KIVA!

A couple weeks back Muhammad Yunus won the Nobel Peace Prize. He shared the prize with the Grameen Bank which he founded. Yunus is a Bangladeshi economist, he received his PhD from Vanderbilt. He won the prize for his work on stimulating development through microcredit. In 1976 he created the Grameen Bank in order to facilitate loans to Bangladesh's rural poor.

I'm not sure if you have ever used a loan but they can be very effective and helpful. They (can!) help us buy large necessities we need to increase our future income. Such as a car or a college tuition. In the same vein, the entrepreneurial poor of the third world need loans to make their businesses more competitive, to expand their businesses, or even to get their businesses off the ground. Unfortunately, these individuals do not have access to the same lending institutions we do. Because of their lower economic status they are deemed too risky for loans by commercial institutions. Usually their only option is a local, exploitative loanshark who will lend money with astronomical interest rates (upwards of 100% is normal).

However, the Grameen Bank and other microfinance institutions changed all this by engaging with the poor and working out an effective credit delivery system. This has produced substantial results in developing nations where jobs are scarce and self-employment is a robust option. This has also produced a real trickle down effect as the income created gets invested locally. And this is also a feminist achievement as the vast majority of loan recipients are women. Women who have been historically neglected and discriminated. Women who organize together to receive loans and then help others in similar situations.

Another wonderful microfinance institution is Accion International. They have been around for a long time and have established large microfinance networks in Latin America, the Caribbean, Africa, and even the United States. In addition to micofinance services, Accion Intl also provides small business training.

If you're wondering what the loan repayment rate is for both these organizations, it is over 97%.

A new microfinance organization that is bringing a personal, intimate touch to all of this is Kiva. Let's say you have an extra 100, 50, or 25 dollars. And by extra I mean you don't need to save it. Making a charitable donation would be a great idea. But what if an entrepreneurial single mother from Africa knocked on your door and asked if she could borrow the 25 bucks from you? That she needed it to expand her small but robust peanut butter business. And that she would pay you back in a year. Over that year she would send you updates as to how the loan has helped her business. Also, she's recommended as a perfect loan candidate by a local non-profit that has yet to recommended an individual who hasn't paid back their loan. If you'd like to loan her the 25 bucks, now you can! Thanks to Kiva!

Kiva is a small microloan non-profit in San Francisco. I learned about them when they were featured in a FRONTLINE/World documentary. You can view the video online at the website. Simply put, Kiva connects borrowers and lenders through the internet. They work with local, community-based non-profits who seek out good loan candidates. A profile of the borrower is posted on the Kiva website. It lists the type of business, how much money is needed, where the borrower is located, who has partnered with the borrower (the local non-profit), over what time period will the loan be repaid, and other pertinent information. It also gives some personal information about the borrower and their business and explains what the money will be used for. Once a loan is filled, the borrower keeps a journal informing everyone of how they have utilized the loan and how their business is going.

What Kiva has done is simply spectacular. It connects people of different ages, locations, economic status, etc in a very personal way. And it is not charity. You are lending money to someone who will not only use it in a profound way, but will ultimately pay you back. Currently, thanks to the attention brought by the FRONTLINE/World doc, Kiva has limited lending to 25 dollars per person. I think it is a great start, especially since that is within my budget, lol. Anyway, I haven't signed up yet but I will very soon. When I loan my 25 bucks I will post about Kiva again. Anyway, I hope you found this post interesting.