By Erica Lee Schlaikjer
With about 300 million people living below the poverty line in China, microfinance -- most commonly defined as small loans for impoverished individuals to help them achieve financial self-sufficiency -- is an attractive option.
Wokai.org, "a capital-contributing microfinance intermediary," is trying to bring money to Chinese entrepreneurs who want to set up their own small businesses, like dumpling shops, fruit and veggie stands and animal husbandry operations. The growing organization has a local chapter here in Seattle.
Wokai, which means "I start" in Chinese, fosters entrepreneurship and fights poverty by raising loan capital online from individual contributors for microfinance institutions (MFIs) in China. Its goal is to expand financial opportunities for the country's poor (and mostly rural) population. Though its primary goal is fundraising, Wokai also provides "capacity building" for microfinance organizations, which can mean anything from emotional support for first-time borrowers to computer training for loan managers.
"While we are a fundraising platform, we're also an information platform, and we're building a community around China microfinance in the United States," McColgan says. She started the Internet-based nonprofit in the fall of 2006 with fellow American Casey Wilson. The two met while studying advanced Chinese at Tsinghua University, and since then, they have set up Wokai's headquarters in Beijing and established three U.S. chapters: Seattle, San Francisco and New York. For now, they're still recruiting a replenishable stream of interns and volunteers to help raise awareness about microfinance in China, as well as research potential lenders and set fundraising goals.
How does it all work? According to the website,
Wokai partners with local MFIs which identify and screen potential microentrepreneur clients. Selected clients are then posted on the Wokai website through profiles that outline their business ventures and loan request. Contributors browse these profiles, select who and how much to finance, and then transfer money to Wokai through our online payment system. Once funds are transferred, Wokai distributes this loan capital to partner MFIs for allocation to microentrepreneurs. At the end of the loan cycle, partner MFIs collect loan repayments and re-issue loans.
So it's kind of an online recycler of microfinance loans: your contribution gets used multiple times to help more than one person. The average Wokai loan is about $300, which is usually paid back between six months and one year. McColgan says there is a high success rate of repayment.
Wokai was set up as an "intermediary" because of legal and governmental restrictions in China. As McColgan says, "[MFIs] are not illegal, but they're not legal," so they're not given an official status. In other words, they're "under the black curtain." As a result, MFIs cannot mobilize funds through savings deposits and active and capital markets. And grants quickly drain away because of operational inefficiencies and a lack of support after an initial fundraising period. That said, Wokai connects with local "field partners"--based on certain criteria--to allocate the funds to Chinese borrowers.
"Our job is to raise money abroad, bring it in, and funnel it through their system and give contributors the opportunity to see that people can pay loans in China," McColgan says.
And that's where the Internet social networking microfinance mash-up concept comes into play. Wokai will be similar to Kiva in that it highlights the individual aspect of microfinance by featuring profiles of both entrepreneurs and lenders to facilitate face-to-face engagement; in other words, it'll empower users to pick and choose where their money's going. Also, it'll be like Facebook because users can network with each other, start discussions and share content. And, finally, it'll be like Wikipedia because volunteers will edit and translate English content into Chinese in order to create a fully bi-lingual platform, catered to field partners in China, as well as U.S. chapter staff.
Currently, the nonprofit is fundraising for $50,000 to cover operational costs through April, which will include the costs of training, evaluating and coordinating with its field partners in China, as well as paying its staff and rent. To listen to a 5-minute podcast with the co-founders, click here.
Erica Lee Schlaikjer is the founder of ResponsibleChina.com, a blog about environmental sustainability, corporate social responsibility and social entrepreneurship in Greater China. She is based in Chicago. Email her firstname.lastname@example.org.
Photo credits: Wokai.org