I came across this via a topic Rikki posted on our company forums.
Kiva is a website that allows one to invest in companies located in developing parts of the world. In a nutshell, you offer an interest free micro-loan (from $25 upwards) to pre-vetted companies registered with the website. When the company has enough lenders, they are given the money with a view to paying it back.
Personally, I think this is a break-out idea that can have a real impact on poverty in developing countries. Small donations to large organizations can be frittered away and make little impact into helping the cause they support but loaning money directly to people trying to start up or expand their small businesses will really help.
Selfishly, it also makes one feel good knowing that you’ve helped a small business and you may even get your money back to withdraw or re-invest. So far Kiva has a 100% repayment rate although you should accept that you may not get your money back.
I’ve invested in a few business and you can see my profile here.
Registration is quick and easy. All payments are done via PayPal who have generously waived all fees so Kiva can pass on 100% of the loan.
Brilliant.
5 comments
Comments feed for this article
April 18, 2007 at 10:45 am
Telemacus
Definitely a break out idea and a brilliant one too!
Thanks for posting this Matt.
April 19, 2007 at 3:10 am
Marcus
Actually, Microloans, while they may sound great, simply end up putting the poor into a debt cycle. Only 5% of those given Microloans actually end up starting businesses.
Just thought I should mention that
April 19, 2007 at 9:36 am
Matt
I should mention that they are already pre-existing businesses and that are looking to expand.
April 19, 2007 at 9:04 pm
Scott Oldford
That is an amazing site, and a really good idea.. looking for a couple people to invest into now. Thanks for the post matt.
May 22, 2007 at 6:44 pm
John Grant
Marcus,
[1] That 5% statistic/study was done by the George Foundation run by Abraham George (basically its only “scholar”). By adding “foundation” to the end he has tried to give his own studies and analysis some credibility. Its impossible to ensure the authenticity of his studies/methods/analysis and notice it has not been referenced by any popular publications or sources.
[2] Microloans help start and EXPAND existing fledgling businesses. Just because only 5% were used to start businesses doesn’t mean people weren’t helped or brought out of poverty.
- http://www.unitus.com/sections/poverty/poverty_mf_main.asp
“…start or expand small businesses…”
[3] While a few have argued that microloans would or could create a cycle of debt, there is little evidence, data or examples that show that this has or does happen. In fact, many have called upon microloans as a way to ESCAPE the cycle of debt some poor are caught in.
- http://news.bbc.co.uk/2/hi/business/6297919.stm
- http://bad-credit.interest.com/content/articles/bad-credit_story.asp?story_id=1000035246&ID=interest
[4] The Evidence
“There is overwhelming empirical evidence that huge numbers of small borrowers do indeed pay interest rates at a level high enough to support MFI sustainability (CGAP 2004). MFIs charging very high interest rates usually find that demand far outstrips their ability to supply it. Most of their customers repay their loans and return repeatedly for new loans.” (International Monetary Fund [IMF] Report)
- http://www.imf.org/external/np/seminars/eng/2006/rppia/pdf/aryeet.pdf
Stanford
- http://www.gsb.stanford.edu/news/headlines/2004globalconf_khosla.shtml
“The success of the more than 6,000 institutions doing some form of microfinance today has proven this wrong.”
another scholar saying the same thing as the IMF
http://72.14.205.104/search?q=cache:aUQ7iBksUdgJ:www.ruralfinance.org/cds_upload/1126184546608_Subsidising_microcredit_interest.doc+There+is+overwhelming+empirical+evidence+that+huge+numbers+of+poor+borrowers+can+indeed+pay+interest+rates+at+a+level+high+enough+to+support+MFI&hl=en&ct=clnk&cd=1&gl=us&client=safari
[5] Oh I almost forgot, microloans have an average repayment rate of around 95-100%, with the average being 99%. That means people aren’t getting stuck in cycles of debt, but are able to pay back these loans WITH INTEREST. Oh yeah, and theres the fact that over 410 million have been brought out of povert with microloans.
- http://www.opportunity.org/atf/cf/%7B4FDDA71B-2D42-4FAE-84B0-75A6C2E25802%7D/Microfinance-Alleviating-Global-Poverty.pdf
- http://www.smh.com.au/news/world/microcredit-lifts-410-million-out-of-poverty-and-counting/2006/11/01/1162339918691.html
I say we do our homework before coming to quick conclusions on an issue. Matt, its a great idea, one that has affected a lot of people, and im glad to see you are taking advantage of it.
[john]