What if the next hot investment was about doing good?

What if generating social returns were just as important as earning a profit?

Social finance has recently exploded in popularity. This is “finance meets Facebook” for the millennial generation. So how can you get involved?

Here are three early innovators:

Kiva Microfunds is a nonprofit that allows individuals to make loans to entrepreneurs around the world via their website. Users can make zero-interest loans of as little as $25 to projects of their choice in over 70 countries.

To get involved, all you have do to is create a Kiva account at Kiva.org, upload money using a credit card or PayPal, select the borrower who has the most inspiring life story posted on their profile, and click send. It’s simple and fast. Since 2005, Kiva.org has raised more than $600 billion in loans.
 
Kickstarter is a crowdfunding platform that brings together the creators of projects— which range from fashion ideas to inventions and innovations to potential start-up businesses—and “backers” all around the world on Kickstarter.com.  

After signing up, users can browse through a broad range of project descriptions and videos to select the plans they would like to help bring to life.  Each project has a minimum funding goal and a deadline set by the creator. If the goal is not reached by the deadline, the creator receives no funds. Unlike Kiva, Kickstarter does collect 5% interest from the funds pledged by donors.
 
Prosper is a peer-to-peer lending platform that gives people the opportunity to borrow money outside of traditional banks and other financial services.

Individuals who are in need of money, but who may not have access to bank loans, can choose a loan amount, describe the purpose for the loan, and post a listing on Prosper.com. After reviewing the loan listings, investors can invest in the loans of their choosing.  Borrowers repay their creditors in fixed monthly payments made directly to their Prosper accounts, typically over a three-year period.
 
Each of these platforms occupies a different space on the social-to-financial return spectrum. Kiva and Kickstarter may both involve more social benefits and fewer financial returns, while Prosper occupies the other end of the spectrum.  This is a diverse and growing field, so social investors will have many platforms to choose from.

Post by: Matthew Katz, a summer intern at StratFI.
 
 
Information contained herein is for educational purposes only and is not to be considered a recommendation to buy or sell any security or investment advice.