Kiva Provides Microloans that Change Lives
The Business of Microfinance a Social Phenomenon
Nov 11, 2009
Microlending is not charitable giving but a business partnership and investment of a 0% loan in someone’s venture. Kiva has created a global community of people by making microfinance accessible to everyone via the internet.
Changing the World One Family at a Time
Kiva users believe it is possible to change the world one family at a time. At Kiva.org everyone with access to the internet has the opportunity to become a business partner. With just $25 and a click of a mouse one can choose to support a young woman in Guatemala who would like to launch a catering business or a farmer in Bolivia so he can buy cattle.
Microlending is not charitable giving but empowers the less fortunate around the world with loans that makes a difference for them and their families. It’s an opportunity to lift them out of poverty.
Kiva’s president and founder Premal Shah was recently featured on NBC Bay Area’s press:here. Shah told host Scott McGrew that he recently lent to an entrepreneur in Kenya to buy a cotton candy machine which now makes him enough money to feed his family. With the interest free loan Kiva users help the poor improve their lives, their family making a difference in a small community.
A Transparent Lending Platform
One of Kiva’s secrets to success is a transparent lending platform and the belief to communicate successes as well as failures. This open approach resonates with Kiva’s user community. Direct transparency starts with the money users lend. There is an immediate personal connection when one can see that the $300 loan for Mariam in Mali is being used to buy a sewing machine. “There is something more dignified about a loan as you are investing in a business,” Shah told Scott McGrew at NBC. The bottom line is accountability and people like to help someone who wants to help themselves.
How does Kiva make sure the proper controls are in place to ensure the money is going where it’s needed? According to Shah, one can quickly tell when something is not working because the loan is not being paid back. Kiva has a 98% repayment rate which is better than a regular bank. Kiva imposes a strict due diligence and auditing process with local field partners. Additionally, if they find something does not go well, it will be made public to the Kiva community. This transparency model has worked well for the organization.
Community and Team Lending a Social Phenomenon
Microlending has become a social phenomenon. According to Shah, the high repayment rate is due to the group lending concept, which leads to greater accountability. Also, the poor entrepreneur takes the loan more seriously as it is an opportunity to change their economic situation.
However, there is a high interest rate to be paid to the field partners locally because of the increased cost to disburse and collect money. “You literally have someone on a moped driving out to remote areas to collect money,” explained Shah on NBC. For Kiva it’s important that their local field partner organizations are transparent in their policies and offer a diverse array of services.
Kiva made a smart move buy creating an interactive community. Users are engaged with the site by creating profiles, teams, and the opportunity to connect with other lenders. It has a social networking component that keeps investors engaged and returning for additional investments. It’s a fun and clever concept, a business networking site with a philanthropic mission.
 |
