By Balachandar Vishwanath
United Prosperity (UnitedProsperity.org) is an internet based non-profit organisation that was established to help lift poor and near-poorpeople around the world out of poverty using micro-financing initiatives. UP’s mission is to empower individuals to provide a compassionate and impactful microloan guarantee that multiplies into a bigger loan to poor clients.
These microloans are made to low-income entrepreneurs, mostly women, who would not otherwise have access to banking and financial services, to help them to start or grow their own small businesses, with all of the benefits that this should bring. The idea of individuals all over the world becoming ‘social guarantors’ for the purpose of making loan guarantees is an innovative approach to tackling extreme poverty. For every USD1 received as guarantee through UP, a partner bank will typically lend USD2 or more in microloans to low income clients through a partner microfinance institution (MFI). At the end of the loan period, when the loan has been repaid to the bank, UP’s guarantee to the bank is released, and the money is returned to the individual guarantor who can then recycle it in a guarantee for loans to other low income entrepreneurs.
Importantly, UP helps the local economy become self-sufficient by creating relationships between the local banks and MFIs which provides access to the capital that the poor entrepreneurs desperately need. UP was launched in June 2009, when it partnered with a large bank in India, and Ajiwika, an MFI that worked with the poor in one of the poorest states in India. To date, UP has raised around USD80,000
in loan guarantees from individuals in more than 20 countries.
As a result, more than 650 entrepreneurs have received around USD170,000 in loans. This scheme makes an immediate impact by increasing the income of the families who take part. Moreover, since Ajiwika got access to capital from the bank through UP’s guarantees, other banks have begun lending to this MFI.
The guarantee provided by United Prosperity impacts several areas:
1. Entrepreneurs receive microloans,increase their income and eventually come out of poverty.
2. The MFI builds credit history with the bank which lends to the MFI based on the guarantee. Once the credit history has been established, over a period of time, the bank will lend to the MFI even without a guarantee thereby lifting even more entrepreneurs out of poverty.
3. Other banks started lending to the MFI, thereby increasing the pool of capital available to poor entrepreneurs.
UnitedProsperity.org’s guarantee-loanimpact model has immense potential to make capital available to the poorest families in the world. It is an excellent way for the general public to make a sustainable and meaningful difference to the lives of low income clients and their families. As poor entrepreneurs become wage earners and start managing their own loans and savings,their status in the family and the community improves, and they are able to plan for the future.
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