Saturday, September 7, 2013

Lending or Giving?

Would lending your lawnmower make you more influential in getting your neighbors to mow their lawn more often than just giving them a lawnmower?  Or put in philanthropic terms, do bankers who provide a line of credit to a charity have more influence on how the charity works than that charity's major donors?

Some donors believe that they can be more effective in their charitable giving if they themselves try to affect the effectiveness of the charities they support.  That is, if they give advice or nudge the charity toward certain activities as a result of their donations.  Not all donors feel they can or need to do this but many do.

Micro-lending has gotten much attention lately because of the tie it creates between the lender and the recipient.  Lenders shape the investment strategy of the borrower as money is only provided if the lender decides the plan for the use of the money is a good one.  Micro-lending has been used to promote entrepreneurship or women's economic freedom or sustainable agriculture, or whatever the lenders find attractive.

Recently, just giving money to the poor has pushed the idea of donor control one further step away from the micro-lending model.  The key finding is that if those in need are just given money with no strings attached they, remarkably in they view of many, use the money effectively.  The gift needs to be large enough to be meaningful, but otherwise just letting people use the money as they see fit seems to work.

The reason for this post at this particular time is that a group of prospective donors have approached Coastal Community Foundation with the idea to start a micro-lending program to local charities.  The borrowed money would be repaid into a fund that would then lend the money out again, much like the conservation loan fund already in existence at the Foundation.

So the question is, who knows best?  The donor, the lender, or the recipient of the money provided?

1 comment:

Angel said...

There was a recent story about this on NPR's This American Life called Money for Nothing and Cows for Free. They compared the impact of giving a cow to just giving money. There were definitely pros and cons to both sides. It makes me think that empowering people to make their own decisions about their lives is the hand up they need.