Peer-to-peer micro-credit over the Internet with Kiva

Creative software applications for development are on the rise. I mentioned a few such tools in earlier posts (here, here, and here), ranging from electronic health records to Web 2.0 social networking in post conflict situations, and even Google.org is extending its toolset (see also the recent Google.org blog post about it). The earlier mentioned tools operate at the destination and might seem ‘far’ away. Recently I stumbled upon the Kiva site through ISF, which brings one of such applications at your fingertips and lets you connect with those people ‘far’ away.

Kiva is based on the micro-credit financing approach pioneered with the Grameen Bank and for which Grameen and its founder, Muhammad Yunus, received the Nobel Peace Prize in 2006. With Kiva, it is not a single bank in Bangladesh that lends to the local entrepreneurs, but an amalgamation of individuals, groups, and companies from across the world that—through the Kiva website—lend $25 at a time to people’s entrepreneurial projects presented on the website, and who then receive the actual money through ‘field representatives’, i.e., local micro-credit finance organizations (MFI) in the countries that Kiva collaborates with.

That is: you choose how and where your money gets used, and, in almost all cases, have your investment paid back in full—and all that with a few mouse-clicks (see graphical explanation of the business process). In addition, you don’t put all your eggs into one basket, but pool together with other lenders to reach the requested funds; put differently: the risk of not seeing back the full amount of your investments is spread out over the whole group of lenders to the chosen project. Further, the lender lends without interest (and I sure hope the local MFI do have none or a low interest rates), and the financial ‘return on investment’ can vary also due to fluctuations in currency exchange rates. The human and social ‘return on investment’ surely is positive.

Thus far (today), some of the Kiva statistics are: $125, 340,035 is the total value of all loans made, of which 98,48% is the current repayment rate, and the number of entrepreneurs that have received a loan is 316,314 of which 82,32% are women, and the average loan is $397.62. Lenders come from 194 countries and there are 53 countries where Kiva’s field partners operate.

The business proposals presented on the website are accompanied by a brief background of the entrepreneurs, a photo, and what they want to use the funds for. Those aims range from agriculture (e.g., to buy two cows and sell the milk), to groceries (e.g., extending the well-running shop, spare parts for a car to increase house deliveries), clothing (e.g., to buy more and better equipment to make them), and much more. The projects are located primarily in Asia, Africa, or Central- and South America, and a large majority of the entrepreneurs are women.

The website also has a blog and email updates where they put short updates about ongoing projects. Although this concept of Kiva probably will not beat the most profitable industries on the Internet, it at least tries to put the networking to constructive use, and it likely will do so even more when the site will be available in more languages and entrepreneurial projects of more countries will be available. Though with such an increase, the currently reasonable search function will have to be improved upon so as to keep finding information quickly. Overall, perhaps it may become an example of the ‘Internet for peace’.

P.S.: True, the Kiva approach is not without baggage, and it surely is not, nor should it be, the only means to narrow the disparities in living circumstances between the entrepreneurs and (potential) lenders, but, in my opinion, it deserved the benefit of the doubt. So, yes, I did give it a try. At the moment I write this, with my and 112 other lends, a clothing sales person in Honduras, teachers in Sierra Leone, and a seamstress in Nigeria have the opportunity to realize their ideas to have a more fulfilling life and improve their lot, and I wish them all the best with it. It is not ‘we’, who are relatively rich, who tell them what to do, but the entrepreneurs themselves who decide how to make the best use of the money, which hopefully is empowering. As isolated projects, this may seem insignificant in ‘the big picture’, but it is significant for the people involved and many little bits do amount to a lot.

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