I stumbled across a microfinance organization called Kiva today through Firepoll’s fireblog. being that one of my major long-term goals is to be involved in microfinance, I was immediately touched by their approach to microfinance. Most (all that I know of) NGO’s have a lot of adminsitrative overhead and once you donate to them, you have no way of knowing where your money goes. This isn’t a bad thing, it’s just the way it is. NGO’s do an amazing amount of good in the world.

Most of the money donated goes to micro-loans or small loans given to persons to start small businesses. This has been shown over and over again to be one of the most effective ways to promote development on a local level. Except as a small-time donor, you don’t ever get to personally see the effects of your donations. What Kiva does is allow you to donate to a specific person (they have a list of qualified loan applicants on their site) and then follow-up on the progress made by the recipient. Also the loan is repayed to you, not to Kiva. You can then re-loan it to another person or take the money back. A very interesting twist on an established practice. I am looking to gather enough money from work, friends etc… to sponsor the entire loan amount of someone. If anyone wants to be involved in this, let me know. I’d like to get together about $500, which is the average amount of a loan.

From kiva’s Web site.

When interviewing entrepreneurs about their standard of living, one simple question she would ask was, “Can you afford to take sugar with your tea?” — a significant indicator of an East African’s standard of living. Tougher questions would follow: Can you afford to eat even two meals a day? Do your children attend school? Has anyone in your family been affected by malaria or AIDS?

What she learned in those interviews astounded her. In almost every case, those who had businesses were doing dramatically better than those who couldn’t get a grant or a loan to start or expand a business. Furthermore, the amount of money it took to start or improve a business was often as little as $100.

Half the world’s population lives on less than $2 a day. Most of these people live in developing countries and are self-employed. Raising the income of self-employed poor and vulnerable non-poor (those hovering just above the poverty line but lacking savings or insurance, and dangerously susceptible to sudden changes in their financial environment) strategically fights poverty.

Microfinance - the provision of financial services to those excluded from the formal financial system - and, in particular, microcredit/microloan programs effectively boost the income-producing capabilities of small businesses run by the self-employed poor and vulnerable non-poor. Microcredit borrowers regularly increase their business’ sales and profits by 25% to 40%, and repay their loans at impressively high rates - around 95%.

Categories: Life in General