Kiva.org Meets Facebook in China?

Casey Wilson is the Co-founder and CEO of Wokai, the first person-to-person microfinance platform for China. Wokai means “I start” in Mandarin.

What’s happening in China?

China has the second largest potential microcredit demand in the world, next to India. Yet the total loan portfolio of China’s non-government microfinance sector is only $200 million, in contrast to India, whose microfinance sector is projected to reach $3 billion by the beginning of 2010.

Founded in 2007, Wokai aims to create a sustainable source of capital to grow China’s microfinance sector by connecting individual contributors around the world with borrowers in rural China. Our website offers users a transparent and secure way to give as little as $10 dollars to support the loans of micro-entrepreneurs in China to start small businesses and lift themselves out of poverty.

Since launching our website in November 2008, Wokai has raised over US$190,000 in contributed loan capital, grown to over 5,000 users, and empowered over 370 borrowers in China to start small businesses. Wokai has been featured by Time, MSNBC, CNBC, Newsweek, San Francisco Chronicle, CCTV, Phoenix TV, and most recently by Bloomberg and Money.163.com, a major Chinese financial site.

What is the most surprising thing that has happened the past year?

The most surprising thing that has happened at Wokai so far has been the groundswell of attention that we’ve received in the Chinese media and the way that has translated into more awareness. In October 2009, we were featured in the Beijing Youth Daily, a local newspaper in Beijing, and the article was then picked up by Sina.com (the Yahoo News of China). Within 24 hours, we went from 200 visitors a day to 10,000 and were soon featured in all of China’s major tv, radio, and print media.

When we started Wokai, we aimed to create a China-helps-China model, in which the 200+ million young urban professionals in Chinese cities would be supporting the impoverished in rural china. However, the idea of philanthropy amongst the Chinese was underdeveloped at that time. About a year later, in May ’08, a devastating earthquake shattered Sichuan Province. Overnight, there was a 180 degree shift in the Chinese perspective towards philanthropy, as the nation mobilized to give to the relief effort, and a lasting cultural change was created. These events laid the groundwork for a massive growth market in China philanthropy that makes Wokai’s China-help-China model very viable in the short term.

Is there a “typical” client for Wokai?

One of my favorite borrowers is Fu Yajun from rural Sichuan, whose loan 17 other contributors and I support. A wokai.org client: Fu Yajun is 30 years old and lives in Sichuan with her husband and twin sons in a home that is less than 30 square meters in size. Fu Yajun felt blessed, grateful, and happy. She was no longer relegated to manual labor and hand-to-mouth living—her business was starting to turn a profit. Aspiring for a stable future for her family, Yajun and her husband wanted to to expand their business but had no avenues of raising money. Having received and benefited from microfinance, Yajun’s neighbor recommended that Yajun apply for a microloan. Today, with the help of Wokai’s contributors who funded Yajun’s USD400 loan request on wokai.org, Fu Yajun has expanded her mushroom farming operation! Her profits have increased, bringing her family the income it needs to afford healthcare and schooling.

How do you navigate China?

One interesting challenge that we navigate on a daily basis operating in China is the regulatory landscape. Microfinance was late to develop in China, only starting in 1994, in contrast to 1976 in Bangladesh. Regulations prohibit MFIs from accessing debt and equity investment, leaving them completely reliant on donor funding which is decreasing rapidly as the outside world sees China as an economic superpower rather than a country in need of aid.

When we first started Wokai, we aimed to create a Kiva-like model in which lenders from all over the world could lend no interest capital that when then go to our MFI Field Partners, and, finally, be lent out to the end borrowers on the ground. Once the borrowers repaid their loans to our Field Partners, the capital would then be repaid to lenders online.

Soon after starting Wokai, we discovered two major regulatory hurdles that forced us to change this model. First, the regulations prohibiting MFIs from accessing debt and equity investment made it difficult to impossible for us to launch with a lending based model. In order to adapt to these regulations, we changed our model to be based on donations (rather than loans) that would serve as revolving investment funds which would be directed year after year by contributors to borrower loans of their choice. Second, we were prohibited as an international nonprofit from fundraising domestically in China. We therefore decided to first prove our model among the international contributor community before later working to develop a partnership structure to launch in the China contributor community.

After receiving significant exposure in the Chinese media, we are making a second attempt to develop a model to engage contributors in China. In this process, we’re discovering that new laws allowing lending domestically in China from one individual to another may enable us to adapt a China specific Wokai to launch in the China lender market.

-Casey Wilson, as told to Jim Rosenberg