Kiva – Microfinance for the Developing World

Kiva is an amazing web site that allows anyone with a credit card to loan money (interest-free) to entrepreneurs in developing countries. Kiva’s website contains lots of information about what they do. For some un-biased information, there is Wikipedia’s article on Kiva as well. Here is roughly how it works:

Kiva allows microfinance institutions around the world, called “Field Partners”, to post profiles of qualified local entrepreneurs on its website. Lenders browse and choose an entrepreneur they wish to fund. Kiva aggregates loan capital from individual lenders and transfers it to the appropriate Field Partners to disburse and administer. As the entrepreneurs repay their loans, the Field Partners remit funds back to Kiva. Once a loan is fully repaid, the Kiva lenders can withdraw their principal or re-loan it to another entrepreneur.

The field partners do charge interest, however:

Field Partners generally charge interest from their borrowers, although Kiva claims to keep track of how much interest is charged and will not work with those charging unfair interest rates. Kiva lenders do not receive any interest because of US Government regulations.

This makes sense as the Field Partners would no doubt have many expenses to cover. Kiva is non-profit and covers its costs through donations. At first I was annoyed that the only payment option was Paypal; however, I soon found out that Paypal does not charge its usual fees for transactions with Kiva:

Additionally, PayPal provides with free payment processing –’s largest variable cost – thus enabling 100% of the loaned funds to reach entrepreneurs in developing countries.

Last week I chose 4 entrepreneurs that I was interested in and gave $25 to each. I chose:

  • A small restaurant/snack stand owner in Mexico who wanted $1200 “to invest in the purchase of more merchandise and to obtain more profits since this is what sustains our family.” Their main business it supposedly fried chicken, but from the picture it looks like they also sell fries, hot dogs, and real fruit juices.
  • A man in Ghana who wanted “a loan of US $1,000 to purchase car starters, second-hand batteries, and car alternators to enable him to meet the demand of his customers.”
  • A man who owns an office supplies store in Azerbaijan is looking for $1200 “so that he can expand the quantity and variety of his inventory.” It is the fifth time he has received a loan from his Field Partner.
  • A man who runs a general store in a public market in Ecuado. His store is called “Cyber el Rey David.” He also has a old used photo-copier, which he bought with a previous loan and sells copies. He now wants $1200 “to stock his shop with all the wholesale items he sells and to maintain his copy machine. He will continue to invest in other products to provide a diverse inventory for his customers.”

It’s an interesting idea and I feel good knowing that I am helping the four people above with their business by contributing to a loan that they would otherwise not be able to get from a large bank, which in turn will help their families. Please give generously this holiday season, whether it be by helping entrepreneurs in developing countries through Kiva or by other means.

BTW, none of the links to Kiva are affiliate links, and I have not been paid in any way to promote them.

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