dimanche 28 avril 2013

Rifkin's TIR, pillar 4/5: smart grids

Here is the follow up on Rifkin's Third Industrial Revolution with its forth pillar: the use of smart grids for transportation and distribution of electricity.

You can find the post on my blog Energy in transition. Enjoy the reading!

dimanche 21 avril 2013

Microcredit: capitalism for all

Today, I focus on microcredit. It consists in lending low amounts (the amount has to be considered in reference to its context) to individuals or businesses in order to finance the realization of small projects, often little shops or family businesses. Microcredit is part of the bigger microfinance family, to which also belong diverse savings, insurance, funds-transfer offers. All in all, microfinance’s objective is to commercialize ad hoc financial products to lower-income populations, who may otherwise have no access to financial offers.

How and where is microcredit used?

It is for this reason, and given the nature of the target population, that microcredit is generally associated with wills to promote economic development of the poor, women emancipation, children scholarship, alphabetization, and so on. With smaller amounts and shorter reimbursement durations, these offers become affordable for smaller projects bearers, whom are found in greater proportion in developing countries. In addition, the well-known Grameen Bank, funded in 1976 in Bengladesh by Professor Yunus, allowed to spread this image.

We think therefore less easily that we can find microcredit around the corner too. In France, personal microcredit on the one hand is a loan ranging from 300€ to 12000€, reimbursed in 6 months to 5 years, allocated by a bank to an individual (non-professional) having a personal project, like buying or reparing a personal vehicle or getting a vocational training. On the other hand, professional microcredit is targeting professional project bearers, be it individuals or organizations, with similar amounts and reimbursement durations.

Why does it matter?

One can see how the underlying logic of microcredit and microfinance more generally is to use the existing market logics and mechanisms to promote the inclusion of traditionally disadvantaged populations, without regard to where they are, what their job and income is, etc. The objective is to not exclude them from a system that has worked for others.

What’s also very important to me in this is the fact that the people benefiting from microcredit and/or microfinance are considered as active entrepreneurs and not as passive victims of a situation. It is not helping by charity, it is giving them credit really: lending money because one is confident they will be paid back. It is fundamentally different from charity and this is the reason why, besides obvious economic viability reasons, I believe microcredit should be used whenever possible prior to charity and aid. One last fact to reflect on: the Grameen Bank’s reimbursement ratio is 98%.

dimanche 14 avril 2013

Crowdfunding: financing a project collaboratively

Today, I'd like to speak about crowdfunding, a financial vehicle that developed massively recently thanks to the rise of the internet, social media, and collaborative platforms. Indeed, as "crowdfunding" litterally means, it is about individuals pooling their money in order to finance various projects, ranging from businesses (be it a start-up or a production plant), to citizen journalism, to movie production. The collaborative principle is applied to investing. I'd like to focus here on two organisations I know about and find interesting regarding crowdfunding.

The first one is WiSEED, a French internet crowdfunding platform offering individuals and businesses to invest in the under-8-years-old businesses selected by WiSEED on criterias like innovation, market performance, and market growth. This is pure crowdfunding: people can co-finance projects on the internet. And this is a specialised platform, focusing mainly on start-ups. The maximum loss for the investors is the capital invested (starting from 100€), not more. Before the start-ups are selected, the WiSEED members can first vote for the businesses they find most relevant and second follow and comment them. The WiSEED team then selects the best businesses and relays their funding needs. The interests can go up to 45% for example.

The second one is Babyloan, another French crowdfunding platform. This platform is interesting because it is not only about crowdfunding, but also about microcredit. Indeed, Babyloan is working with MicroFinance Institutions (MFIs) all over the world. The MFIs give Babyloan the informations about the project and project bearer and Babyloan relays the story on its website. There, you can choose the project to which you want to lend some money (starting from 10€). Some projects are developed right down the street, others are located on the other side of the globe. Once you've given your bank account informations and the project has been fully funded (by other Babyloaners), the money is collected from your account and transferred to the MFI responsible for the microcredit to the project bearer. A few weeks later, you start being paid back on a monthly basis. A few days ago, I received my forth notification 4€ had been recredited to my Babyloan account, paying back for my lending to a Filipino women wanting to increase her stockpile in her clothing store. A specific feature: on Babyloan, you don't receive interests, you just lend the capital, as you would do with a friend.

Of course, there are other platforms, but these two are those I know best, and I think they give a rather good idea of what crowdfunding can be today. Crowdfunding is also part of collaborative finance, a term used to describe financial transactions that occur between individuals without the intervention of traditional financial institutions. Generally, those transactions are highly personnalised (in the two examples I've used, you can choose the project you are co-funding) and when there is an intermediary institution between the lender and the borrower, its governance mode is more open than of traditional institutions (as you saw at WiSEED, the WiSEEDers give their opinion before the final selection is done).

dimanche 7 avril 2013

Rifkin's TIR, pillar 3/5: storing electricity

Today, I carry on with Jeremy Rifkin's Third Industrial Revolution by focusing on its third pillar : the ability to store electricity once it is produced. This is important because renewable energies often are intermittent.

Read the post on my blog Energy in transition.