Kiva.org Microloans

Posted on November 27, 2007
Filed Under Business & Entrepreneurship, Finance & Economics, Global Issues, Ideas |

A couple of months ago I made two $25 loans on kiva.org.  This week I received notice that both of the entrepreneurs have repaid 10% of the total loan commitment.

I am excited about this for a number of reasons.  First, I have become convinced that micro credit is the best way to bring the third world out of extreme poverty.  In theory it works like any other bond investment in that you lend money and are returned payments of principal and interest.  However, in the case of micro loans, there is a third component: Social return.  Kiva.org doesn’t yet pay interest to its lenders, but there is still a significant social return that is provided.

Second, I love the idea of taking my charity dollars each month and putting it towards funding third-word entrepreneurs.  What I consider a small loan can literally change someone’s life, and I’m not just giving it away- there is a very high probability that I will get my money back.  This means I am able to recycle the money back to other borrowers, and reap even more benefit.

Third, I get interaction with the borrowers, albeit limited.  I am provided with profiles as well as periodic updates via a borrower journal.  Here are the profiles of my borrowers:

“Clarence Vincent Obuya is 24 years old. He lives at his parents’ residence in a sprawling slum neighborhood in the town of Mombasa. Despite being under his parents’ care, he is determined to make it on his own and be independent. He supplements his parents’ income using earnings from his water vending service that he runs within the slum residence. He began this business three years ago after being unable to find formal employment after he completed school. His activities include delivering the water in cans to the customers’ premises. He uses a wheel-cart to ferry the water cans from door to door. This service is quite essential in this slum area since the majorities of the residents do not have tap water at their premises, and have to purchase water from vendors. He saves some of his earnings and plans to enroll in college in future. He has a large number of clients who place orders for water delivery on a daily basis. His main problem in this business is that he has to hire the wheel-cart and this consumes his profit. He is therefore requesting a loan of $350 to assist him in purchasing his own wheel cart and more water cans. ”

“Margaret Owino Okello is a 28 year-old married woman. Her husband works as a casual laborer at the docks. She lives with her unemployed sister in a slum residence in the town of Mombasa. To earn a living, she runs a small kiosk selling fruits and vegetables to the residents of her area. She has been doing this business for the last four years and her earnings have managed to provide for all her family’s basic needs. The items sold are popular among the slum dwellers since they are sold in small, convenient quantities that are affordable to the residents of this low-income neighborhood. Recently, the business has been performing poorly. This has been caused by increasing costs of the vegetables at the market, forcing her to purchase only a few items, which makes her earn very little, which is barely enough to sustain her family. She would like to increase her income so that she can make more gains from this trade and be able to operate at a profitable level. Margaret is requesting for a loan of $350 to enable her to increase her stock of vegetables and fruits. The proceeds from here will enable her to uplift her lifestyle and afford better housing.  “

Kiva.org has become popular very quickly, and my experience as a lender so far has been positive.  I am excited to get my loans returned and recycle them back to other entrepreneurs.

Give kiva.org a try.  It also makes a great gift!

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