Kiva
Micofinancing is among the better ways for the haves to help the have-nots. Small loans are made to poor but ambitious workers, who expand their livelihoods with the small loan and then pay it back. Which is then lent out again. The previously recommended agencies Opportunity International, and Trickle Up are great tools for individuals in developed countries to kick-start other folk's self-development. These agencies do the hard work of identifying and training the recipients, and tracking loans and performance.
But why not use the peer-to-peer model to allow individuals with money to loan to specific individuals in need of a small loan? That's what Kiva does and it works wonderfully.
Kiva enables you to make small $25 or above loans to an individual or small group of individuals in a developing country. They use these small loans (aggregated to about $200-$400) to finance a food stall, repair shop, hair salon, sewing machine, new cash crop, etc. When they pay it back to you in about 11 months, you can then re-lend it to another person of your choice.
The advantages of Kiva over the other worthy agencies are three fold. One, you can direct your loans to the kind of projects or livelihood you deem the most important or the most sympathetic. Maybe you are into food so you gravitate to funding small cafes or local fruit growers. Or maybe you think women's sewing centers are a key. Secondly you have more direct contact with the borrowers. They have names, faces, stories. Not a few Kiva lenders have met up with folks they have lent to. Thirdly, while most microfiance agencies are thrifty, Kiva is particularly thin in administration thanks to the well-designed software platform that runs this service.
The payback rate for Kiva is about 97%. That's a better "investment" than stocks this past year! The variety of folks you can lend to is exhilarating. The karma is good. These loans make a difference. Kiva lends $1 million dollars every 10 days. It is easy to do. A few folks are already on their third cycle of re-loaning the same money they first put up three years ago.
I think the peer-to-peer lending service of Kiva is such a wonderful tool that I have started a Cool Tools Lending Team. The intention is to gather like-minded folks to make microloans to folks needing tools to start or build a livelihood. I've seeded the team with the first $300 of loans to three borrowers planing to use the loans for tools and I'll add up to $1,000 of Cool Tool's ad revenue as the team identifies borrowers hoping to secure tools. Ideally, other Cool Tool readers will join me in lending small amounts to enable others to self-develop and remake their lives. If you are interested, please join me at the Kiva Cool Tools Team.
-- KK
UPDATE: Good news and bad news. Good news is that word-of-mouth praise drew many folks to Kiva this holiday season and all available lendees have been funded. There were several thousand a week ago, so this is a great thing. Bad news is that if you are headed there for the first time, you won't find anyone to loan to. I trust this is temporary but I have no idea when they'll be an "inventory" of loan candidates. When there are lendees available, you can join the Cool Tools team by signing up for the team, then making a loan to an individual in the ordinary way and choosing Cool Tools from the Team option when you "checkout."
Sample entrepreneur:
My name is Khursheed Bibi. I am a fifty-year-old woman. I have lived in the city of Pakpattan, Pakistan, for 15 years. My husband, Mr. Rafiq, is a mason. I have three kids: one son and two daughters. My son runs a furniture making business. My elder daughter is in 9th standard and my younger in 8th standard. I run a decorative embroidery business. I embroider dresses and sell them in clothing markets. I charge $3 per dress. I invest my income in my daughters' education (paying school and tuition fees). I've successfully repaid two previous loans from Asasah (a microfinance institute of Pakistan). Now I am applying again for a loan to buy lumber to expand my son's furniture making business. I am the leader of a group of entrepreneurs sharing this loan.
Favorite (15)
Sheila
Thanks for this, Kevin. I'm a fan of your blogs and enjoy the variety of topics you cover. This inspired me to join in. Found an good article from 11/2007 on Kiva here, too, for anyone curious about the little organization that could and does:
http://www.stanfordalumni.org/news/magazine/2007/novdec/features/kiva.html
eljovenwarren
If we could make a "direct" peer-to-peer flow of cash from the lenders to the right borrowers, i think we have a chance.
When I say "direct" flow i mean without the local goverment burocracy.
This direct flow could help borrowers and their comunities and even could help to reduce corruption levels, because the right people would receive their loans.
This have the potencial to became a new kind of globalization.
The globalization of help and develop.
More reading on this topic, I recommend to read the book from Mr Muhammad Yunus
http://www.amazon.com/Banker-Poor-Micro-Lending-Against-Poverty/dp/1586481983/ref=sr_1_3?ie=UTF8&s=books&qid=1230561500&sr=8-3
best regards from Argentina.
Leisureguy
I have blogged several times about Kiva, through which I've been making loans for some years. Very pleased to see that it made the list. Here's a way to use it in a class project: http://tinyurl.com/6vmf6g
whittemore
I've been a Kiva participant for a good two years now, and a recent change they made has substantially increased my contributions: Kiva used to notify you only when the entirety of your loan had been paid back. For some loans, this could be over a year.
Instead, they now notify when small payments have been paid back. With the multiple ongoing loans I have, this means that I am much more quickly able to accumulate those small amounts into another $25 so that another loan can be made.
This more frequent turnover causes more frequent visits to their website and more frequent contributions of additional monies. I often find myself padding out a partial repayment (say, $17) up to another $25, and the ball continues rolling bigger down the hill. Brilliant change they made there. I wonder if they anticipated this sort of behavioral change as a consequence?
Nilay Shah
I've been a happy Kiva member for over a year, with several "successful" loans which have been repaid. I think this is a great model for those of us living in the "1st world" to lend a helping hand to our peers in other parts of the world whom we could normally never reach. The direct contact we have as lenders to our loan recipients really makes a huge difference; while its great to give money to charitable organizations such as the Red Cross, United Way, etc., these "microloans" are much more satisfying, in a way.
Even in this recession, I held off my Starbucks for a week and easily found $25 more to lend out... and I strongly encourage everyone to try Kiva out.
GoingLikeSixty
Good to spread the word about Kiva.
We have dollars that are constantly rotating in and out. As whittemore said: when we get a payment, it gets reinvested. It's so refreshing for a great program like this flourish.
If you aren't involved, please consider taking some of that Christmas money and get started.
Kate
I became a Kiva lender this year, and I too have blogged about this organization. I also gave two Kiva gift certificates this Christmas as gifts. The people I gave them to were perfectly happy with these gifts, which could, after all, have been cashed in for the money. I saw that they had been redeemed and loaned just yesterday. I'm glad that the gift recipients acted quickly and found someone to loan to.
Here's hoping that Kiva updates their supply of lendees soon. And I hope the shortage won't deter anyone from joining. It's a great project.
Eric Nguyen
I've also been a happy Kiva user for a few years. Another way for individuals easily participate in microlending is to use MicroPlace. This is a much larger lender, and a regulated financial institution that will actually pay you interest on your loans. I've been using both for some time.
I compared the two in a blog post, a little while ago: http://mindtangle.net/2007/11/06/kiva-vs-microplace/
Surgam
It's incorrect that there are no more people to loan to on the Kiva site. I just made a few donations myself. There aren't any in some sectors (eg Education), but there are still plenty of people in the system to loan to. I had signed up ages ago but forgot all about it until I saw this post to remind, so I've just gone and made some loans now. Thanks, Kevin!
Monte Asbury
Serious love for Kiva here in Iowa!
Gavin Heaton
Plenty of options now! I keep putting small amounts into my "portfolio" and continue to reinvest. Great way of doing "something" on your own terms and in your own time.
E.
Things are not necessarily better with the new software. Since last October Kiva has NOT been able to account for the re-payments on my loans. Despite promises that accountability would be returned in December, nothing has been done and Kiva Staff has neglected to respond to my email.
Perhaps a more critical examination of the "new" system under the current software should be undertaken.