Wokai is starting to get some nice news coverage and the video below is a good introduction to what they are trying to achieve and how the  local microfinance partners actually work.

As the reporter notes China is not really regarded as a poor nation anymore. How could it be with over $2trln in reserves. But outside of the big cities it is a different stories. Access to finance in rural areas is difficult and state finance has been directed towards major projects and city development.

By creating a platform and helping local partners Wokai is actually laying the foundations for community based finance systems in China. This is a great mix of local and gloabl partnership and shows the power of the internet as a platform for building global networks without government interference.

The financial restrictions in China mean that loans through Wokai eventually become donations as the money cannot be repatriated out of the country (for now). However, it is tax deductible being a donation so you get a good bang for your buck.

Another bonus is the opening up of China to the outside world. Given that censorship is still heavy (many networking sites are often blocked) its great to be able to connect with the local population in an open business exchange. This can only help bring China closer to the international community and foster a greater connection between different people.

Here is a moving story from our intrepid Kiva fellow in the Philippines, Sloane Berrent. It details the lengths to which people will go in order to be educated. The desire for education and the knowledge that it can lift people from impoverishment is clear and stark.

Within the story lies another imperative: the desire to give. Giving has become my passion whether it’s time, money or stuff. Yes reforming the global financial system is interesting but nothing will ever surpass the desire to perform service to others in a direct way. It’s our most universal law.

To raise $42 for a boat would take a few seconds these days. It’s that low cost, diversified approach that makes the web network so powerful.

These Stories from the Field are wonderful to read. People want connections, they want to see they are making a difference and they want it to be real.

Well it doesn’t get any more real than this.

I’m just back from 3 lovely days in Wellington (nice weather for a change!) at the NZ Association of Economists Conference. It had a good vibe and felt like there was a wider range of interesting papers than the last one I attended. The topics of interest for me are listed below (I will post in more detail once the papers have been uploaded to the NZAE website):

- Tax Reform: The perennial favourite, Capital Gains Tax, made some waves as did some more detailed examination of a possible Land Tax. This initially popped up 18 months ago as a floated idea and more recently was discussed at length over at Interest.co.nz.  The session on Tax Reform was sponsored by the Treasury so expect more debate on this in the near future.

- Aid and Development: There were a few papers on corruption and developmental outcomes which were worth following (though I haven’t seen anything to rival Paul Collier’s work). I especially enjoyed a paper on whether aid was helping to achieve the Millenium Development Goals. To me it was clear that whilst aid can make some contribution, targeted p2p actions such as microfinance and giving are more likely to have a lasting impact as they tunnel through the swathe of government and administration on both ends of the aid pipleline. Message to Government: Let people do the giving.

- Business and Innovation: It’s good to see economists looking at this topic since it’s of major importance to NZ. Again lack of capital and R+D incentives for business was a clear problem. We simply can’t compete with countries like Finland or Israel when all our capital is tied up in housing.

- Health: One good paper on “fat” taxes or food “subsidies”. It simply reinforced my position of taking a supply side approach. It’s hard to influence demand through pricing strategies when the underlying commodity (food) is experiencing huge swings in price. As with oil and carbon taxes, the prices movements in food prices will overwhelm any attempt to reduce demand by taking away GST for example (12.5%). Perhaps incentives like gift vouchers/cash in savings accounts will help focus (a bit like the idea to pay girls an annual stipend for each year they don’t get pregnant). We have to get our future health costs down somehow and creative solutions may be required. Time to call in the behavioral psychologists methinks.

- The Financial Crisis: Nice paper looking back at financial collapses over the last 200 years. Yes they happen with regularity…..whoa…yes we know that. The cycle goes back as far as records allow. Even the Bank of England was not immune from overstretching itself… a run on the Central Bank itself. Ooops. So my simple question is: When are we going to change the system?

Overall it was a good conference and a lot came out of it. For next year I can see more focus on the impact of microfinance and p2p activities, more focus on tax reform, more focus on the debt based financial system and hopefully we will have some more ideas to contribute ourselves.

Also good to see someone with a laptop on the go! Surely a first for the NZAE.

Because of its closed monetary system, microfinance, using external funds, has been tricky to deliver into China. So you will notice Kiva does not offer loans there as yet. However, Wokai, which I featured a while ago, has started up and is making great progress in delivering finance to those who are unable to access it through traditional banking channels.

