Reimagining crowdsourced microfinance | Milaap

Reimagining crowdsourced microfinance

With Muhammad Yunus being awarded the Nobel Prize in 2006, we are definitely in a society which recognises the might of microfinancing. Over the years, several crowdfunding based MFIs have cropped up across the globe. Tapping on the power of the internet, they connect borrowers (usually from developing countries) in need of small loans to lenders who are willing to lend at low or negligible interest rates. The money once in the system, can go from one borrower to another, thereby multiplying its impact on the society. Despite so many apparent advantages, such crowdfunding based models are yet to achieve a sustained growth that one would anticipate. It's easy to observe that as a lender there are no significant incentives except altruism. While helping others in itself is a powerful motivation, can more be done to keep lenders involved and increase the reach? Gamification - adding more incentivesFreerice[1], an initiative by World Food Program (WFP), has two goals - provide education to everyone for free and end world hunger by providing rice for free. It does so in a straightforward manner - users from around the world can take quizzes to educate themselves, for every correct answer they give, 10 grains of rice are donated to someone in need. The website hosts related advertisements from sponsors which fuels the rice donations. This simple concept went viral since its inception and peaked to millions of rice meals[2] being donated due to the voluntary efforts of freerice players from around the world. Such a success and participation would have been hard to imagine if WFP had simply put up a website with advertisements and donated 10 grains of rice of every advertisement viewed. Freerice's example illustrates how adding simple incentives can greatly improve the reach and sustainability of crowd sourced campaigns. Probably a lesson to be learnt for MFIs?Social Gaming and MicrofinancingThere was a time when facebook was taken over by farmville[3] requests and players. Social gaming had arrived and it was keeping everyone hooked in an artificial world for long hours. Such games had regular notifications, new additions and your entire friends circle on them - hard to let go, right? Most of these games also have small in-game purchases, just to keep you going. An interesting aspect of such games is the ability for a player to donate through the game. Zynga has raised millions of dollars[4] for various causes through the small donations made by players, from within the game. That suggests the huge potential that games have to get a crowd involved for a cause - definitely something that crowdsourcing based MFIs can look into!Shifting from the status-quoIt now becomes slightly more acceptable that the current model in social microfinancing can evolve from the straightforward borrowing-lending paradigm. There is a need to add more incentives on the lenders side to keep more of them involved for a longer period. Gamification of a process appears to be a proven way of adding incentives for continual participation and, as was shown by Zynga's example, the participation can be directed towards philanthropic causes as well.One such idea of coupling microfinance with gaming is discussed here (the linked article has also been the inspiration for this blogpost). The basic concept is to simulate a small city. As users progress through the game, they can make microtransactions to be invested in particular causes for the betterment of the society in the city. These microtransactions in the virtual world are matched with the microloans in the real-world for real causes.  The social impact of their loans gets simulated in their virtual city - giving the lenders a more evident cause-effect scenario for their loans, spurring them to make even more loans (compare this to the monthly 'loan reports' that are sent in the current model to the lenders)Of course, the entire idea of gamification of a financial instrument might seem a bit unconventional, but looking at its apparent advantages, it’s definitely worth a discussion and some brainstorming. We are living in an age where efficient design has transformed our societies and it thus makes sense to look at the current microfinance models from a fresher design perspective. Initiatives likes gamesforchange [5] are already exploring the idea of using games for making a social impact, probably more can be thought upon to use them in the microfinancing scenario as well.References:[1]:[2]:[3]:[4]:[5]: