Case Study | MYC4

–Overview

MYC4 is a company that facilitates microcredit via the Internet to small businesses in developing countries. It connects investors in developed countries and borrowers in developing countries. Since the company's creation, 14,900 investors from 90 countries have invested more than € 8.3 million in 4,700 businesses in seven African countries - Uganda, Kenya, Côte d'Ivoire, Rwanda, Ghana, Senegal and Tanzania. In June 2008 more than € 700,000 was distributed in loans. (MYC4, Wikipedia.)

–Background and challenge

The African banking system is the smallest in the world and consequently has very little competition in a monopolistic situation with a lack of distributional capacity and uncompetitive rates. The losers are “the Missing Middle”, the medium-sized (100-250 employees) and small (1-100 employees) businesses that are often forced to turn to local money administrators because their services are convenient, fast and flexible when the need arises. However, small businesses engaging with a local money administrator often results in stagnation and a decline in income because of the sky-high interest and the unreasonable conditions keeping them trapped in poverty, which is a setback not only for the individual entrepreneur but for the development of the region as a whole. (MYC4, Wikipedia.)

–Innovation

Investors who have created accounts on the website are given a variety of third-world businesses to choose from, which they then bid money towards supporting. The recipient, after agreeing on the terms, closes the transaction. Then third-party financial groups evaluate the terms to disburse initial funds and collect repayments. Repayment generally carries five to twenty percent interest, as decided by the bidders. Unlike its similar service model Kiva from the U.S in MYC4 investors actually make money out of the interest they underbid, through which innovation the service will be more sustainable businesswise and will create more beneficiaries in both parties. (MYC4, Wikipedia.)

–Keywords

Poverty relief (economic), business sustainability, contribution to local economy

–Reference

MYC4, Wikipedia. [http://en.wikipedia.org/wiki/MYC4], retrieved Nov 30, 2009.