Saturday, July 31, 2010

Karma Update: I Won a Free iPad!

I haven't been particularly diligent about updating this blog, I know, but this recent news was of such import that I thought it was worth sharing:

I won an iPad!

How I Won an iPad
My company has recently had a couple of contests which have offered iPad 3Gs as prizes. I signed up for their Twitter contest, but did not win. Then I signed up for the Facebook contest ... and I won!

The iPad itself hasn't arrived yet, due to a backorder situation, but still ... very cool! I'm not saying that this is karmic payback for the giving experiment, but the iPad is cool, I wanted one, and I would not have shelled out that much money for a fancy electronic toy. I'm not saying it's karma, but I'm not saying it ain't, either!

Karma's a Bit... Weird
Also last week I had a flat tire, which was unrepairable and required the purchase of a new tire, but that was just a little over $100. And twice my car refused to start and required a jump, so very likely needs a new battery. Still, in total, I consider myself way ahead on the rewards versus losses chart.

Monday, July 19, 2010

Microfinancing Student Loans

I recently stumbled upon a new take (or at least new to me) on microfinancing, in which you offer relatively small amounts of money to impoverished people, so that they can help themselves out of poverty and pay you back. These programs have proven incredibly successful since they were initiated by Muhammad Yunus, who founded the Grameen Bank as a means of providing them in his native Bangladesh. The Grameen Bank and Yunus were jointly awarded the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below."

Student Loans

Many people have looked into new way expand the microfinancing model into new areas, but this is one of the most interesting that I've see. Vittana allows you to search for a student in a country that does not have many college loan opportunities, so that you can help microfinance student loans.

I don't have the experience with Vittana that I have with some other microfinance organizations discussed below, and since Vittana's new there's little on record about it. They don't yet have a Charity Navigator profile and only a very barebones GuideStar profile.

What is Microfinancing?
In short, it provides those in extreme poverty a way to get money for start-up capital to get ahead in their small, entrepreneurial businesses. For example, Yunus found that poor craftswomen were being charged such extreme interest rates by loan sharks to borrow money that, by the time they bought the materials and paid back the interest, they had no money left. Even worse, many money lenders demanded that the women could only sell their wares to them, which essentially gave the money lenders a bank of slave labor ... for as little as $27, as he discovered. Yunus paid this money out of his own pocket to break the hold the money lenders had on the women, and sought to expand the program.

However, because these were poor women, they could not get loans from any other source. Many were illiterate, and therefore had barriers to completing the required paperwork to get loans. His story of expanding this program is really inspirational, as you can learn in his Nobel Lecture. Here's an excerpt, discussing how the emphasis of our current economic system robs us of some essential elements of our humanity:

I am in favor of strengthening the freedom of the market. At the same time, I am very unhappy about the conceptual restrictions imposed on the players in the market. This originates from the assumption that entrepreneurs are one-dimensional human beings, who are dedicated to one mission in their business lives − to maximize profit. This interpretation of capitalism insulates the entrepreneurs from all political, emotional, social, spiritual, environmental dimensions of their lives. This was done perhaps as a reasonable simplification, but it stripped away the very essentials of human life.

Human beings are a wonderful creation embodied with limitless human qualities and capabilities. Our theoretical constructs should make room for the blossoming of those qualities, not assume them away.

Now, microfinance is becoming a very popular form of philanthropy. Individuals can take part through Kiva (a non-profit which provides no interest back to the individual lender) and Microplace (a for-profit which does provide an interest-yielding return on the investment). There are some other differences, too. On Kiva, you choose a specific person or group to loan money to, while on Microplace you're investing in a lending note that will be provided through a separate agency to needy people in the region chosen without ever knowing precisely who the money actually goes to.

There are several nice aspects to microfinancing. First, you don't actually lose your money. Assuming that the borrowers don't default on you (and the overall default rate is low, at around 2%), the money is paid back. You can either re-loan it out to a new borrower or withdraw it. This makes these sorts of programs a nice place for socking away some extra money as part of your nest egg. It's not highly leveraged, and is far less volatile than the stock market.

Second, it's not a hand-out, but instead a business agreement. There is no social stigma or loss of dignity for someone who accepts a business loan.
    Third, the systems in place allow you to really have a lot of options in how you direct your money, moreso than with some other charities. In general, a charity is either local or global, and either way you don't have a ton of say-so in how your donation is spent. This, however, often lets you target a specific type of entrepreneur or borrower, so that you can be sure you're supporting a project that you really want to support.

