Many Americans think nothing of spending $25 on a nice dinner or movie tickets. But in the developing world, $25 can mean more than a pleasant evening. It can provide start-up capital for a small business in Uganda, or help a family farm thrive in Kenya. A variety of so-called micro-lenders make loans in these small amounts to poor entrepreneurs in third world countries. One of the newest is Kiva, a non-profit based in San Francisco, that lets anyone with money to invest become an international lender.
Matt and Jessica Flannery came up with the idea for Kiva three years ago, after hearing microfinance pioneer Mohammed Yunus, founder of the Grameen Bank, speak at their university. Matt recalls, "that was a point where Jessica decided to dedicate her life to this field. And that was a point where I really learned about it in-depth and got excited about it as well."
He explains that he knew he wanted to start some sort of a technology-related business, but didn't know exactly what. "I had all sorts of hare-brained ideas," he admits and credits Jessica with directing that thinking to something more socially responsible and a little more focused on international development. "The combination of these two passions resulted in this business we have today," Flannery says.
The Flannerys launched Kiva with the help of their friend and neighbor, Premal Shah, who was then an executive at the on-line payment company PayPal. After five or six years there, he recalls he was looking for a more fulfilling job. Although he was materially well-off, Shah says, "I was just kind of spiritually just treading water at that time and really wasn't an inspired person." He calls leaving PayPal for Kiva "a no-brainer."
While microfinance banks have been around for three decades, Kiva pioneered the concept of matching individual would-be lenders with poor entrepreneurs via the Internet. Lenders visit the Kiva website, read about the businesspeople asking for support, and then loan as little as $25 to anyone they choose.
Jessica Flannery explains that the entrepreneurs Kiva tries to help represent a wide array of businesses, listing some of the individuals she has financed. "There's a popcorn seller in Samoa; there's a butcher in Afghanistan; there's a salon in Iraq, a ton of cows, chickens, goats, king of animal husbandry-type businesses, all sorts of farming endeavors, fruit stands, vegetable stands — a lot of things like that."
Ken Gardner has been a Kiva micro-lender for the past year. So far, he's made 91 loans in 20 countries. His first loan was $25, to a young Ecuadorian woman who had a fruit stand. "She was on her own. She was divorced and she was just barely getting by," he recalls. "She was borrowing money from the moneylenders on the street at 30 percent interest to buy her fruit and then sell it at the stand. And the charges to the moneylenders were eating up all of her profits. And so that's who I lent my first money to. She was right on time every month, and very faithful. I'd love to know what she's doing now, but she paid off the loan and I haven't seen her pop up again."
Ninety-eight percent of all Kiva loans are repaid and lenders like Ken Gardner usually allow their money to roll over into new loans.
Kiva's founders say their success is due in part to strategic partnerships with corporations like Google, Yahoo, YouTube, Starbucks, and PayPal. They help reduce Kiva's cost of operations and help direct Internet users to the Kiva website.
Matt Flannery also attributes Kiva's success to its young staff and volunteers. "We really view this as a community collaborative project," he explains. "There's so many more people who have made a heroic impact on Kiva besides Jessica, myself, and Premal. The list can go on and on. People putting their egos aside, not necessarily getting credit, but doing something heroic to make this platform available to more people just blows my mind and that's personally been overwhelming. This last two years has seen people stepping up in huge, really unusual ways for Kiva."
Since it went on-line, over 100,000 lenders have stepped up and joined Kiva. This year, Kiva has given out more than $10 million in loans, up from $500,000 last year.
Although the fight against world poverty is far from over, Matt and Jessica Flannery and Premal Shah have helped thousands of people out of poverty, through strategic philanthropy and innovative on-line partnerships.
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