A recent news article prompted a world-wide discussion of the investment potentials in microlending.  The article described three microlending companies and they stated they have a 97 percent success rate in repayment of microloans with rates between 3 and 5 percent return on investment.  Of course, with any uninsured investment, there’s a chance of risk involved.  Any investment has a potential risk so some people opt to put their money in a savings account.  The average savings account in the United States today might yield 1 percent.  That’s a horrible rate of return and nobody with significant assets would consider a savings account an investment.  It’s hardly better than shoving cash in a mattress.

Even weighing the risks of default, a microloan might be even better than the rate of return on some certificate of deposits (CD’s) and have a risk similar to junk bonds.  However, most CD’s have a minimum of $1000 and bonds, significantly higher whereas a microloan might be $500.  Microlending offers an individual willing to accept some risk an opportunity to invest in something that has the potential to significantly alter the life of the recipient of the loan.  The person receiving the loan makes significant guarantee to a local office that supervises the loan and reports the return to the investor.  With minimum barrier to entry, small investors can “feel good ” that they’re making a positive change in the world, while making a rate of return that beats the return they would receive on their savings account.

Investors of any size are well advised to do their due diligence before making any investments.  Microlending is not any different than traditional investments in this regard.  To get started, check out these three microlending/microfinance institutions – Microplace, Kiva, and Micro Credit Enterprises.  As the word spreads about the potential for reward from microlending, other institutions will follow.  More investors will discover for themselves the ability to do good and make money.