Micro-finance Gives Developing World a Chance to Ease Poverty

Thursday, September 6, 2007

An email has just arrived in my inbox from an organisation called Kiva, telling me that a Cambodian woman I recently lent money to, Pork Saru, has made a repayment of $28 (?13.88, e20.54). Twelve other people from all over the world received the same email. In June, the 13 of us lent Saru a total of $500. She used the loan to buy a motorcycle to transport goods more easily to the grocery store she owns, and to improve her product range.

None of the lenders knew each other, and none of us knew Saru. Until recently, it would have been almost impossible for her to access the funds she needed to improve her business, and almost impossible for 13 people living in the West to help her.

Kiva (which means agreement in Swahili) is a US-based, non-profit organisation. It acts as a kind of retail micro-financier. Micro-finance gives access to capital to poor people in the developing world who otherwise would be unable to borrow; it doesn?t require collateral. According to the World Bank, of the 3bn people of working age in the developing world who could make use of micro-finance, less than 1bn have access to it. Kiva is attempting to make a start at bridging that gap.

Where it differs from traditional micro-finance institutions is that it allows an individual in the West to choose who they will help in the developing world via its website. It personalises aid. Unlike a donation to a large charity, or the tax you pay that is spent on international development, you can see exactly where your money goes. Kiva connects people who need to borrow money with people who want to lend money; it does not interfere with who lends what to whom, it just provides the platform for thousands of transactions to happen.

There are thousands of entrepreneurs like Saru featured on Kiva?s website asking for the loan they need to invest in their businesses, and there are thousands of people willing to lend. Since the website was launched just over two years ago, it has enabled 90,000 people to lend almost $10m to 15,000 entrepreneurs across the developing world. From a brick manufacturer in Kenya, who used his $150 loan to rent a brick press, doubling his production overnight and enabling him to hire five new staff, to a female mechanic in Honduras, who took over her husband?s business after his death and used her $300 loan to buy new equipment and now employs four staff, it is providing help to entrepreneurs and acting as a catalyst for wealth and job creation in countries that are in much need of both.

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Source: The Business (link opens in a new window)