Charity

Person-to-person microloans

I discovered Kiva a month or so, and I got excited. It’s a great idea that’s been well implemented. I love things that use the power of the Internet for good, and Kiva does. Basically, the idea is that a person who has some money (as little as $25) can lend that money to someone in Africa who needs it for a capital expense. Using that investment, they build their business, increasing its ability to make a profit and also paying back the loan.

This is huge. Capital expenses can be the deal breaker when you are unable to feed your family. I read a while ago about a solid, foot-operated irrigation pump being sold in Africa for very low cost (around $52 at this writing). That $52 pump can permanantly lift a family out of poverty, which is fantastic—if they have $52 to invest. But if you can’t feed your family, where do you come up the capital investment that will allow you to feed them and send them to school?

That’s where the microloans come in. With small loans, the capital investment can be made, making it more than possible to pay back the loan and give the family a chance at sustainable income. Kiva works on different projects than KickStart (the pump folks) but they’re both doing some great things to encourage financial freedom (it would be very cool if they were able to work together on some projects in the future!).

Microloans aren’t a new idea. Several aid agencies have been using microloans to help villages for some time now. Kiva, however, is the first time I’ve seen a person-to-person microloan made available. That’s amazing. For instance, right now, I could loan Mathayo Bayo $25 to buy stock for his village store. Using the website, I can see how the store is doing and what Mathayo Bayo is buying. This is so much more personal than giving money to a relief agency (as worthy as that is) and—get this—Kiva’s administrative expenses are entirely covered through other donations and a small amount (<10%) of interest on loans. That means that all money loaned to an African entrepreneur goes to that person.

Kiva had a windfall not too long ago when they got featured on some huge blogs, and every loan request got funded. I’ve been waiting impatiently for them to have new loan applications, and when I checked back this morning, they do! So go loan someone money already. One other really cool thing is that since it’s a loan, the same $25 (or whatever amount) can be loaned over and over to help family after family with no additional out of pocket cost to the lender. That’s a renewable resource.

© 2005 Something Epic.