The investment market has a high barrier to entry. It's generally open only to high net-worth investors, while people who can only spare, say, $100 or so are left out entirely. MicroPlace, an eBay-owned platform that matches people who want to invest even small amounts of cash with socially responsible institutions around the world, changes that. Much like Kiva crowdsources loans, MicroPlace crowdsources investments. And now MicroPlace is bringing its services to the U.S., starting with the California FreshWorks Fund.
The Fund, which is a public-private partnership between the California Endowment and over a dozen partners, has gathered up $200 million to give to food vendors in California food deserts, or places that lack easy access to fresh food. The FreshWorks Fund is offering cash for projects that range from food trucks to large grocery stores. It's an ambitious undertaking, to say the least, and MicroPlace is offering anyone who can spare $20 a chance to get involved.
"We want to challenge the assumption that everyday people can't invest," says Ashwini Narayanan, general manager of MicroPlace.
Here's how MicroPlace works: Potential investors use the site's search engine to select a region and type of investment (a five-year investment, for example, with 5% interest). Once a project has been chosen, investors open a brokerage account with MicroPlace, pay for their investment with PayPal, and receive a quarterly interest statement with updates on the project. The average investment amount is $250. And once investors begin to trust that MicroPlace can offer real returns (generally over a two year period), they often choose to up their investments--anywhere from $1,500 to $5,000.
In the case of the FreshWorks Fund, investors don't actually give to grocery stores--instead, they invest in (and get returns from) the fund, which gives money to the stores. This is, according to Narayanan, the investment model of the future. "Creating an investment product in the post-financial crisis environment is a challenge because there is so much scrutiny about protecting individual investments," she says. "The fund needs to be there."
It's no coincidence that MicroPlace is launching its platform for U.S. investments at nearly the same time as Kiva's launch of Kiva City, a funding platform for U.S.-based businesses. The reason: Microfinance is finally gaining steam in the country. "We're only beginning to see community investing funds that want to tap retail investment capital," says Narayanan.
In other words, Americans are finally realizing that microfinance isn't just for developing countries; it can work in our struggling economy, too.