h a l f b a k e r yRenovating the wheel
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Very simple idea: a micro stock exchange for micro entrepreneurs in the developing world.
1. at a central location, the entrepreneur presents his existing project and issues shares (total worth only a few hundred dollars). The presentation is taped with a webcam. Financial basics and a business outlook
are presented as well. (Mr X now has 8 goats, but he sees opportunity to grow to 24 within 6 months, because of X and X. After 6 months, he will sell much more cheese and make three times as much profit.)
2. the project is uploaded on a website, and you can buy micro-shares in the mini-company.
3. quarterly reports are taped and presented on the website, with a short overview of the financial health and basics of the company.
4. for wealthy people in the West, this may be a playful way to participate in the micro-market of the developing world in a direct way; your stock portfolio would consist of companies in all sectors - from fisher man who want to grow by buying a new boat, to street-vendors or ricksaw drivers who want to expand their business.
5. this may have advantages over micro-lending and micro-credit, which charges lenders big time, and which often pushes poor people into eternal debt.
6. in order to avoid speculation, certain obvious rules will be implemented (e.g. you can not own more than 10% of a micro-company's shares; no shorting allowed, etc...)
7. for wealthy consumers in the West, this is low risk and fun; for micro-entrepreneurs in the South, this could make a difference.
8. there are no charges for buying/selling stock on the market.
9. Dividends paid on a yearly basis.
Obviously, the website is nicely illustrated with pics of the businesses, news, interviews, etc...
Cambrian House: Micro Stockmarket
http://www.cambrian...r/ideas-id/N6GNvHo/
Without the development angle. [jutta, Jul 14 2007]
http://en.wikipedia.org/wiki/Pangloss
[pertinax, Jul 15 2007]
http://www.investop...tivedestruction.asp
[pertinax, Jul 15 2007]
http://en.wikipedia...wiki/Invisible_hand
[pertinax, Jul 15 2007]
Usury, per the States (they each have a different idea)
http://www.lectlaw.com/files/ban02.htm
N.B. I should have said "often usurious;" it kinda depnds which state your in. [DrCurry, Jul 16 2007]
Co-ops
http://en.wikipedia.../Worker_cooperative
I'd rather... with a credit co-op being the first such [BunsenHoneydew, Jul 23 2007]
Mondragon
http://en.wikipedia...erative_Corporation
... as per here [BunsenHoneydew, Jul 23 2007]
Grameen Bank
http://en.wikipedia.org/wiki/Grameen_Bank
that Nobel Prize guy [BunsenHoneydew, Jul 23 2007]
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Intriguing idea. I'm concerned that we would be capriciously playing with people's livelihoods, but I guess your point 6 addresses this. |
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[aside: All your participants and examples are male. Do you think that reflects entrepeneurial reality? I'm used to seeing stressed how important it is to get financial means to women in the third world.] |
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Is there really that big a difference between micro loans and micro stocks? OK, if someone defaults on their loan, you get to be more upset than if someone's stock tanks, but, realistically, you're not going to go there and beat them up over either.
And there are some micro loan programs that are ethical, right? Like that economist who just got the Nobel prize, Muhammad Yunus - he's alright. Right? (Honest question; this is way out of my area.) |
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I'd complain about the gratuitous use of media and websites, but the "One Laptop per Child" project has enough media stuff in their laptops to produce something like this, and there's going to be enough people who can - so I wouldn't actually be surprised to see it in reality, about three years from now. |
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There's an ethical problem with the shearing forces of trade between two societies with drastically different levels of income and power. It'll be a little as if everybody is on one gigantic reality TV show, with people discovering new ways of making themselves interesting for the overpoweringly rich investors. That's going to get ugly. But it's already pretty ugly as is. |
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What's wrong with speculation, shorting, etc.? |
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How do you avoid getting ripped off? (What if the industry currently devoted to spam and mail fraud turns their attention to stocks?) Or do you just not care, since the risk is so low? |
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All valid points, Jutta, but I think the last one is the key one. Penny stocks have long been the realm of fraudsters and manipulators. |
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Besides, the costs of all the things Django proposes would dwarf the costs of the projects he wants to support. Not atypical for charities devoted to the Third World, of course, but put those two things together, and this simply won't work. (If "working" is taken to mean improving the lot of the average Third World entrepreneur, as opposed to enriching a bunch of website operators and fraudsters.) |
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Another scheme to make money off someone else's labor. [-] |
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I am always against anything that smells even remotely of commercial pigism. Micro credit however is a very good idea. It alows for poor people to start their own business and provide for themselves. I see this idea as a natural follow up. Big + |
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zeno: I do wonder how you square opposing "commercial pigism" with the fact that micro credit works so well in part due to the fact that the interest rates charged are usurious? |
