Saturday, August 11, 2007

Kiva: Loans That Change Lives

Yesterday I made my first microloans at Kiva, a non-profit web site that allows people to choose specific individuals they would like to lend money to. You can loan as little as $25. Click here to learn about the people I agreed to loan money to.

To describe Kiva in more detail, I'll draw heavily on a generic email that they suggest I send to friends:

You can go to Kiva's website and lend to someone in the developing world who needs a loan for their business - like raising goats, selling vegetables at market or making bricks. Each loan has a picture of the entrepreneur, a description of their business and how they plan to use the loan so you know exactly how your money is being spent - and you get updates letting you know how the business is going....When the entrepreneur pays back their loan you get your money back - and Kiva's loans are managed by microfinance institutions on the ground who have a lot of experience doing this, so you can trust that your money is being handled responsibly...It's finally easy to actually do something about poverty - using Kiva I know exactly who my money is loaned to and what they're using it for. And most of all, I know that I'm helping them build a sustainable business that will provide income to feed, clothe, house and educate their family long after my loan is paid back.

What others are saying about http://www.kiva.org/:

  • 'Revolutionising how donors and lenders in the US are connecting with small entrepreneurs in developing countries.'-- BBC
  • 'If you've got 25 bucks, a PC and a PayPal account, you've now got the wherewithal to be an international financier.'-- CNN Money
  • 'Smaller investors can make loans of as little as $25 to specific individual entrepreneurs through a service launched last fall by Kiva.org.'-- The Wall Street Journal
  • 'An inexpensive feel-good investment opportunity...All loaned funds go directly to the applicants, and most loans are repaid in full.'-- Entrepreneur Magazine

My main frustration is that most of the people on the site do not appear to be the absolute poorest of the poor. However, they certainly are a lot poorer than I, and I'm happy to try out this new social phenomenon of loaning small amounts to people I've never met, in hopes that they'll use the money to making lasting improvements in their lives. The default rate to-date is only 0.2% on loans originated through Kiva, so my most likely cost/risk is foregone interest on the money.

1 comment:

David Stoker said...

The individuals who make it on kiva's site are not the poorest. They are established borrowers from established microfinance organizations, both to reduce risk for kiva and lenders like you and me. I still believe in what Kiva is doing and that the loans are beneficial for the borrowers and the concept at its heart is good and right and I support it.

But there is this issue of reaching the poorest. Microfinance in general knows they are missing the poorest. The poorest are too scared to join microlending groups, they don't self volunteer.

On interesting movement that I think has promise is the idea of savings matches for the poorest instead of loans. John Hatch, the founder of FINCA, is a big proponent of savings matches and is spending his retirement promoting the cause. The only way I know of getting involved is through ASAP (Alliance for Students Against Poverty) www.asap2025.org. They are very new and the website is just a quick something to get something up there. But the pitch line, "a dollar a day for those who live under a dollar a day" is very powerful.