Babson Students Engage In Microlending

The Babson College Micro Credit Investment Fund is a student managed micro credit investment group within Babson College. Student managers invest in promising entrepreneurs and organization leaders, providing them with the credit necessary to launch. J. Daniel Catalano, President of the fund, has indicated that the initial capital will be supplied by donors and returns will be reinvested in the fund.

The micro-lending fund will initially operate in Kiva, a 501c3 non-profit website that allows individuals to act as microlenders to entrepreneurs in developing nations, but eventually will explore other opportunities for micro credit lending in a more personal environment. The student managers will make collective decisions to optimize the portfolio and grow assets. Catalano told us that the long-term goals of the fund are to educate students on the principles and intricacies of micro lending while effectively alleviating the burden of poverty among ambitious third world entrepreneurs and their surrounding communities.

For those of you that have heard the term thrown around but aren't quite sure what it means, micro crediting is the act of providing entrepreneurs will small loans quickly and without a pledge in order to support and facilitate commercial activities. The entrepreneurs will rarely have a formal business plan, but are typically provided a private consultant (prevents moral hazard and increases productivity) in addition to the borrowed money for free. The financing is interest-bearing, but only for the funds that are exhausted. The average repayment period through organizations such as Kiva is usually about four months.