Using the power of the World Wide Web, Kiva.org has joined the fight against global poverty by being the first nonprofit website designed to help individuals connect with and make personal loans to low-income entrepreneurs in developing countries. Kiva’s individual lenders make a loan for as little as $25 and give someone the ability to purchase a sewing machine, livestock, fencing or thousands of other items needed by small entrepreneurs around the world to grow their businesses.
Kiva’s loans help people earn their way out of poverty. Kiva.org posts profiles of qualified low-income entrepreneurs. Kiva users browse through these profiles and choose entrepreneurs to fund. Before an entrepreneur appears on the Kiva.org website they have first been vetted by Kiva’s Microfinance Institutional (MFI) partners for loan application approval. This ensures that the loan funds are actually going to genuine entrepreneurs who will use the loan for the purpose specified.
The loan is between the lender and the borrower — it is not a donation. The funds are made available either through a credit card or PayPal account. Kiva pools the money from the individual lenders and transfers it to its MFI partners who administer the loans. As loan repayments are made by the entrepreneurs, the MFIs send funds back to Kiva. Once loans are repaid, Kiva users can choose to withdraw their principal — or re-loan to other entrepreneurs. Updates are issued throughout the course of the loan, usually 6-12 months, so lenders can see how their loan is making a difference.
Kiva.org sends 100 percent of the loan monies to the borrowers listed on the site. Kiva’s loans are personal agreements — there is no note or security involved and there is a chance that the funds will not be repaid. However, loans made through Kiva.org are low-risk. According to the UN, Microfinance loans worldwide generate repayment rates of 97 percent. To date, Kiva.org’s repayment rate is 100 percent. To minimize the risk of losing one’s capital, it is easy to diversify. For example, loans of $25 can be made to a number of businesses, rather than $100 to one business.
In the last two years through Kiva.org, 10,000 loans worth $7 million have been made to entrepreneurs in 30 countries. Just a few weeks ago Kiva.org began making loans to individuals in Iraq. The organization also makes loans to Afghanistan. The majority of lenders helping through Kiva.org are from the United States. Since it would be dangerous for individual Iraqis to be seen taking money from Americans, Iraqis receiving funding through Kiva do not know that most of the individual lenders are in the United States. Kiva has found that there is a huge demand to fund loans to the working poor in the Middle East. Requests from individuals in the Middle East for small loans are often funded the same day the request is posted to the website.