After two young entrepreneurs visited Yale to discuss a new Web site they created that may help fight world poverty, Yale students are now getting involved.

The Yale Microfinance Task Force is preparing to launch a Yale initiative in which students form teams on — a Web site created last December by Dallas natives James Beshara and Drew McWay to connect investors with organizations that will distribute funding to poor debtors in developing countries — and compete to invest the most money, task force member David Kastelman ’13 said. Beshara and McWay, who recently gave a talk about their Web site and microfinance in general at a Davenport College tea, said the Web site provides a way by which Yale students can alleviate global poverty.

But some Yale economists, including professor Dean Karlan, said some research suggests that microfinance may not help increase the incomes of the poor.

Because the Web site uses a new method of microfinance, called person-to-community microfinance, it has attracted national attention: Vikram Akula GRD ’96, CEO of India-based SKS Microfinance and one of Time Magazine’s 100 most influential people, said he believes might “change the world of microfinance.” But with their matching corduroy blazers and slightly rumpled hair, Beshara, 23, and McWay, 24, could easily be mistaken for wide-eyed young idealists.

McWay, an accounting major at Washington and Lee University, spent a year working at the microfinance company Sinergia in Peru, while Beshara worked as a loan collector at the Kuyasa Fund in South Africa. To Beshara, his time in South Africa was “the most fortunate unfortunate experience of his life.” He once saw a 6-year-old boy advising his younger brother to “eat dirt to deal with hunger pangs.”

Beshara, a 2007 graduate of Wake Forest University who majored in developmental economics, said he believes that applying business solutions to poverty reduction is one of the most powerful aspects of microfinance. After creating an account, investors using contribute small amounts of money, $98 on average, to a campaign with a target goal, usually $1,000, that is set up by one of three microfinance partners in Nicaragua, Senegal or Vietnam.

After a year investors receive their loans back with interest, which ranges from 3 to 7 percent of the loan. Charging interest on loans is not done at some other microfinance Web sites, such as San Francisco-based But Beshara says that interest-free or subsidized loans are the “worst thing[s] for microfinance” because they distort markets (by enticing debtors to borrow more than they can give back) and pushes out competition (by providing the cheapest loans to debtors, who would not consider any other lending organization).

Although is only two months old, $15,000 in loans already have been distributed through the Web site, 300 people are active members and the founders have been asked to give a presentation about technology, social networking and social entrepreneurship at the World Bank in Washington this summer. And Beshara and McWay plan to add on other forms of microfinance, such as microinsurance, which provides an insurance plan to low-income residents who may not have access to a large-scale insurance provider.

Still, the founders are taking it slow and have added some restrictions to the Web site’s growth. Web site users cannot invest more than $2,500. Beshara says that the rapid growth is “actually a little scary” and that the founders want to ensure that their Web site remain safe for investors and the poor.

Despite the Web site’s success, Karlan, a developmental economist who studies microfinance, said microfinance organizations such as may not be doing much to solve world poverty.

“Benefits can be accrued from microfinance, but this is not transforming people out of poverty,” he said. “There may be some benefits, but as a knee-jerk reaction, microfinance is a bit shortsighted.”

Karlan points to two recent studies that evaluated the impact of microfinance and found that it either had a weak or no effect on poverty. He said he believed that programs that work with the poor should encourage them to save money rather than solely provide loans to them, citing the Bill and Melinda Gates Foundation, which currently focuses on providing savings accounts for the poor. He added that organizations should be more pragmatic and focus on proven solution, such as supplying bed nets to prevent malaria, to provide a positive impact.

Beshara said they do not believe microfinance will be able to “end” proverty. McWay added that while “it is easy to criticize anecdotal evidence,” his experience seeing the benefits of microfinance gives him confidence that microfinance provides unquantifiable benefits to the poor.