How Technology Built a New Industry

Small budgets can yield big gains with the help of high technology

Bhalchander Vishwanath plans to operate in the global financial markets, and for a mere $5,000 cash investment, he has a pretty good shot.

Vishwanath is the founder and CEO of United Prosperity, which plans to raise money from individuals to guarantee the microcredit loans banks make to impoverished entrepreneurs. Contributors will make pledges, and they'll get their money back when entrepreneurs repay their loans.

As one can imagine, there's not a lot of funding available for a start-up nonprofit that's helping to serve the poor. So Vishwanath and executives at similar organizations have to make every penny count. They do that by using technology to minimize costs while maximizing reach.

Not long ago, this business model would have been impossible. Now, though, it's clear that technology has built a new sector within the world of microfinance -- and it's proving that small budgets can yield big gains with the help of high technology.

"We consider technology as an integral part of our future, for our visibility and for our donors to have a great experience," says Kristin Houk, president of NamasteDirect in San Francisco.

NamasteDirect raises money to make microcredit loans to poor women in Guatemala. The organization collects donations through various avenues, and it has found that online fundraising costs a fraction of what traditional methods cost, Houk says. Other IT initiatives have also enabled the organization to achieve high-level goals on shoestring budgets. For example, NamasteDirect used volunteers to build an e-card system that costs nothing to run and generates "a ton of traffic to our Web site," Houk says.

Researchers expect interest and investments in microfinancing to grow significantly in coming years. A December 2007 report by Deutsche Bank Research predicts that U.S. institutional and individual investments in microfinancing will jump from $2 billion in 2006 to $20 billion in 2015.

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