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microloans for students - a thought experiment

at the IDEO/Harvard iLab, my group explored the idea of building trust in communities through a microloan network.

Photo of Ryan Mather
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Over the weekend, my team participated in this cool event (full blog post available here ). We devised a microloan network, powered by Bitcoin, that would help students connect to successful people in their networks. This is harmonizing a bit with Meena's awesome post

I thought I'd share some of our research findings from the prototyping phase. 

Our prototype starts with the story of Suzanna, a (fabricated) college student majoring in anthropology (GPA 3.5). She's got this amazing internship offer to study bathing rituals in Jerusalem but it's unpaid, and she's not sure she can afford it on her own. 

We interviewed a friend of mine Julia (a real person!) who used a crowdfunding site to raise funds for a similar opportunity. She told us that :

a lot of other people in my program had a difficult time crafting their campaigns because they felt guilty asking people for money to help them get to Ghana, even if it was for a good cause

We thought: How might we design a way for individuals to raise funds in a way that leaves them feeling empowered and confident?

We made this sharpie drawing of a micro-loan interface (see above image) and walked around asking people if they would rather give money to a general fund, that the recipient had flexibility with how they wanted to use it (the drawing on the left), or if they would rather buy something specific for that person (the drawing on the right). We found that people feel overwhelmingly more comfortable supporting someone in need by investing in something specific (this is why some people would rather give food than money to a homeless person).  We were surprised to uncover another interesting insight: People liked to use their choice of what to buy as an expressive gesture (for example: "I'm a photographer, so I bought Suzanna's camera, since I like photography). 

So, in short:

  • people might be more apt to support each other financially if they know exactly where the money is going

  • people used this choice as an expressive gesture, which makes it fun to invest in others!

Check out the full blog post for more info about the project.

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Photo of Shruti Verma

Hi Ryan! I think the insight that 'people like to give to people' is really useful. We often forget that products sell better when people identify the use and the user.
As for the point about students feeling guilty about asking for money, I think this is a phenomena which has developed about of the current situation with colleges and student loans. I myself feel ridiculous even asking my parents for a little bit extra so I can explore my area of interest.. haven't they done enough already? :)
Your suggestion therefore fits in well.. A targeted loan for a targeted outcome is empowering, makes the student feel responsible and makes the person giving the loan feel that they have helped someone in a way which is bigger than a 'handout'. ( Maybe you can add a postcard feature- the person giving the loan can receive a postcard when the targeted activity is done, hopefully with a personalized thank you note !)

It will be interesting to see what types of loans are popular. Do you think certain student activities will gain more traction?

Photo of Jared Bybee

I'm not sure I follow the Bitcoin connection. Would the askers then do a "registry" a la marriage for the project? I.e. I need a camera, a new set of shoes, a plane ticket, etc? What if what they really need is cash?

It seems that digging into why givers are comfortable giving and how askers can be comfortable asking is a really smart approach. I've been on the asking side and now more often on the giving side. I almost invariably give when I know and like and believe in the person. In the "Suzana" world of fundraising, I won't give to a person I have no affection for or confidence in regardless of the project.

Since, in my giving, there is no connection between the project and the gift, but rather only the person and the gift, there might be some value in also disconnecting the giving from the project and just let it be an expression of confidence in the person. That lets the giver give more authentically.

"Give to me because you know I'm awesome" puts askers in an awkward position - even if it is the real reason givers give. Could you frame the gift in a "pay it forward" way? "Give me some money to make this amazing experience or project happen. I commit to do the same for a new crop of students in the future." Do you think something like that might align interests and motivations authentically?

Photo of Ryan Mather

Really interesting point! The bitcoin connections is tenuous, as you identified. It was mostly just a starting point.

Re: Investing in the person. The reason we strayed away from that was that some of the people we talked to felt really vulnerable and embarrassed trying to "sell" themselves. We thought that by making it about the objects & things, it might take the pressure off of them being awesome. One of the things we had in mind is that the best loan network would be something that the average person can participate.

The pay it forward idea is really interesting! I was thinking about how with Bitcoin, there is a limited number of bitcoins. It could be really interesting if you could donate a Bitcoin (Maybe you can give it your name or something?) and that specific Bitcoin is passed down to future users. The interesting thing about Bitcoin is that you can (in fact you need to) track the history of each bitcoin. It could be interesting to see the history of one bitcoin empowering many different people.

Thanks for the insightful dialogue ~~ awesome!

Photo of Meena Kadri

Great reflections (and thanks for the hat-tip :^) Do you think donors would like to hear about the eventual use of their funds? (i.e. how the recipient has been empowered?) I'd be keen to hear about Sarah *did* with her camera – which is the real impact of my donation.

Photo of Ryan Mather

Hi Meena,
I think that people would be interested to hear. My only concern is avoiding this kind of situation for the borrowers : https://medium.com/@cameronmoll/the-economics-of-a-kickstarter-project-5b374cfeb43c

Photo of Meena Kadri

Great share – and poses lots of opportunities for empowering people with financial knowledge so they are fully aware of the risks they are taking . Micro loans also have their fair share of horror stories for borrowers – let's learn from these as we march towards our upcoming Ideas phase to build stronger, human-centred solutions.

Photo of Bob Dole

It makes a lot of sense that people want to know where the money is going, but there's always a backing concern that this can be limiting. If a homeless person wants a sleeping bag instead of food, or our intrepid anthropologist realizes at the last minute that she'll need a new backpack, tying up funding becomes a limitation.

Obviously that issue takes second place to getting donations at all, which is why I like the idea of targeted buying, but I wonder if there's a way that you could achieve both? One possibility that comes to mind is offering a list of "price points"; rather than a list of items you can buy, it's a list of values where "a donation of $X will fund Sarah's Y". This is already used in a lot of food drives to humanize donations, where all money is pooled centrally but the consequences of a specific value are described.

As a followup question: is this a micro *loan*? My understanding is that Kiva and its ilk ask their recipients to pay back the support and roll the repayment into further loans. This looks like a straight donation system.

Anyway, it's a very cool idea - rather than funding by project like IndieGogo or Crowdrise, it's cool to see donations centered on the person receiving them.

Photo of Ryan Mather

Hi Bob!

Really interesting points. I agree that it would be ideal to have both. In the system we conceived, we kind of flipped between whether it should be a gift or a loan. I think we ended up thinking that it would be best if it was a loan by default, but that people could make it a gift if they wanted to. Kiva is really similar to this! The main difference is the itemization of things.

Reddit Gifts might actually be an interesting case study - it's a platform where 10s of thousands of people give gifts to each other. https://www.redditgifts.com/ People seem to really have a lot of fun expressing themselves through the act of giving.

It would really be tricky to figure out the right balance of limiting the options of the borrower - probably something to validate through user testing I'm guessing. I feel like maybe if we told borrowers that they had to list out specific items, they might just assume it's normal.

Thanks for commenting ~

Photo of Ryan Mather

oops! I forgot to give credit to the other team members!!!
Many thanks to my amazing team : Avinash Raju, Maja Šoštarić, and Katini Mwangasha.