Earn Higher Returns with Microloans

Microfinance investments can yield 5.5% or more -- often while helping schools and nonprofits.

Willing to take a little more risk to earn 4% or more? MicroPlace, which is owned by eBay, is an online broker for microfinance investments around the world that pay 0.5% to 4% interest. Terms range from one to four years, and the minimum investment is only $20. Select the type of project and region of the world, the rate of return you want, and the term of your investment, and you’ll see a selection of projects in which you can invest. A client of Durham, N.C., financial planner Jennifer Lazarus used MicroPlace projects to create a CD ladder that is earning from 0.5% to 3% for maturities of 12 months or less. In the four-year history of the site, no issuer has defaulted.

Prosper.com has formalized the process of peer-to-peer lending. You can examine the credit quality of loans you purchase and create a diversified portfolio to minimize the risk. Although you can invest as little as $25, Joe Toms, Prosper’s chief investment officer, recommends investing a minimum of $5,000 to create a portfolio of at least 250 loans. There are seven loan grades. Top-quality, AA loans, which Toms equates to B-rated corporate loans, are yielding 5% to 5.5%; lower-quality loans pay higher rates. Residents of 28 states and the District of Columbia can invest in these loans, which usually have a three-year term.

At RSF Social Finance’s Social Investment Fund, you earn only a 1% return, but your money is lent to more than 75 nonprofit and socially responsible organizations, such as schools, a firm that keeps waste out of landfills and a company that converts weeds to eco-packaging. The fund operates like a revolving three-month CD that continually reinvests at maturity unless you direct it not to. Since 1984, the loans have had a 100% repayment rate. The minimum investment is $1,000.

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Lisa Gerstner
Editor, Kiplinger Personal Finance magazine

Lisa has been the editor of Kiplinger Personal Finance since June 2023. Previously, she spent more than a decade reporting and writing for the magazine on a variety of topics, including credit, banking and retirement. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.