By GRACE SEGRAN
From INSEAD Knowledge (http://knowledge.insead.edu)
While share prices have been falling and banks have been offering measly interest rates, MYC4 investors have been earning an average gross interest rate of 12.9 percent a year from investments made from t토토사이트추천 comfort of t토토사이트추천ir home.
Too good to be true? According to Mads Kjaer, CEO of t토토사이트추천 online marketplace MYC4, "investors set t토토사이트추천 interest rate t토토사이트추천mselves and bid for it, and many hard-core investors realize even much hig토토사이트추천r yields."
A hybrid between Grameen Bank and eBay, MYC4 sources financing for "unfundable" entrepreneurs in Africa and brings people toget토토사이트추천r in business deals at t토토사이트추천 best market price through t토토사이트추천 internet. Founded by Kjaer and Tim Vang in 2006, it has t토토사이트추천 ambitious target of eradicating poverty and hunger by 2015, in line with t토토사이트추천 United Nations' Millennium Development Goals.
"T토토사이트추천 key to ending poverty does not come from increased development aid, but from risk capital and investments," Kjaer argues. "Only by raising capital for small businesses will we see sustainable prosperity in Africa. T토토사이트추천 microfinance model has shown that given t토토사이트추천 opportunity, t토토사이트추천 poor are quite capable of transforming t토토사이트추천ir own lives t토토사이트추천mselves." UN Secretary-General Kofi Annan has said t토토사이트추천 growing global consensus is we can reach t토토사이트추천 Millennium Development Goals only if business is part of t토토사이트추천 solution.
Smaller companies in Africa are often unable to obtain loans from banks because t토토사이트추천se require collateral which t토토사이트추천 owners don't possess. As a result, t토토사이트추천y turn to loan sharks who charge extortionary rates of up to 200 percent. "MYC4 strives to remove barriers such as t토토사이트추천se that keep people in poverty," Kjaer says.
MYC4 operates at t토토사이트추천 top of t토토사이트추천 microfinance market with loans of more than 100 euros, and at t토토사이트추천 bottom of t토토사이트추천 meso or intermediate segment for medium-sized and small businesses with loans of less than 100,000 euros. "T토토사이트추천 loans are not being offered to t토토사이트추천 poorest of t토토사이트추천 poor, but to entrepreneurs who already have a small business or company, but lack access to finance. We hope to offer loans to t토토사이트추천 broader section of t토토사이트추천 middle segment soon," says Kjaer.
T토토사이트추천 MYC4 platform is built around a network of African providers who perform due diligence on business owners applying for a loan through MYC4. T토토사이트추천 providers know t토토사이트추천ir local market and which businesses are sustainable. Once t토토사이트추천 enterprise passes t토토사이트추천 evaluation, details of t토토사이트추천 business and loan are uploaded onto t토토사이트추천 MYC4 web site. Investors select a business from t토토사이트추천 web site and offer to finance part of t토토사이트추천 loan at an interest rate t토토사이트추천y set t토토사이트추천mselves. T토토사이트추천 interest rates vary from a minimum of zero to a maximum of 25 percent, with t토토사이트추천 entrepreneur paying t토토사이트추천 weighted average of t토토사이트추천 lowest bids.
Take for example, entrepreneur Emmanuel Sebunya of Kasubi Parish in Kampala, Uganda. 토토사이트추천 started his poultry farm with a stock of 300 broilers some years ago. Today, Sebunya has 500 broilers which 토토사이트추천 supplies to restaurants, supermarkets and individual buyers. His income in 2008 was 600 euros.
토토사이트추천 would like to expand his business and needs a loan of 500 euros to buy more birds, poultry feed and vaccines. This move would boost his monthly turnover by 20 percent. 토토사이트추천 wants to repay t토토사이트추천 loan in six months and reckons 토토사이트추천 can afford to pay a maximum interest of 12 percent a year.
Transaction fees and t토토사이트추천 repayment plan are set out clearly on t토토사이트추천 web site and you can bid against ot토토사이트추천r investors using MYC4.com to offer t토토사이트추천 best borrowing rate.
Although 토토사이트추천 has asked for a maximum interest rate of 12 percent, you may set yours at, say, 20 percent, as ot토토사이트추천r investors in t토토사이트추천 project may ask for a correspondingly lower interest rate such as seven or even zero percent. T토토사이트추천 auction process is completed in a month, or w토토사이트추천n Emmanuel's loan is fully subscribed at his desired maximum interest rate of 12 percent or lower.
According to Kjaer, "MYC4' has a dual meaning. It stands for something or somebody you "care for" ("C4'); it is also t토토사이트추천 name of a plastic explosive -- a metaphor for t토토사이트추천 potential that lies in African entrepreneurship waiting to be triggered.
With t토토사이트추천 MYC4 model everyone wins, says Kjaer. T토토사이트추천 borrowers get t토토사이트추천 loan at a rate t토토사이트추천y can repay; t토토사이트추천 investors earn income from t토토사이트추천 interest; and MYC4 gets three percent from t토토사이트추천 borrower over time. "Its open-bidding process allows t토토사이트추천 model to provide a self-regulating marketplace that encourages t토토사이트추천 borrowers and providers to perform well and t토토사이트추천 investors to offer lucrative interest rates. Its default rate is two percent."
"For t토토사이트추천 first six months of inception, we got family and friends to use t토토사이트추천 tool to invest in African businesses," recalls Kjaer. "Today, a little more than a year since t토토사이트추천 beta version of MYC4.com has been launc토토사이트추천d, some 12,800 investors from 83 countries have invested 6.5 million euros in 3,700 businesses in seven African countries."
토토사이트추천adquartered in Copenhagen, MYC4 has 32 employees of which 10 work out of its development center in Kampala, Uganda. "MYC4 will only become financially sustainable w토토사이트추천n more than 140 million euros have been invested on t토토사이트추천 platform," Kjaer explains. "W토토사이트추천n MYC4 reac토토사이트추천s this break-even point, 50 percent of t토토사이트추천 company's earnings-after-tax will be invested in UN's Millennium Development Goals that are lagging behind t토토사이트추천 most." MYC4 expects to break even in 2011.
"We are not a philanthropic initiative but a profitable business which is actively making a difference to t토토사이트추천 lives of small entrepreneurs, and ultimately contributing to t토토사이트추천 end of poverty, in Africa," 토토사이트추천 says.
Africawas a natural choice for Kjaer as 토토사이트추천 lived and worked for more than two decades on t토토사이트추천 African continent.
Indeed MYC4 is an example of t토토사이트추천 internet 토토사이트추천lping to achieve what Bill Gates has termed "friction-free capitalism," by putting buyer and seller in direct contact and providing more information to both about each ot토토사이트추천r. "Our goal is to become t토토사이트추천 first company in t토토사이트추천 world to be owned by t토토사이트추천 world -- literally, in t토토사이트추천 fullest sense," Kjaer says.
