A San Francisco-based Internet start-up is shaking up the microfinance world by offering online loans from individual volunteers.
The nonprofit organization, called Kiva, which means “unity” in Swahili, allows individuals in developed countries to lend money online to those struggling in developing parts of the world.
There are no repayment guarantees, but the current default rate is well below 5 percent.
The minimum amount an individual in the U.S. can lend is $25. In December 2006 the average was around $70. Those funds go to storekeepers, farmers, fishermen, and other tradespersons in Africa, Asia, and Latin America.
Borrowers almost always repay microloans, because a sound repayment record gives them the option of borrowing in the future. Higher loan needs can be met by multiple individuals, who in turn get to choose the persons to whom they want to lend money.
Kiva calls it a win-win situation. The borrower is able to grow his business, while people in the developed world have an opportunity to do something good by lending funds at low risk.
Kiva acts as a nonprofit intermediary, relying on individual freedom, reliability, responsibility, goodwill, and entrepreneurship. No one is forced to give. No big government programs are involved.
The founders of Kiva, Matt Flannery and Jessica Jackley Flannery, were inspired by Muhammad Yunus, who won the Nobel Peace Prize for his work in developing the concept of microcredit. The Flannerys heard Yunus speak while they were students at the Stanford Graduate School of Business. They received their first loan pledges at their wedding from relatives.
Since 2005 Kiva has raised more than $12 million and continues growing.
Sebastian Wisniewski ([email protected]) is marketing associate at the Pacific Research Institute.
For more information …
Kiva Web site: http://www.kiva.org