Microcredit, or micro-lending, has become increasingly popular in recent years. It is the granting of small loans, usually no greater than USD 500, to individuals who live below the poverty line. Microcredit is said to have originated from the Grameen Bank in Bangladesh in the 1970s and is considered a tool for socioeconomic development.

Recently, microcredit has grown in popularity in China where over 200 million people live below the poverty line. Loans are given to either individuals or small groups for entrepreneurial efforts. Often a group is given the loan to ensure that they hold each other accountable to pay it back in full and on time. The majority of people who take out micro-loans are women, as experience has found they are more likely to pay the money back than men are.

Despite its international success, micro-finance is a relatively underdeveloped sector in this country and has only existed in China since 1993. Originally loans were only provided by the United Nations and international banks, and due to high interest rates, they were largely unsuccessful. Any organisation which is not government funded is considered in a ‘trial’ stage; interest rates do not have a cap and can be inflated as much as a bank or organisation wishes.

Wokai (‘I start’ in Chinese) was the first group to find a way around the dense Chinese regulations regarding micro-finance. Foreign non-profit groups are not allowed to register in China, so Wokai is registered as a foreign business in China and a non-profit group in the US. In China, Wokai gives grants to two Chinese non-profits: Chifeng Zhaowuda Women’s Sustainable Development Association and the Association for Rural Development of Yilong County. These groups then deal directly with the actual lending to Chinese borrowers.

Wokai was founded by 25 year old college grads Casey Wilson and Courtney McColgan. It is the first web-based people-to-people microfinance organisation of its kind. Borrowers set up personal accounts on Wokai’s website and provide details about why they need a loan. Donations range from USD 10 to 380. A typical donor is someone who may “feel a strong connection to China and its people,” says Julia Meeks, the Chief of Staff at Wokai. Once the initial donation is given, donors can track their recipient’s progress through blog postings and photos. The website also shows the progress of loan repayment. Wokai’s field partners charge a 16 to 20 per cent interest rate and so far they have a 98 per cent repayment rate.

One individual who has benefited from Wokai is Hasituya, a 53 year old woman from Inner Mongolia. Hasituya needed a loan of RMB 4,000 to purchase a milking apparatus and feed for her small herd of cows. She received her loan in July of 2009 and by June 2010 it had been repaid.

To date, Wokai has provided 391 loans to individuals worth USD 340,066, contributed by people in 46 different countries. Looking towards the future, the non-profit plans to translate the website in to Mandarin, expanding their field partners, and raise USD 1 million in capital by the end of 2011.

Web: http://wokai.org