Michael Masterson's Rule of Effective Charity: Micro-Loans for Locals Who Want to Start a Business
Oct. 4, 2010
Michal Masterson of Early to Rise has written a report on his operations in Nicaragua. Here, he shows how he got hit with beggars, and how he got rid of them, the old-fashioned way. He offered loans instead of handouts. He has described his experience and his plan here:
The basic outline is this: he makes them say in writing what they plan to do with the money. They have to prove that the money will make them productive. They have to pay back the small loan before getting another.
So far, he has a 100% repayment rate. This is amazing.
The guidelines make sense. The money must be productive. He converts sinkholes into profit centers for these people.
We forget how poor Third World residents are. There is not enough productivity. With his system, he lets people capitalize their skills. They convert what they already have -- drive, knowledge of special local conditions, and work skills -- into a stream of income.
What he is doing is to make them bring capital to the table before they get his money. They have to have an idea. They have to have commitment. The money is a catylist.
Not all charity can produce positive returns. Giving money to house Alzheimer's victims is charity with no ROI. But most charity can and should produce a positive rate of return.
Fund those people who need a jump start. This way, you get the most bang for your buck.