It’s always good to see footage from the field and here is a great video interview with Casey Wilson, the co-founder and CEO, shot by GrubbyLens. These personal stories help build the picture and make the connection more real.

Facebook for Farmers from grubbylens on Vimeo.

According to my colleague and friend, Branton Kenton-Dau , human beings are intentional devices. We are here for a purpose, a reason and our human form is a structure for expressing intention. I like that. Every time we act we are expressing something about ourselves even in the most nano way.

So when it comes to managing our money we are faced with the same questions: who am I and what is my intention?

It seems to me that we have 3 ways of using our money: Giving, Lending or Buying.

Giving is the simple act of directing one’s money to somone else with no expectation of financial return inclduing the original gift. But there is a clear intention that the gift should have some kind of impact. Simply this can be regarded as giving money to charity or a fundraising appeal. Your return is hopeful, that some positive outcome or impact will be achieved by way of your contribution. This is a powerful way of expressing your intention. Of course one can also give your time, goods and services for no financial return and this is a more hands on approach.

Lending, otherwise known as saving, is also a powerful tool. When you deposit your cash in the bank you are in effect lending to the bank. In legal terms you are an unsecured creditor of the bank. There is little intention here as we tend to see the process as the bank doing us a favour. But when it comes to peer to peer lending, microfinance or simply lending money directly to friends, the process takes on a deeper signifiance. There is a more direct energy involved and a desire to participate in an outcome. The personal connection to borrowers helps create this possibility. Another form of lending is to large business via corporate bonds. This is akin to saving in the bank except again there is a directness involved. A large business wants to raise $100m and I lend it $20,000. I’m a small piece of that but I’m essentialy helping to fund the business. But there is still some distance there as I’ve probably dealt through a boker or investment advisor. What I am keen to see is more peer to small business in developed countries. We’ve seen Kiva open up loans into the US now and soom we will see more acceptance in people lending larger sums to small businesses. Not so much microfinance as peer finance. What better way to create strong and trusted communities than people lending to businesses they buy from.

The third form of intentional money is the process of buying. This is two parts: buying for ownership in a business and buying for personal consumption. The latter is the world of ethical and values based purchasing. It’s a well developed market and I won’t got into that. But actually directing your money into businesses through ownership is another way to direct the flow of your financial intention. Whether it’s ethical investing at the macro level (buying into ethical funds) or at the micro level (investing in start ups that share your goals and values). The micro level is more interesting because the impact of your investment is greater. In the macro world of stock markets and large companies your investment is not so influential because of the way institutional investors control so much of the market.

We have many choices when it comes to dealing with our money. Each time we make a financial decision we have an opportunity to express our intention. Its a very powerful force. The more we align our choices with who we are, the more powerful our impact becomes. We become an efficient intentional system

As they say money talks.

Following on from the news about Kiva moving into the US small business market, fleet footed Ben Kepes calls us to action in New Zealand.

Small businesses in NZ have seen no relief from high interest rates in the recent lowering of rates here. At the same time credit is hard to come by and many business owners have resorted to credit cards to keep their businesses going.

This is a troublesome state of affairs given its the productive economy that has to earn the dollars to pay back the humungous debt necklace hanging around the necks of Kiwis.

So what’s the state of play with microfinance at the moment? Well Kiva is going great guns. It’s really tapped into people’s desire to help and be generous in giving but created this new joy of creating and empowering change for people. It connects people together and that personal touch pulls the punters in.

The more tradtional p2p lending services are not finding life so easy. Charis Palmer reports here on recent developments citing problems for Prosper in the US and some success for Zopa in the UK. Locally Peermint has fallen by the wayside, Nexx hasn’t really got going and Lending Hub has joined a busy Australian market.

So there’s no shortage of platforms but it’s proving harder than expected to deliver the business. But there seems to be no platform for small businesses to secure funding. This is certainly an opportunity as there is certainly a strong and established market on the borrowing side with appropriate forms of due diligence available.

The major stumbling block for p2p start ups has been compliance with various regulatory authorities. However there may be ways around this and with politicians supportive of the small business sector the time may have come for a serious attempt to create what would be a mini-corporate bond market funded by the retail investement market direct.

Now that sounds like a major step forward in building a more productive economy.