Microfinance: A Little Goes a Long Way

I first heard about microfinance when I was living in Samoa. There were a few NGOs in country dispensing tiny loans, less than a 1000 US dollars, to various groups and people to get small businesses off the ground. It doesn't take much money in the developing world, but many of the loan recipients and entrepreneurs don't have access to the traditional finance systems that we take for granted (e.g credit cards, banks, etc.). My own family in Matautu had a little ice cream business that they ran out of our house. I think they needed a few hundred bucks to buy a fridge and arrange ice cream delivery -- lots of inspiration and a little bit of cash.

Anyway, I didn't have any money when I was in Samoa, so I couldn't really help out financially, but now that I'm back in the States and doing well, I have the opportunity to contribute. I heard about this San Francisco based microfinance company called Kiva from a story on Frontline: World.

The story detailed how the company was founded by two Americans who had been working in Uganda. Small microfinance loans from Americans have supported markets, brick makers, peanut butter producers and whole host of other small going concerns in Uganda. The stories were all very inspirational. I wanted to sign up. I went to the website to make a loan only to find that the traffic driven to the site by Frontline had crashed Kiva's servers. A victim of it's own success, it seems.

That was a few weeks ago. Kiva is now back in business, and business has expanded beyond Uganda to Bulgaria, Kenya, Mexico, Togo, Ecuador and elsewhere. They are limiting loans to $25 at a time so that more people can participate. You have 25 bucks, right? And, remember, this is a loan. You give an entrepreneur 25 dollars and you get paid back in 6-18 months. Kiva reports that none of their customers has ever defaulted on a loan and they have a 100% repayment rate. You won't earn interest, but you'll feel damn good about yourself. The process is simple. The payments are all handled through Paypal. Couldn't be easier if you already have an account with Paypal. If not, it will take a few minutes to set one up.

The brilliance of Kiva is that they harness the power of the Intranet to create connections between people that in the past were prohibitively expensive. It is far more personal than simply donating money to charity because you know exactly whom you are loaning money to. You can receive updates from the people whose loans you help fund and track the progress of their business. And there is no bureaucracy to eat up your contributions. 100% of the money you lend goes directly to the loan recipient.

I made two $25 loans this morning. One to Elsy Santana in Ecuador and another to Mary Muthoni Gitau in Kenya. Both have markets. Both, at this point, need additional funds to finish. (UPDATE: Mary's loan has been fully funded, but Elsy is still looking for financing as of November 9th, 2006). It's really nothing. I won't miss 50 bucks if it's never paid back, but I'll expect repayment in 10-18 months.

Want to get involved? You can learn more about Kiva on their website or go straight to the lending page and find a worthy cause.