Ebay founder Pierre Omidyar, one of the world's richest men, is betting to ease one of the world's most daunting problems: Poverty.
Omidyar, who started eBay 10 years ago, announced Friday that he is donating $100 million for a new Tufts University program to generate millions of tiny loans, some as small as $40, to finance entrepreneurs trying to escape poverty in India, Bangladesh and other poor countries.
The gift is a big endorsement of social entrepreneurship — a field of growing interest for the new generation of technology entrepreneurs. The shift could recast traditional philanthropy dominated by non-profits such as the Ford Foundation built on Old Economy wealth
The new entrepreneurs, impatient to resolve global problems more quickly, are applying the very business models that made them rich at eBay, Microsoft, Google and America Online to battle the most vexing issues, from poverty to childhood disease. "We ought to be looking at business as a force for good," Omidyar said in an interview.
Other tech entrepreneurs are making similar moves. Microsoft's Bill Gates just announced $258 million to help drug giant GlaxoSmithKline and others defeat malaria, a disease killing 2,000 African children daily.
Google's founders last month said their planned $1 billion in philanthropy would include backing entrepreneurs in places such as western Africa.
Yet the $100 million from eBay Chairman Omidyar and his wife, Pam, both 38, stands out for several reasons. It's a record dollar commitment by an individual to the microfinance industry, he says.
The industry began about 30 years ago in rural Bangladesh when economics professor Muhammad Yunus launched what is now Grameen Bank. It has 3.7 million borrowers, virtually all women, relying on the bank's nearly 1,300 branches covering 46,000 villages. Repayment rates are 95% to 98%, says Grameen Foundation USA, the bank's U.S. affiliate.
Since Grameen's launch, a network of other microlenders — as many as 10,000 — has sprung up worldwide, lending about $24 billion annually, says the Microcredit Summit Campaign, funded partly by Omidyar. Over the next 10 years, he expects the Omidyar-Tufts Microfinance Fund could unleash $1 billion in loans, many to women, as capital is repaid, then lent again. That could attract billions more from Wall Street.
It is the biggest — though not the last — such gift from a man with very deep pockets: Omidyar, with $10 billion, ranks No. 18 on Forbes' list of the 400 richest Americans.
Omidyar's capitalist approach to philanthropy could encourage other wealthy entrepreneurs from his generation to follow a similar trail, says Diana Aviv, president of Independent Sector, a charity trade group whose members include stalwarts such as the American Red Cross. "These guys broke the business mold and, in a way, they are trying to break the social-compact mold as well," Aviv says.
Omidyar's gambit is not guaranteed. For decades, do-gooders have thrown billions at programs meant to raise living standards for the world's 3 billion poor, many living on far less than $1 a day. "We're talking about deep, intractable problems," says Gene Tempel, executive director of the Center on Philanthropy at Indiana University.
While Grameen Bank has been successful, few have tried what Omidyar seeks on such a big scale: luring risk-averse Wall Street to invest in entrepreneurs such as Bhagyamma Vadla, 26, in the Andhra Pradesh province of southern India. She started a buffalo-milk dairy and clothes-making business with four loans totaling $674 over the past four years, says Grameen Foundation USA. She now earns $2.44 a day, nearly four times what she earned before the loans.
[Excerpted from an article by Jim Hopkins, USA TODAY]