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Kiva: Reducing Poverty and Building Sustainable Communities through Micro-Lending.
by J.D. Stein


A girl kneeled at the base of an escalator at the Paris Place Charles De Gaulle subway station. Her scarf-covered head was bowed, eyes closed and hands pressed together in prayer. The bright silk of her dress spread out on the cement like a paper fan. An empty cup sat in front of her.

Kiva.How Kiva and Internet-Based Micro-Lending Work

Kiva lets individuals loan to the working poor.

Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.

Kiva partners with organizations all over the world.

Kiva partners with existing microfinance institutions. In doing so, it gains access to outstanding entrepreneurs from impoverished communities worldwide. Kiva's partners are experts in choosing qualified borrowers. That said, they are usually short on funds. Through Kiva.org, partners upload their borrower profiles directly to the site so you can lend to them.

Kiva shows individuals where their money goes.

Kiva provides a data-rich, transparent lending platform for the poor. It is constantly working to make the system more transparent to show how money flows throughout the entire cycle. The diagram below briefly shows how money gets from you to a third-world borrower, and back!

Kiva facilitates connections.

Kiva is using the power of the internet to facilitate one-to-one connections that were previously prohibitively expensive. Child sponsorship has always been a high overhead business. Kiva creates a similar interpersonal connection at much lower costs due to the instant, inexpensive nature of internet delivery. The individuals featured on our website are real people who need a loan and are waiting for socially-minded individuals like you to lend them money.

Source: Kiva.org


My nine year-old daughter, Breanna, stopped and asked after we had passed. “Is she poor for real?”

“I think so,” I said, handing Bre some change. She retraced her steps and let the coins clink in the cup. The beggar girl raised her head, lifted her hands, and appeared to whisper a blessing to my daughter. The gratitude revealed in her piercing brown eyes left no doubt. She was poor for real.

This simple act of disbursing coins provided only temporary relief. I am certain the beggar girl still kneels at the base of the escalator. She should be in school. She probably wants to be in school, yet her financial plight keeps her away.

Global poverty’s reach can seem overwhelming. Four billion people live on less than $3,000 per year, according to a recent study by the International Finance Corporation. This is not by choice. Millions leave their families and communities each year in search of better economic horizons. The challenge of our time is to find ways to incorporate the impoverished into the global marketplace while building sustainable communities and protecting the environment. Certainly government and non-governmental policies, initiatives, and programs will play a role in this fight against poverty. Yet sometimes the greatest successes come from the simplest acts—as simple as a few coins clinking in a cup.

Erika Dinora Roque Luna, a young woman living in Queretaro, Mexico, faced a situation that is common for the world’s poor. She had a job, but her salary wasn’t high enough to cover her own living expenses and provide for her elderly parents. So she quit. Erika began going door-to-door selling products from a catalogue. Her enthusiasm made her a natural salesperson. She gradually built up a clientele, but she was hindered by a lack of reliable transportation. Depending exclusively on the bus made it difficult to deliver products to her clients. Erika had a car, but it was broken and the $475 repair cost seemed insurmountable as local lenders wanted upwards of 76 percent interest to provide the funds.

For the poor, sometimes the difference between just getting by and actually moving ahead is only a few hundred dollars. In Erika’s case she was finally able to get a loan at a reasonable interest rate. I know because I was one of nine people who provided funds to fix the car. I found Erika through Kiva, an innovative not-for-profit that uses the Internet to match individual lenders with needy entrepreneurs in the developing world.

Kiva partners with local microfinance organizations that screen applicants, process the loans, and work with entrepreneurs on their businesses. For as little as $25, individuals can help a beekeeper in Ghana improve hive production, provide the means for a farmer in Cambodia to buy a tractor to increase crop yields, or help a cosmetics shop owner in Afghanistan expand inventory.

The loans are small—averaging only $666—and the terms are short, typically 10 to 12 months, but the impact is huge. Since October 2005, more than 60,000 individuals have lent over $6.7 million to small businesses through Kiva.

Kiva's loan cycle.Sustainable communities need broad-based local entrepreneurship. Unfortunately, in the developing world, economic opportunity often disproportionably favors a narrow segment of the population due to public policy, business monopolies, and corruption. While a select few may benefit, the community as a whole suffers when entrepreneurs have little access to capital. Fewer entrepreneurs means fewer innovative ideas, fewer jobs, and greater poverty.

Kiva fills the capital void. I choose which entrepreneur to help, my small contribution is combined with others, the micro-loan is made, and a small business somewhere in the world is given some needed help. Certainly not all the businesses will succeed, and few will grow larger than one- or two-person operations, but small investments widely distributed like seeds tossed in the wind can reduce poverty. A beggar girl can put away her cup and go to school, because her parents have work. No longer will she be “poor for real.”


J.D. Stein resides in Idaho where he works as an investment advisor managing portfolios for endowments and foundations. His personal blog is Global Wandering.

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