Is Paypal the MicroFinance Platform?

PayPal clearly has designs on becoming the payment processing platform of the future. It has moved beyond processing payments on Ebay to supplying payment processing for merchants, credit & debit cards to consumers and even high yield savings accounts. But, I am most curious about its ability to support microfinance lending and repayment transactions.

Kiva has relied on PayPal to handle over $13 million in microloans  to 20,000+ entrepreneurs by 200,000+ lenders[1].  Paypal further supports Kiva's lenders and entrepreneurs by waiving normal transaction fees. This is a sizable contribution given Kiva's $2 million monthly growth rate[2].

Where Kiva's not-for-profit model connects investors and entrepreneurs directly, Paypal's parent company Ebay is betting on a model that is more reminiscent of Wall Street than community sites like... well, Ebay.  On October 25th, Ebay launched MicroPlace which allows people to invest as little as $100 in a securitized portfolio of microfinance loans. MicroPlace connects individual investors to organizations like the Calvert Social Investment Foundation that create pools of microfinance investments from thousands of local partners[3]. This increases the amount of funds available for microfinance investment while reducing transaction costs and diversifying risks (think Fannie Mae, Sallie Mae).

Paypal will provide the transaction processing for MicroPlace. Ebay say's profits from MicroPlace will be donated to various charitable organizations, including (but not limited to) the Ebay Foundation [4].

In addition to these high profile microfinance institutions, several others appear to be relying on PayPal to provide transaction processing. These include OPENaid International,  Garmeen Foundation,  Globe Giving and more.

As an aspiring social entrepreneur, I implore PayPal to offer a turn-key solution for microfinance organizations that will allow donors/lenders/investors to contribute and withdraw funds, transmit funds and loan repayments to/from entrepreneurs, and maintain account balances and transaction history for registered users.

[1] "A Letter to Kiva Lenders" Kiva Blog October 31, 2007
[2] "Kiva.org Crosses $11 Million in Microloans to Developing Nations", Josh Catone ReadWriteWeb.com September 13, 2007
[3] "Microplace Launches Investment Website to Address Global Poverty" Patrick Mitchell CalvertFoundation.org October 24, 2007
[4] "Ebay-owned MicroPlace Launches MicroFinance Site" Julie Sloan Wired.com October 24, 2007