Kiva is truly extraordinary
Today is a momentous day. I received the first repayment against one of my loans at Kiva – $2.09.
You might say my investment in Vicente Zumba’s shoe store in Ecuador is paying dividends.
You might just be wondering how the hell I managed to invest in a shoe store in Ecuador anyway – and you’d be right.
As I’ve enthusiastically regaled more than one close friend in the last month, Kiva is my favourite “Web 2.0” business. Not because of the Ajax, because of what it can do. It’s what I’d call microloans “done right”. It takes a few ingredients from Flickr, one or two from Blogger and mixes them together with a non-profit microfinance model to create an incredibly powerful (and empowering) idea.
The basic process is as follows:
- you put money into Kiva (which is itself a non-profit, based in San Francisco I believe) using PayPal. As much or as little as you want.
- you then browse the series of businesses around the world which have applied for money, and been vetted by local staff in their country as viable
- find one you like, and contribute as little as $25 to the loan, along with a host of other lenders. Each loan is usually spread out over about 25 or more lenders from my experience, see Mr Zumba’s lenders (flickr anyone?)
- the money is aggregated, lent to the business which spends it – in Mr Zumba’s case, he bought more inventory and two new display cases for shoes
- the recipient can then write a journal (ok, it’s a blog) about their business as often as they like, communicating directly with the lenders.
- over time, the loan is paid back and the “profits” evenly distributed – hence Mr Zumba’s $98 repayment on his $1175 loan earned me my first $2.09
I say “profits” because the entire process is non-profit. You don’t earn any interest on your loans, and Kiva doesn’t take a cut. The only benefit you receive is the warm feeling that you’ve helped someone build their business in a meaningful way with a few dollars.
You can withdraw your funds after they are repaid (if you want), but Kiva recommends that you simply re-loan them to someone else, thereby creating a virtuous circle.
Treat it as a donation that just keeps donating over time. If your loan doesn’t get paid back, it was a donation. If it does, donate it again. It’s a little bit about teaching men to fish, not providing them with seafood platters.
Does it work? They have around a 96% payback rate right now. From personal experience, this is my first instalment (the loan was made on Dec 06, 2006 – so that’s 1 month later).
The thing I love about it is that from my desk I can help people around the world. My loan “portfolio” now includes businesses in Ecuador, Togo, Mexico, Bulgaria and Azerbaijan. A few hundred dollars of my money could either be sitting in a bank account, or helping entrepreneurs build businesses on 4 different continents, while I sit on a fifth. Who can’t see power in that?
So come on. What are you waiting for? You have a credit card – why not lend $25 to an aspiring entrepreneur in Togo and see how good it makes you feel.
I’ll tell you what, why don’t we make this a challenge? For anyone who reads this post, signs up to Kiva and makes a loan – email me the loan details and I’ll join you in the loan. Let’s invest together. I can always expand my portfolio.
Follow this link and do it today. As is their slogan, make “Loans that change lives.”
Be warned though – it becomes addictive.