    Finally, the benefit of microfinance is that it's based upon the actual needs of the local people in impoverished areas. They need the money to achieve necessary goals, and are asking for the money. It isn't a case where someone in the United States just decides that these people need a certain sort of service. (Not that there's anything inherently wrong with these programs, such as One Laptop Per Child, but the fact that they are not locally-centered is a bit of a drawback.)

    What do you think about Vittana, or about microfinancing in general? Have you had experiences with any of these programs?

    Saturday, July 10, 2010

    Charity Navigator Upgrade

    One of my favorite resources to check prior to donating to a new charity is Charity Navigator. They rate non-profits on a four-star rating system. Each organization has an overall rating, which is obtained from evaluations of two sub-categories:
    • Organizational Efficiency
    • Organizational Capacity
    New Accountability System
    This week, though, Charity Navigator announced an upgrade their site involving a new rating system which begins to add a dimension of accountability that has been missing from the existing rating system. Here is a description of the new accountability and transparency system and the factors that will now contribute to their analysis.

    The first charity that they've rolled out with this new accountability rating system is Nurse-Family Partnership. Their only negative mark on accountability is that the organization does not post their latest Form 990 (the form that non-profits must file with the federal government) to their website, which is an ethical best practice but not an actual requirement for non-profits.

    Issues with Current System
    There are still some issues with the current evaluation system, of course, as with any evaluation process. For example, Heifer International has a bit of a hit on the site, having only a three-start rating, in part because:
    • The CEO makes a fairly large salary ($258,246)
    • They spend a large percentage of their budget on fundraising (16%)
    • They don't have a big Working Capital Ratio (they couldn't run off of their savings if donations dried up)
    However, when you consider that this charity is a massive international project, requiring a substantial amount of coordination among diverse groups, the CEO's salary doesn't necessarily seem out of line. And they don't have much working capital because the majority of the money is immediately spent on livestock, per the organization's mission. Their expenses are directly linked to the donations, in other words, and if donations dried up, then the purchase of animals would also slow down in proportion. The work of education and the Pass on the Gift program would continue in these cases, but the purchase and distribution of livestock would cut back significantly, so they'd last a lot longer than their current financials would really indicate.

    The current rating system doesn't take all of this into account, and there are other issues - some of which are even more important - which have been left out.

    Other Non-Profit Vetting Resources
    Guidestar - Guidestar's mission: To revolutionize philanthropy and nonprofit practice by providing informaiton that advances transparency, enables users to make better decisions, and encourages charitable giving.

    GiveWell - GiveWell attempts to look beyond the financial data, to evaluate organizations on how well they effectively accomplish their mission. I admit, I haven't delved into this site too much. They are, admittedly, fairly strict in their evaluations - of the over-400 charities they have evaluated, only 11 have received any stars in their rating system.

    Philanthropedia - Philanthropedia brings together experts in fields such as climate change, education, and microfinance (as well as some San Francisco Bay Area local issues) to evaluate charities seeking to have an impact on these issues. They have created "Expert Mutual Funds" based on these suggestions, which have distributions among the top organizations for each issue. Donations to a fund are split accordingly among the various individual organizations, but you only have to worry about going one place to donate (which also helps keep track of things for tax purposes, if you happen to itemize your deductions).

    Other Resources of Note
    Charity Navigator Blog
    Tonic - Getting the Most Bang for Your Charitable Buck
    Newsday - State eyes possible fraud in car donation charities

    Wednesday, July 7, 2010

    The Face of Empathy

    If you've ever known an older couple who just look like they fit together, you aren't just imagining it. Our bodies are wired to recognize and mirror the emotions of others, including the physical way those emotions manifest, and this results in these similarities, according to biologist Frans de Waal in his book The Age of Empathy: Nature's Lessons for a Kinder Society:

    Mood transfer via facial expressions and body language is so powerful that people doing it on a daily basis literally start to look alike. This has been tested with portraits of longtime couples: One set of pictures was taken on their wedding day and another set twenty-five years later. Presented with separate portraits of these men and women, human subjects were asked to match them on similarity. For the set taken at an older age, they had no trouble deciding who was married to whom. But for the pictures taken at a younger age, subjects flunked the task. Married couples resemble each other, therefore, not because they pick partners who look like them, but because their features converge over the years. The similarity was strongest for couples who reported the greatest happiness. Daily sharing of emotions apparently leads one partner to "internalize" the other, and vice versa, to the point that anyone can see how much they belong together.

    While I certainly don't want my wife to begin "converging" toward my own ugly mug, I do think there's something beautiful and profound about this scientific evidence. It shows that the connections between us reach every level, down into our very flesh.

    Despite being profoundly (and thankfully) emotional and mental, love is also, if you'll pardon the phrase, skin deep.