I mentioned Wokai briefly in the previous post but after closer examination they deserve the full monty. Developed by 2 smart ladies (Courtney McColgan and Casey Wilson) from the US who met studying advanced Chinese at Tsinghua University.

Wokai means “I start” in Chinese and represents the entreprenuerial spirit of microfinance. It looks an amazing undertaking. With over a sixth of the world’s population the potential for domestic economic activity is enormous.

With 300,000,000 living below the poverty line and the Rural Credit Bank only servicing 25% of demand, there is clearly a large market here for small, flexible lending which is the hallmark of microfinance.

It’s another exciting addition to the microfinance and P2P stable of companies. As long term readers will know I believe strongly that P2P financing will replace traditonal banking systems within 20 years.

Who knows it may be sooner with organisations like Wokai springing forth.

Remember a time when we hoped women would take over the world and make it a better place?I picked up this story on the Girl Effect from the super Wokai crew who are focused on microfinance in China,

When I look at the breakdown of my Kiva loans I see 80% of my loans going to women. It makes sense really as they are at the providing end of the scale: food, retail, clothing, agriculture.

So this one is for the girls today

The P2P phenomenon which started with online communities and has now spread to lending money, couch surfing and music swapping has another possible application: currency exchange.

The reason I mention this is because of the highway robbery some currency exchange outlets are carrying out. To give you an example:

Last week I took a trip to Sydney. I bought some A$ at Christchurch airport through the BNZ. Their rates are always very good usually a spread of around 2-2.5%. Now that’s still pretty big but remember these rates are change maybe once a day max and the markets can be moving as much as that. I bought some US$ at 0.7929 knowing the market was actually trading at 0.7945 so i was getting an almost at market rate.

But when I arrived in Sydney I checked out the rates available at Travelex. These guys are offering outrageous prices (unfortunately they are at Auckland airport also).

Their spreads on A$ to NZ$, US$ and GBP were 20%, 15.6% and 22.4%.

Who are these guys kidding. In market vernacular I could drive a bus through that spread (more like a fleet of them).

So what to do? Well we have P2P lending now established in many commonwealth countries. So how about extending that to provide a currency service within the new distributed network.

It’s food for thought.

With rising food prices starting to kick in globally the specter of food fights is becoming a reality (hat tip to Nevil).

Riots have been seen in many countries now and food, like climate change, is starting to be seen as a national security issue.  The Philipines is facing major rice shortages which is almost unthinkable for a country where rice is a staple. It is also causing serious unrest.

Even here in New Zealand consumers are unhappy about paying 60% more for a block of cheese which has been produced down the road.

Its a difficult situation that will take some sorting out. Producers want the best prices they can get and so will sell into the international market. Subsidies continue to distort the market.

World Bank President, Robert Zoellick has suggested a move away from direct aid and an attempt to remove barriers, create local markets and improve local production.

About time! That’s what i like about Kiva which promotes empowerment and local solutions. That is the way forward. Forget about the huge projects of the 1970s and 80s which dropped so many developing nations into the debt trap. Create a level playing field and encourage local solutions.

The P2P lending sector is growing all the time with the main companies starting to increase custom and size. The rise of P2P lending is helping bring money and its nature into the wider consciousness. Alongside this sits other proposals for fully distributed money systems. Many of these revolve around traditional and tested complimentary currencies such as LETS, Time$ and other locally based systems.

One proposal is Ripple. It’s been around for a few years and there is some good information on the site including the initial paper from Ryan which I have posted up in the research section. There’s plenty of commentary around about it which is worth a look at. Essentially it proposes to replace bank created debt money with personally created credit through a fully distributed network based system. What is good about this proposal is that it takes the concept of local currency systems to its logical conclusion which is a globally based one with servers finding the right path to the appropriate relationship or network.

The most important part of this is identifying that most of what we think of as money is in fact simply an IOU. So why should banks create this? Well the main reason is trust. What Ripple proposes is the creation of that trust through networks, which as we know are already widely in use.

Jamesey proposes a further layer on top of this adding in microfinance structures and leveraging off the Paypal system.

We also have very well embedded and established credit card systems (Amex and Visa) who already have the distribution systems. So the trust system is going to be a key issue. Who is in your network? Who can you trust? I’d suggest and I hope that VortexDNA will play a role in helping this kind of global protocol to develop.

The main problem is the control of supply. One would like to think that a complex system, such as proposed, would regulate itself constantly adjusting to feedback. We know that the current system is close to imploding because of rampant money creation. So cculd it be any worse? Could governments participate also?

It’s open season and anything is possible.

News comes of a huge class action suit brought in Canada by a litigator called John Dempsey. Following on from John Kutyn’s (a Canadian living in NZ) paper “the Nature of Money” it takes the next step of actually calling banks to account under the law.

It’s being held up in the courts but at some point the suit must be acknowledged and heard. Its a tough one for the judges as they are being asked to rule on one of the most accepted practices in society today, namely the equivalence of “digital money” and cash in the form of notes and coins.

With the relentless advance of Peer to Peer lending systems coming online and complimentary currencies in every country it is easy to see how a major change is underway. Sure the banks may not be too concerned now but we are seeing the beginnings of a major revolution in what we know as money.