Traditional microfinance has largely been funded by large institutional supporters such as Citigroup, FINCA International, and the International Finance Corporation – that is, commercial banks, non-governmental organizations and development agencies, respectively. Over the past several years, a variety of grassroots initiatives have emerged which help augment traditional funding streams by tapping into donations and other support from large groups of ordinary individuals.  This somewhat less formal approach has a strong dual social purpose, simultaneously empowering both those in need of loans as well as those seeking to take part in social change.

While institutions such as Trickle Up have accepted donations from individual donors since the early eighties that provide small grants to entrepreneurs, newer organizations such as Kiva and PoverUp are designed with the primary purpose of integrating those outside the financial services industry into the microfinance dynamic.  PoverUp, for example, seeks to engage millions of students through outreach campaigns dedicated to eliciting small donations.  Kiva, on the other hand, provides an internet platform which brings together potential loan recipients with non-institutional donors from outside the financial services industry.

In addition to cash flows, this populist push is also affecting the very administrative makeup of the microfinance world.  PoverUp was founded by a college freshman at the University of Pennsylvania, and provocative student run initiatives such as the Columbia Business School’s Microlumbia and Oxford University’s Microfinance Initiative have been increasing youth involvement.  Likewise, countless undergraduate microfinance clubs have been formed around the United States, and even high school level groups are emerging. Whereas twenty years ago microfinance was the purview of an esoteric group of non-profits, emerging market specialists, and academics, today it is increasingly within the immediate vocabulary of any graduating class.

Through activities such as these, exciting innovators are restructuring the very nature of microfinance capital flow dynamics and the intellectual investment of the general public. As this approach to funding entrepreneurs is popularized, it gathers momentum in the P2P realm.  However, regulators in the U.S. are currently reviewing such lending platforms which may place a burden on microfinance lenders.  (read more on P2P regulations).