A Year of New – Week 2: Micro-lending

Where: http://www.kiva.org
Cost: $USD26.25/$CAD31.27

Several years ago a friend of mine in the States got a job in ‘micro-financing’ and I must admit that at the time I had no idea what that even was. When I finally ‘got’ the concept of micro-finance – “the provision of financial services to low-income clients, including consumers and the self-employed”1, it made perfect sense to me. It reminded me of the time when I applied for and received a small loan in high school to start up a summer business, one that helped me make a lot more money per hour than my friends were making in traditional jobs at that time.

After I learned about micro-financing from my friend, I really hadn’t thought much about it until a couple of years ago when I heard about Kiva.org. I saw its founders – Matt and Jessica Flannery2 – on the Oprah Winfrey Show, and was really impressed by both the two of them and their business concept of micro-lending (one aspect of micro-financing) to entrepreneurs in developing countries. I learned that micro-lending is about lending small amounts of money to small entrepreneurs and it has been on my ‘to do’ list to lend to someone in another country through Kiva ever since.

Kiva.org is “the world’s first person-to-person micro-lending website”3 which to date has provided over 194,000 small entrepreneurs in various countries with over $80 million in loans from over 519,000 lenders. Kiva’s mission is “to connect people through lending for the sake of alleviating poverty.” Kiva partners with microfinance institutions (“field partners”) in 48 countries (now including the United States – its first ‘developed’ country) who work with the borrowers that we see profiled on Kiva’s site.

Using the Kiva site was really very easy. I was able to browse through all the current borrowers’ profiles by gender, sector and region and choose one that really spoke to me. I wanted to lend to someone who was a wife and mother just like me and ended up choosing a woman in Vietnam who is looking for a loan to expand her livestock business (raising ducks) by purchasing feed and other supplies. This entrepreneur has already repaid a previous loan, and the risk level of the field partner that she is borrowing from was rated a four out of five (low risk).

The amount I loaned to this wife and mother was USD$25, but then I also opted to pay Kiva a small percentage of that amount to go towards their administrative costs. Since Kiva doesn’t take a ‘cut’ of the loan you make to the borrower, they suggest (but don’t require) that you give them a small donation on top of the amount you are lending to the borrower. Kiva is a non-profit registered in the U.S. and I think they are providing an excellent service so I did add in a donation to them during the checkout process.

What happens next? Well Nguyễn Thị Luyến, the borrower, needs more loans from individuals just like me (and you) to help complete her loan request. If you’d like to help her out too, visit here: http://www.kiva.org/app.php?page=businesses&action=about&id=117294. When this borrower pays back her loan to the field partner and the field partner pays Kiva, I will get my money back to enable me to either withdraw my money or loan another entrepreneur another $25.

I’ve heard that people can become addicts (in the nicest sense of the word!) to lending money to entrepreneurs through Kiva.org, and I can see how this might happen. It’s very rewarding to see the actual person that you are helping and know a little bit about their story. I like the concept of lending instead of giving (although I do also donate with no strings attached to other organizations) because it means I’m helping someone create or sustain a small business for themselves that allows them to provide their own living and way of life for their family.

It took me a long time to get around to doing this new thing but I’m so glad I did. This may be the beginning of a beautiful friendship between Kiva and me.

To read more about the first few years of Kiva activities, I recommend reading Matt Flannery’s articles at:
http://media.kiva.org/INNOV-SKOLL-2009_flannery.pdf
http://media.kiva.org/INNOV0201_flannery_kiva.pdf


References
1. http://en.wikipedia.org/wiki/Microfinance
2. http://www.youtube.com/watch?v=YNA4Fi11ycM
3. http://www.kiva.org

Wondering what “A Year of New” is? Check out the first post or visit the label “Year of New” on the right nav bar.

2 thoughts on “A Year of New – Week 2: Micro-lending

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