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Become a banker to the poor

Kiva.org merges Philanthropy and Venture Capital with their world changing microlending web site.

Kiva, was the first non-profit organization that enabled individuals to make personal loans to microenterprises located in developing countries. They opened the Internet to people looking for a personal, high-engagement means of taking steps to eradicate poverty in developing countries by lending money directly to small businesses.

Lenders may loan money through kiva.org, which lists businesses in need of funding and provides background on the entrepreneur starting the enterprise. Individuals may makes loans in increments as small as $25, and can expect to receive repayment, without interest, at the end of the loan term, which typically runs between six and 12 months. Since Kiva’s source of capital is charitably-minded individuals, it is able to provide more flexible loan terms than traditional financial institutions.

The representative of this group is Ms. Adela Balderas Rosales. She is 40 years old and educated through the third year of secondary school. She has four children (three boys and one girl). Cesar is 19, Soledad is 14, Francisco is 12, and Alexis is 6 years old. Adela sells shirts and napkins. She is requesting this loan to buy shirts and napkins. She started this business six years ago out of economic necessity and in order to send her children to school.  . The business has helped to feed her family and to pay her children's school expenses.
The representative of this group is Ms. Adela Balderas Rosales. She is 40 years old and educated through the third year of secondary school. She has four children (three boys and one girl). Cesar is 19, Soledad is 14, Francisco is 12, and Alexis is 6 years old. Adela sells shirts and napkins. She is requesting this loan to buy shirts and napkins. She started this business six years ago out of economic necessity and in order to send her children to school. . The business has helped to feed her family and to pay her children's school expenses.

Despite the current credit crisis, which has prompted a cutback in loans, Kiva Lenders have never felt more inspired to lend to developing world entrepreneurs. “My loans to a Cambodian pig farmer, Azerbaijani clothing seller, Bolivian cheese maker, and others have been repaid in full,” said Katie Pool, a Kiva Lender. “The only interest paid by Kiva borrowers to me is a better world. In today’s financial climate those dividends make me feel like a millionaire.”

Making a loan through Kiva is easy, secure and personal. The lender simply goes to www.kiva.org, registers in a password-protected section, browses the business section to review the enterprises in need of funding, learns how much funding the enterprises are requesting, and then chooses one or more businesses to which to loan. Loans are made via PayPal, a globally recognized online payment service. Lenders can stay abreast of the progress of the businesses to which they have lent via blog-like updates posted on the Kiva site. If lenders wish to correspond with the business owner, they can do so.

Pendo Luisi (27 years old) borrowed $175 to open a cafe in Dar es Salaam, Tanzania.
Pendo Luisi (27 years old) borrowed $175 to open a cafe in Dar es Salaam, Tanzania.

“People are looking for ways to contribute without making a significant impact on their pocket book,” Premal Shah, Kiva.org President says. “Kiva.org lenders often choose to reinvest their initial $25 loan because they were able to witness the impact it made on an entrepreneur. Because investing in community is one of the most cost-effective ways to fight poverty, Kiva.org is seeing continued lending growth despite the tightening economy.”

Kiva was the brain child of Matthew and Jessica Flannery, a couple with connections to Stanford and Silicon Valley. While living and working in Uganda, Kenya and Tanzania in 2004 — Jessica with a non-profit organization called Village Enterprise Fund (VEF), and Matthew as a filmmaker — they saw first-hand a number of entrepreneurs who were being helped by VEF, and hundreds more looking for an opportunity to start their own enterprises. The couple began developing the concept of an Internet-based fund where socially-minded individuals could loan directly to these deserving entrepreneurs, and spent the next year researching and creating a business plan to make Kiva a reality.

“Microfinance is an exciting movement. Before Kiva, there was really no way for the individual — at lower price points — to get involved as a lender. We wanted people like us to be able to participate in the power of microlending,” said Matthew Flannery. “We started Kiva because we saw loans as a very personal and sustainable way to help entrepreneurs across the world. When you loan to someone and get paid back, you get proof that a business has succeeded — and you are more likely to loan again. ”

While there are various estimates of the size and growth potential of the microfinance industry worldwide, the demand for microcredit services among the world’s poorest is still largely unmet. Estimates show that donor agencies spend between $800 million-$1 billion per year, serving 13-16 million poor — just 4-10% of the potential market. There is a lack of capital being directed to microfinance institutions, and therefore a significant opportunity to redirect this capital to distribute as microloans, which are repaid at rates of 95% or higher. The microfinance industry has grown 25-30% annually over the last five years, and is expected to continue to grow.

About Kiva.org

Kiva.org is the world’s first person-to-person micro-lending website, empowering individuals to lend to an entrepreneur across the globe. Founded in 2005, Kiva.org’s mission is to connect people, through lending, to alleviate poverty. Over 585,000 people have loaned more than $100 million to 249,000 entrepreneurs in 49 countries. Currently, loans made through Kiva.org have a 98% repayment rate. Kiva.org is headquartered in San Francisco.

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