What Would Google Do_ - Jeff Jarvis [105]
Other variations on the theme: Zopa sells certificates of deposit and gives investors a voice in lending the money. Loanio is supposed to make loans safer by involving cosigners and getting more documentation. Virgin Money handles the details in loans among friends and family. Lending Club makes loans social via Facebook.
Microloans are better-known—and tend to go to better causes—in developing economies, where they are used to buy cattle to start a business or to send a child to school. Go to dhanaX.com to see stories in India—where only Indians may invest—or to Kiva.org, where you can grant loans as small as $25 to businesses all over the world. Kiva has made $35 million in loans—averaging $485 each—in 43 countries, and 98.1 percent have been paid back. (For comparison, 2.7 percent of prime loans in the United States were in default in the spring of 2008; subprime loans saw 16.6 percent in default.) One Kiva request: Mrs. Phally of Cambodia raises pigs at her home, making $7 a day, while her husband farms, earning $5 per day. The family is also supported by two of their children who work in the local garment factory. Mrs. Phally asked for a $1,000 loan to buy a small tractor for her husband to plow his land. Adding context, Kiva tells us it is common for Cambodians to rent out tractors to make extra income. Kiva’s loans earn no interest for the lender, but local administrators charge interest. These loans change the world one entrepreneur at a time. That is an internet dividend.
To make a similar impact in the United States, a bit at a time, see DonorsChoose.org, where you can contribute to teachers’ needs. See also Facebook’s Causes application, where members start, join, support, and donate to causes. All these new entities rely on small bits adding up to big impact, on direct and personal connections, on giving control of the use of resources to those who have them, and on open information.
The root of the credit crisis that spread from America around the globe in 2008 was that bad loans were hidden in packages with good loans and sold to financial markets, with no accountability down to the level of each loan and no transparency. That’s not the case in these peer-to-peer loan operations. I don’t mean to pretend that the social banking system could replace banks, but banks could learn a lot from it. Why not set up direct marketplaces that let me establish my own diversified portfolio in small-business loans, home mortgages, and student loans? Why not use the infrastructure the bank has, as Virgin Money and PayPal do, to facilitate our own financial transactions? Why not make banks human again? We may not see such an evolution in big, old banks—they’re just too big and old. That is why we are seeing new and innovative, peer-to-peer banks and financial institutions emerge. But there can be no question that the industry needs both more transparency and more accountability.
The internet also presents new opportunities for financial markets. Online we have new sources of information and analysis about companies other than the conflicted analysts who work for financial institutions. Investors themselves can share knowledge, data, strategies, successes, and failures. The Motley Fool’s CAPS service pools investors’ knowledge to help each member of the community. I invested in Covestor, where stock investors share their verified trading history and others will be able to invest alongside them. Any investor can become his own mutual fund and a winning investor has another way to benefit from betting well.
In my entrepreneurial journalism class, Shirky advised students working on a personal finance site to offer a branded credit card, enabling them to aggregate data from the community to let people know where they stood against peers: “Warning—you are spending 15 percent more on restaurants than people your age with your income.” Learning from lots of data is a pillar of Googlethink. Banks and credit cards know more about our spending than anyone and almost as much about our buying as Amazon. That’s our data