Kiva is a website which allows individuals to lend money to small business owners in other countries through third party microlending banks, via Paypal at www.Kiva.org.
In 2005 the future founders of Kiva, Matt and Jessica Flannery spent 3 months in East Africa to do impact surveys for the Village Enterprise Fund. While conducting the surveys, Matt And Jessica spoke with people who had received a loan of $100 - $150 dollars from VEF in order to grow their business and subsequently, increase their standard of living.
While hearing stories from loan recipients of how the relatively small loan they had received had drastically changed their life, by allowing them to sleep in better conditions, purchase better food, or better supplies for their businesses, Matt and Jessica realized that everyone is more connected to the developing world than we realize. They realized that the poor are very entrepreneurial and personal stories and testimonials that they can tell, could connect people in a powerful way.
The Flannerys spoke to entrepreneurs, who used their loan money to buy a better breed of cow for more milk production, or a better net to catch fish and they knew that many of their friends back home would want to support these businesses if they also heard their stories.
So, they began a year of phone calls and meetings with experts, lawyers, economists, and anyone else who would listen to their idea of "sponsoring a business", and in March of 2005, seven businesses, including a goat herder, fishmonger and cattle farmer, were posted on Kiva’s website requesting loans totaling $3,500. Six months after the money was lent to them, every loan had been repaid. In fact, overall, Kiva.org only has a .1% default rate in the over 4 million dollars worth of loans that have been fully repaid to date. (That wasn’t one percent, people, that is POINT ONE percent!)
In October 2005 Kiva.org announced the official launch of the world’s first peer-to-peer micro lending website and in November of 2006, Kiva.org had raised its one-millionth dollar and was named one of the top ideas of the year.
So here’s how it works:
Anyone can log on to Kiva.org and search through loan recipients, listed and categorized by country, gender, profession or loan amount. The lender (regular people like you and me) can choose to loan any $25 dollar increment up to the full amount requested. The money is paid to Kiva.org through Paypal. This money is funneled through a Microlender- or small bank specializing in these types of Microloans, located in the recipient’s country.
The loans are paid back in increments, according to terms that are laid our clearly in the summary for each request, and when the whole amount of the loan has been repaid, the full amount lent is credited back to the lenders account, and the lender can either choose to withdraw the money, again through Paypal, or lend again- to another business owner. By using this system, over 89 banks in 44 countries have disbursed loans from over 241,000 lenders since October 2005.
So you may be asking your self- Why can’t these people just go to a bank in their own town to open a savings account or request a loan? A few reasons-they don't have any money to open a savings account, they don't have any collateral to secure a loan with, they don't have a credit record and they might even be unable to complete the necessary paperwork as they are more than likely illiterate.
By giving loans to people who do not have the means to get a loan through other avenues, Kiva, its partner microlenders and the private lenders (you know, people like you and me) help poor households meet basic needs, improve household economic welfare and enterprise stability or growth, and support women's economic participation in many countries.
Kiva’s mission statement argues that “By reducing vulnerability and increasing earnings and savings, financial services allow poor households to make the transformation from "every-day survival" to "planning for the future." Households are able to send more children to school for longer periods and to make greater investments in their children's education. Increased earnings from financial services lead to better nutrition and better living conditions, which translates into a lower incidence of illness. Increased earnings also mean that clients may seek out and pay for health care services when needed, rather than go without or wait until their health seriously deteriorates." (CGAP)
The website also gives examples of households in Bangledesh, El Salvador, India, Ghana, Indonesia and Vietnam whose household income and /or assets were increased by over 100 % by participating in microfinancing opportunities similar to the Kiva Model.
I greatly encourage you to take a look around on Kiva’s website. Browse through the loan requests and read the testimonials of the loan recipients who have already paid back their loans- learn how they have used the money that has been provided through Kiva. It is amazing how a virtually small amount of money out from each of our pockets can be combined, to pay for supplies that could change a small business owner’s standard of living. I hope you find something- or someone on the website you can be passionate about! Good Luck!