kiva.org

Saturday, 7:13 pm

A few months ago, while tuned in to my public radio station, I heard a piece about the 2007 Nobel Peace Prize winner, Muhammad Yunus and his Grameen Bank. Yunus, who received his PhD in Economics at Vanderbilt University, has spent a lifetime studying poverty and opportunity in his native Bangladesh. Well, let me amend that—he’s spent a lifetime studying and implementing the concept of microcredit lending. Yunus began, after the 1974 famine in Bangladesh, by lending $27 to a group of 42 women to buy bamboo supplies so they could make and sell stools. Their enterprise was a success and they repaid their loan. Yunus thought that if it worked once, it would work again. And again.

By 1983 he had officially established the Grameen Bank, the first formal microlending institution on the planet. His was a revolutionary idea, but simple: Lend very small amounts of money to the poor and they will help themselves. Not only that, but he discovered that the loan repayment rates were better than 98% and the loan recipients were lifting themselves out of dire poverty by establishing trades and livelihoods. Incidentally, nearly all of his borrowers were women.

His idea and success caught on.

Jump ahead to this weekend. I stumbled across a reference to Kiva. They are a small microfinance outfit who have partnered with several microcredit institutions across the globe. (they also have a fascinating blog on the Social Edge website.) Kiva is a donor based outfit with a growing internet presence—they raise the cash so that their partnering microcredit institutions can lend small amounts to people wherever there is need. As with Yunus’s experience, repayment rates are consistently in the 98-99% range.

The way it works: I (or you) choose individuals to lend dollars to. Say for example a woman in Cambodia who wants $400 so that she and her electrician husband can buy second hand televisions and radios to repair and resell for a profit. He’s good at what he does and she has sales experience. They apply for a loan with one of Kiva’s microcredit lending partners and are approved. I lend them $25 (or any other amount I choose) and other Kiva lenders do likewise. Within a short time Kiva has raised the donor dollars to lend to this woman and her husband. She agrees to repay the loan within 12-15 months. And there is a 98-99% chance that she will. I will get my $25 back and I have the option to withdraw it or re-lend it to another borrower.

So why, you may wonder, don’t these folks get loans with regular ole banks? Because regular ole banks can’t afford to lend microcredit amounts. Writing a loan for $400, and managing it, would cost more than the loan. To make it a break even enterprise, the rates of interest charged would have to be beyond usurious. Commercial lending institutions just aren’t geared for or interested in microlending.

Microcredit institutions are set up to lend out small amounts. But according to banking laws, they can’t qualify as official banks. They cannot offer banking services like checking accounts or savings accounts from which a regular ole bank draws to make loans. Therefore, microcredit banks must rely on donor dollars. Ideally, this is not how it should work (Yunus, Expanding Microcredit Outreach to Reach the Millennium Development Goal- Some Issues for Attention, Jan. 2003), but changing banking laws is a ponderous, glacial process—so until laws change, that’s where places like Kiva and you and I come in.

I spent hours poking around to see just how sound this operation is and whether I should lend my dollars. Well, lots of people got there before I did. I learned that PBS’s Frontline aired a program, back in October 2006, on microfinance in Uganda, spotlighting Kiva. It’s an excellent program and viewable online at the link.

Then I learned that New York Times columnist, Nicholas Kristof, wrote a column on March 27 of this year extolling the virtues of Kiva. He even traveled to Afghanistan to visit the man to whom he loaned dollars for his bakery business. The column is behind the NYT’s paywall, but you can read it reprinted in it’s entirety at The View From Here blog (thanks, Google) or via Kiva’s pdf file, which includes the column’s photographs. It’s a good read. Even better is Kristof’s video, which is available to all. Really, go watch it.

And finally, I honed in on two of Kiva’s citizen lenders. Tom’s publicly viewable Kiva portfolio shows that he’s been a Kiva donor for a little over a year, lending to nearly 100 individuals. The 100% repayment rate of his older loans is impressive. Several of the loans are in the ongoing process of being repaid and other’s have not started repayment yet as they are brand new loans. Tom also wrote a great blog post (with lotsa pictures) on Kiva and was another one who traveled to visit a couple of the people he loaned to. This time in Guayaquil, Ecuador.

Similarly, Nathan’s publicly viewable portfolio shows the large number of folks he’s loaned his donor dollars to with just a fantastic repayment rate.

These are people who are making a difference in the world. One person at a time, but a whole bunch at a time, too. It was enough for me. I started my portfolio last night. It’s tiny, but I plan to expand it a little bit each month. I’ve loved the concept of microfinance since I first heard about it. Little did I know that, several months later, I’d be able to participate. To me, this gives a whole new meaning to recycling. I know, an odd thought, but really, I loan money to create opportunity, get it back, and get to send it out again to create more. Over and over. No, I’m not earning any interest on my dollars loaned (laws prevent it), but that’s not why I’m doing it. When I donate to charity, my money is used once. This way it’s used many times and the benefits are far reaching.

Improve the life of one person by helping them to develop, establish, or expand a trade and you’ve already helped a community. Remember the old proverb? Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime. Or as The Nobel committee said, Yunus and his Grameen bank received the 2007 Peace Prize for their efforts to create economic and social development from below. It works.