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The costs of transparency & accountability are going to be a problem. With debt finance, the only critical question to the financee is 'Can you come up with the money when it falls due?' and how he/she does that is his/her own problem. With equity finance, on the other hand, there are questions like 'Do all the goats in that photo really belong to you? Are you selling off the milk at below cost to a separate, privately-owned entity, and thereby pocketing money which ought to go to investors as dividends?' (Let's take as read all the 'two-cow' jokes; no need to repeat them here). |
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//What's wrong with speculation, shorting, etc.? // |
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Speculation and shorting tend to maximize churn. They are good news for middle-men. Some panglossian theorists maintain that they are good for the economy as a whole (generally the same theorists who wax lyrical about 'creative destruction'). |
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In my opinion, though, they represent the Invisible Hand wanking. |
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Well, maybe not speculation (it depends what you mean by 'speculation'), but shorting, definitely. |
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perinax: you're ignoring the zero transaction costs - why is churn bad in that case? And shorting keeps the market honest. |
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What zero transaction costs would those be? And can you explain what sort of dishonesty can be eliminated by shorting? |
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The point of a stock exchange is to create liquidity for share owners, and thus encourage overall investment and therefore growth. Creating such liquidity for micro businesses seems pointless -- their liquidity, such as it is, is already provided by the success of their business. Loans, on the other hand, do make sense -- it's how they start can actually start their business. |
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[Dr Curry], I simply have no knowledge of interest rates regarding micro credit nor do I know the word usurious. I just thought they would get a fair deal concerning interest. If they are not I am angry about that. |
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"Usurious" literally means charging interest for money. It's used today to refer to excessive interest - "usurer" is a fancy word for loan shark.
I don't actually know whether interest rates for micro loans fit this description or not. |
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There may be an enforcement issues. Microcredit tends to work best when you lend to groups rather than individuals.
Great idea though. |
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Jutta: depends which country you're talking about, but the rates charged by microlenders would typically be illegal in the States (one reason microlending doesn't work well in developed countries; the other is that people already have ready access to credit).
zeno: define fair. They're getting credit and no one is going to break their legs and burn their house down if they don't pay it back. Microlenders have to charge a high rate of interest if they are to make a profit - it simply costs more to lend small amounts. And microlending only "works" insofar as lenders make a profit; if they didn't, it would be called charity. |
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The Idea makes sense. A lot of the banter about rates, costs, and ethics does make sense also, but the context and ends of micro-lending present a different set of challenges to a public market than the challenges faces by a 'publicly held' (micro capitalized) firm leveraged by equity. |
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A shepherd who borrows money to breed two goats, and gives up one of the flock as 'interest', may be giving most if not all profit to the lender assuming half of the breeding pair came from "OK Rent-a-Goat". The same principle applies to investors in the equity of a small bio tech company whose fortune depends on success or failure of a long shot developmental stage blockbuster drug to treat, say, goat infertility. That is to say, profit depends on units produced (one) and ownership of proprietary interest in future profits. |
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The micro stock market as depicted by [django] would be no more usurious than when a private equity consortium takes a multi billion dollar firm private in order to divide and sell it at a profit. Like any investment offered to the public, though, there are ethical and legal considerations that may vary depending on where the marketplace is located and under what stipulations traders are forced to operate. |
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Fair would be something that can be easily paid. 500 euro loan. 550 pay next year. hey that's 10 percent right? Would that be easiliy pad back? I don't know. I would call fair what enables a set up for business with a good income and a payback rate that leaves room for a good income, at least better then before. Hell, I don't know I'm making this up as I go along. |
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I'm offering shares of [normzone] Light Industries for bargain prices. |
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Although I'd personally prefer [link], and ethically I'm 100% with [nuclear_hobo], this isn't a bad bit of halfbaking. [+] |
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Cut out all the high tech fandango (except where the OLPC has rolled out perhaps) and stick with local investors gathered around the local coffee house chalk board. Hey, it worked out OK for Europe (barring a tulip crash or two). |
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I'm not quite sure your beef with microcredit really holds up [link]. |
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