Wealth Distribution

I know that many out there are thinking, why shouldn't the wealthy be forced to pay higher taxes so that the government can give the poor money?

The reason why that doesn't work is because for every dollar pulled in by the government through taxes, very, very little goes to middle to lower class families (When is the government going to realize that it just isn't at all efficient? And when are we going to stop putting up with that?). However, when the wealthy are given the chance and encouragement to share their wealth then for every dollar spent a dollar goes to the middle and lower class families. The interesting thing is that the wealthy like giving money and are willing to give on their own terms, but they will go to great lengths and hire attorneys and accountants to keep as much money as possible from the government.

Here is a great story that would be good for everyone to read. The company it talks about is now opening up in the U.S. to give loans and they already have people in other countries who are excited to now make these loans to people in the U.S. (How cool is that?). Also, just in case the article isn't clear enough, the company is struggling finding people to loan to because it is getting too much money to loan:

SAN FRANCISCO (Fortune) -- When the economic downturn took hold last autumn, the management team at non-profit Kiva.org made a calculated bet to curb investment, anticipating that donors would slow the volume of small loans they make to entrepreneurs in the developing world. That slowdown never came. Now, the non-profit site is racing to keep up with user demand even while planning to bring its unique form of charity to the U.S.

Nearly 500,000 users have lent almost $65 million, interest-free, to developing-world entrepreneurs through Kiva.org. The nearly four-year-old site received a major boost during its early days from a wave of media publicity (including FORTUNE's The only non profit that matters) and the very public endorsement by former President Bill Clinton.

Media attention has waned in the last year or so, but growth has only accelerated due both to friend referrals and loyal users who repeatedly re-loan money rather than withdrawing it. The site distributed $3.5 million last month. "The good news is that we're doing more loans than ever," says Premal Shah, president of the San Francisco-based organization. "The flip side is that we under-estimated demand. [Our growth] rate exceeds the rate at which we can scale."

Kiva takes no cut of the loans allocated for entrepreneurs. Instead, it solicits an optional 10% fee of every loan to help pay salaries and keep the lights on. The organization uses microfinance institution partners to vet entrepreneurs before allowing them to solicit funding. By asking a series of questions to assess roots in the community and the legitimacy of a business, Kiva is able to establish a risk profile for each entrepreneur. Before offering money to, say, the proprietor of a Dominican fruit stand, any lender can read the entrepreneur¹s profile, history of defaults, and a bit about the business.

Default rates are low --­ 2% total ­-- and users can lend a minimum of $25 to any single person. Spreading loans across a series of entrepreneurs further lessens a lender's exposure to risk, and gives more people an opportunity to put money into the system. Lately, however, lenders are putting up more money than Kiva can distribute. Several times in the last month, the site has displayed a message saying there were no entrepreneurs to lend money to.

"This is pretty much a fault of management," says Shah. "We assumed things were really going to fall off. We didn¹t sign up enough microfinance institutions. That turned out to not be the right assumption. There are plenty of poor people out there."