United Prosperity

Donors as collateral


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US United States
Web http://www.unitedprosperity.org/


About the project Edit

Founded in April 2008 by Bhalchander Vishwanath, United Prosperity is the first person-to-person loan guaranteeing website. Unlike most microcredit or person-to-person lending organisations, this California non-profit organization does not directly lend to the micro-entrepreneur, but instead the micro-loans are used to provide a guarantee to a local bank, which lends to the micro-entrepreneur. Donors serve as collateral. Typically the local bank will lend about twice the amount provided by the micro-lender's guarantee, thus providing greater leverage than traditional micro-credit.

When a set amount of donations is reached, United Prosperity issues a cash-secured guarantee to a bank on behalf of the microfinance institution (MFI) that uploaded the entrepreneur’s profile. The MFI is then issued a loan from a local bank, which then lends the money to the entrepreneur. After the entrepreneur repays the loan to MFI, which in turn repays the bank, the donor’s guarantee is returned and can either be withdrawn or can be used for another loan. The idea for United Prosperity actually came up when Vishwanath was working for Mortgage Insurance Company PMI and saw that banks would be willing to make a loan to individuals with poor credits under the condition that the borrower or the bank buy mortgage insurance from PMI. He quickly realized the adaptability of the model and soon sought to use the idea to help the extreme poor in securing small loans.


In what ways is this project unique and creative? Edit

United Prosperity has found a creative way to address current challenges facing traditionnel microlending model. Nobel Laureate Prof. Mohammad Yunus notes that the biggest problem we face in trying to expand the reach of microcredit is not the lack of capacity, but the lack of availability of money to help microcredit programs get through their initial years until they reach break-even level.

United Prosperity uses a Web-based variation on the usual microlending model. Through the United Prosperity website, donors - here termed as compassionate social guarantor - can view the profiles of poor entrepreneurs who are seeking loans, and donate small or large amounts of money (there is no minimum donation amount) to the business or entrepreneur of their choice. A criticism of traditional microcredit models is that they can create a long-term dependency between the micro-lenders and the micro-entrepreneur as the micro-entrepreneur never builds a relationship with local banks.

What is the social value of this project? Edit

The value of this concept is both in the microfinance and the guarantor aspects – because loan guarantees are only a fraction of the total loan amount, a small donation goes a longer way than it would in the traditional donation format. Another claimed benefit of this approach is that the micro-entrepreneur develops a relationship and, most importantly, a credit history with their local bank, enabling the micro-entrepreneur to become independent of the micro-lenders in the long term.

With its innovative application of microfinancing, United Prosperity aims to become a self-sustaining business with the objective of combating global poverty by multiplying the impact of money through loan guarantees.

What is the potential of this project to expand and develop? Edit

What was the triggering factor of this project? Edit

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