MicroPlace: is this Ebay's version of Kiva?

There always seems to be a buzz about some cool new venture taking off in San Francisco, and tonight the excitement took place at The City Club downtown, with a party that centered on the official launch of MicroPlace, a new Ebay subsidiary that provides a way for everyday people to make investments in the world's working poor.

Like many people, when I first heard of MicroPlace a couple of months ago, I thought it sounded just like Kiva, a non-profit also in San Francisco that supports microfinance institutions in developing countries through its peer-to-peer online lending model. I was curious to find out what was different about MicroPlace, and in my search for an answer I came upon two great blog posts, one by Robert Katz and one by Josh Susser.

Susser, who worked on MicroPlace's engineering team, calls to attention the following important points about MicroPlace:

1. MicroPlace is a SEC-registered online brokerage, and pays a return on your investment. It's a small return, a few percent, but it'll beat the rate in a typical savings account.
2. When you fund your investment through PayPal, PayPal waives the transaction fee, so 100% of your money goes into the loan.
3. When you invest, you do not fund a person directly. Instead, you choose a country, and a specific fund in that country. The fund you choose will make loans to individuals. The MicroPlace model is similar to investing in a mutual fund of microloans. You purchase investments from microfinance security issuers.
   
4. Any profits made by MicroPlace will be donated to non-profits, including the eBay Foundation.

Great. So then what exactly is the Kiva model?

1. Kiva is a non-profit, and as such does not provide lenders with an interest return on the loan they make.
   
2. Similar to MicroPlace, Kiva.org also receives free payment processing from PayPal, which helps Kiva to keep operational expenses low.
3. In the Kiva model, you lend to a specific entrepreneur in a developing country and can receive email journal updates from this entrepreneur. As a result, Kiva provides a platform in which interpersonal connections between lenders and borrowers can take place. The Kiva model is a more intimate way to lend.

In his article, "Kiva vs. MicroPlace: What's the Difference?", Robert Katz suggests that in some ways the two organizations compete, since on one hand they "compete for lenders". On the surface, this does appear to be the case, and I am sure there will be some crossover of lenders who support MicroPlace over Kiva, or vice versa. However, it seems that the two organizations will also attract different groups of lenders as well. For example, people who prioritize the interpersonal connection they can make with entrepreneur borrowers will be drawn to Kiva. In contrast, people who want to help alleviate poverty by empowering entrepreneurs while at the same time earning interest (however small) will gravitate to MicroPlace.

The question of competition between these two organizations, Kiva and MicroPlace, seems to me to be a non-issue. Sure, there may be competition. One organization may attract more lenders than another. However, for entrepreneur borrowers and the microfinance community at large, the launch of MicroPlace is a win. Afterall, it is the alleviation of poverty that is the important goal.

The launch of MicroPlace is a great thing for the microfinance world. With its strong corporate backing from Ebay, MicroPlace will provide that much more exposure and awareness of microfinance to an even broader audience. It was so great to join in tonight's launch celebration of MicroPlace. It's an exciting, promising new project that is sure to benefit hard-working poor people around the world.