In recent years, microfinancing as a form of charity has grown tremendously in popularity. It’s easy to see why: for a small “recyclable” loan, a lenders can help countless individuals achieve actualization without losing any money themselves. This mentality can be effectively applied to corporations: through corporate microloans, they could increase their Corporate Social Responsibility (CSR) without spending the money associated with other forms of charitable donations.
The CSR Microloans program would provide both a method and an incentive for corporations interested in institutionalizing microfinancing for employees.
The Program:
Corporations Must…
- Pay an annual fee to CSR Microloans to cover the program cost.
- Pledge to maintain mutually acceptable wages and working conditions.
- Offer all ex-employees an opportunity to apply for a microloan, upon termination of employment.
- If the application is accepted, provide a loan of the approved value to the borrower.
CSR Microloans will…
- Provide experienced ground-workers to verify all loan requests, assess these applications fairly, and approve only sincere, low-risk borrowers.
- Ensure that the terms of borrowing and repayment are reasonable for both the borrower and the corporate lender, and that the borrower repays their loan in a timely fashion.
- Grant participating corporations with official certification of their social responsibility.
- Promote these corporations as respectable, socially responsible corporations.
CSR Microloans 
This is a great model. The independent assessment of loans is an especially important specification. Would CSR Microloans have any relationship to non-CSR microloan organizations, or operate solely with corporations interested in microlending? Would the company seek advice on microloan management, or seek to hire ground-workers with that kind of experience?
Thank you, Beth! You raise some very good questions.
The way I see it, CSR Microloans would operate independently of other microloan organizations. However, that doesn’t mean we wouldn’t ask for advice when starting out! The tried-and-true methods of organizations such as Kiva seem to be working, so CSR Microloans would most likely follow that model. Likewise, hiring experienced fieldworkers would certainly be a plus.
Are there any studies that have been done that show how effective microloans are at helping the receiver? More importantly, are there any statistics regarding the payback rate? I feel like corporations would be hesitant to give out money as loans, even microloans, but if they are given proof that the system works AND they won’t lose money, many more companies would be receptive to instituting your model. Just a thought!
Thanks for the comment, Abbie!
I’m actually in the process of writing a new post that includes some of the things you just brought up, but I’ll give a quick answer here as well.
“Are there any studies that have been done that show how effective microloans are at helping the receiver?”
– I haven’t investigated this, but I will now! From what I can tell, though, microlending is tremendously successful because it gives borrowers the capital necessary to improve their businesses, and reap the benefits through increased profit.
“More importantly, are there any statistics regarding the payback rate?”
– Repayment rates are generally very good; for example, Kiva’s is 98.65%. Obviously, such a high repayment rate can only be achieved if the field workers are experienced in verifying small businesses and ensuring that they choose only responsible borrowers.
Thanks again!
I like the idea that corporations must all offer a microloan to employees upon the date of their dismissal. However, I doubt that the corporations themselves would be unreservedly in support of this idea. Do you have any ideas for arguments that might convince them?
I’m working on a post about this right now, actually! The basic premise is that corporations would seize on the opportunity to improve their CSR without actually spending money (as their loans are being repaid.) I’m currently working out the details on an incentive system that would include certification and positive press that would improve the public’s image of the corporation, and hopefully sales.
Sarah, I think this is a really insightful model. It definitely allows for a way to help ex-employees without virtually any cost. This model could be used in regions all over the world other than just the Mexican border. For example, it could be used in Africa where HIV/AIDS positive workers are either dismissed or must leave their jobs due to their health. The loans could be offered to their spouses so as to provide for their family.
Awesome idea, and of course, love the inspiration!
This is a really interesting model! I had never heard of microlending before kiva was mentioned in class, and I think it’s really great to get information about microlending out to the public. I was curious, though, about what would happen if the loan did not get repaid. It’s often tough to get a small business off the ground, and I was wondering what would happen to the ex-employee in the case that he or she is unable to pay the company back.
This is a good model, but I have to wonder how it will help the situation of the people in those Mexican sweatshops or elsewhere in the developing world (the problem as I see you’ve stated it under your “problems” section). Do the loans simply help the pregnant mothers get through the time they have to spend away from work while pregnant? Are the borrowers going to start new businesses? Basically, what do you envision the purpose of these loans is?
It would probably be a good idea to look at the Kiva loans and compare them to the area of Northern Mexico… Id’ guess that Northern Mexico is more developed than the places Kiva sends money to. How will this impact the ability of your borrowers to use their loans?
(PS, you really do have an awesome idea! I just have a lot of awesome questions 😉
This is such great, progressive idea. And it seems so simple, overall!
I think the idea of using it for pregnant mothers, but what about those that are injured, or have other extenuating circumstances? I have no idea what kind of laws Mexico has. Do they have any major regulation for workers compensation, etc.? Is that ever a problem?
Also, I have to wonder about how small the loans from the companies could even be. And what risks might be involved for these companies?