eBay site lets people fight world poverty

from The Globe and Mail

JONATHAN STEMPEL AND ERIC AUCHARD

NEW YORK — EBay Inc, the world's largest online auctioneer and payments company, launched a website today that allows ordinary investors to buy securities aimed at improving conditions in the world's poorest countries.

MicroPlace, located at http://www.microplace.com, will allow people to invest as little as $100 to support development in impoverished areas.

So-called microfinance is the supply of loans, savings, insurance and other basic financial services to low-income households and businesses, typically without collateral. It is often conducted in emerging economies, where people cannot typically obtain bank loans.

Microfinance is at work in more than 100 countries, and is generally provided by financial institutions or wealthier investors. It gained wider renown last October when Bangladeshi economist Muhammad Yunus, who pioneered it in 1976, and the Grameen Bank he founded won the Nobel Peace Prize.

"Capital markets are just waking up to this asset class," Tracey Pettengill Turner, the founder and general manager of MicroPlace, said in an interview. "This is different because it is the first Web-based service for the everyday investor to invest in microfinance, and earn an investment return while addressing global poverty."

Turner said she has worked in Bangladesh, and worked at Grameen in 1998 after graduating from Stanford Business School. She said she sold MicroPlace to eBay in June 2006.

Another microfinance site, Kiva.org, said last week it has built a $13-million loan portfolio in its first two years to help about 20,000 entrepreneurs. Other sites include Finca International's http://www.villagebanking.org and Accion International's http://www.accion.org.

MicroPlace chose the Calvert Social Investment Foundation to offer its first 10 securities, where funds are designated for such countries as Cambodia, Ecuador, Ghana and Tajikistan.

The securities mature in two to four years and, despite lacking credit ratings, yield just 1.5 per cent to 3 per cent a year. That's below the 3.8 per cent yield on similar maturity U.S. Treasuries, which have essentially no credit risk.

Turner said issuers "generally have very good track records, often with 10 years in investing in microfinance with no history of defaults." She added that the issuers often set aside reserves to limit potential credit risk.

Investments may be made through eBay's PayPal service, or a regular bank checking account, and investors are assessed no fees, commissions or expenses. Prospectuses are available online, and MicroPlace is regulated as a brokerage by the Financial Industry Regulatory Authority.

Turner said MicroPlace makes money from charging issuers to list. "We aspire to break-even, and if and when we reach profitability, eBay intends to reinvest any profits back into its own social initiatives," she said.

Catherine England, a spokeswoman for San Jose, California-based eBay, said the program will be "not material" to results at the online auctioneer and payments company.