Lendingclub

Muhammad Yunus won the 2006 Nobel Peace Prize on Micro-financing. (The 2007 one went to Al Gore.)

I talked about in the last post the well-developed consumer credit market, though not necessarily an all-good thing. The credit market, and the capital market in general, is at a flinging but premature stage, because the banking system is a national monopoly. Credits for small and medium business (SMB) are especially lacking.

So I think micro-financing might be a way to go. Here's an introductory piece: What Microfinance Means for China’s Growth.

A funny story (with a kinda cruelty) from the article:

One of the borrowers I talked to was an extremely small man with a hump on his back that makes it difficult for him to do physical labor. When he took out his first micro-loan, he was literally a beggar living on the street. The loan was 300 RMB, less than fifty U.S. dollars. He used the loan to buy a small pig that he kept with him on the street and begged for food for it. When it was available, he performed what limited day labor his disability allowed to pay for scraps. Months passed, and the pig grew. At the end of the year he sold the pig for slaughter. He repaid his loan and made close to 200 RMB besides.

These sort of stories are everywhere across poor countries like India, Bolivia, Honduras.

If you think this kind of model won't work in the U.S., look at this one - Lendingclub, P2P-based microfinancing.

The essence remains the same, except it's been Americanized, with the Internet, Fico scores, Venture Capital, convertible notes, preferred shares, warrants.

If you have some extra cash, you might consider giving it a try.