, according to Fiona Ramsey, public relations director for the organization.

Kiva has facilitated more than $75 million in loans, with the average borrower receiving $417, Ramsey said.

It has become a popular teaching tool for schools, including the Meadows, Ramsey said.

“We’re excited when we see students using our site in this way,” Ramsey said. “It really gets to the heart of why we’re doing this. The point isn’t to get as much money as possible into the developing world. This is about more than a one-way transaction.”

Meadows history department Chairman Kirk Knutsen, the bank’s faculty adviser, said the bank has become one of the more popular activities at the school, with about 60 students participating.

“This group isn’t being run like a club, it’s being run like a business in the nonprofit sector,” Knutsen said. “Students are seeing capitalism unleashed not just for profit, but for good.”

The Meadows is one of the city’s elite — and expensive — private high schools, with tuition topping $20,000 annually. About 18 percent of students receive financial aid, but most of the kids come from wealthy families.

The students’ fundraisers for the bank have included selling teriyaki bowls at lunchtime and operating a weekend lemonade stand that netted $750.

The purpose of the microbank “isn’t to be a condescending charity giving people what you think they need, but to empower individuals to help themselves,” Knutsen said. “You can tell kids that $50 or $100 will change somebody’s life, but it’s a lot easier to get that message across when they actually see it happen.”