For the past six years, an internet-based bank has been lending money from individual donors in the West to small businesses in the developing world.
Kiva (www.kiva.org) has seen more than 900,000 lenders provide around $205 million (€146 million) to businesses in the developing world. The founding principles of Kiva are simple enough: individuals can make loans across the internet. They do not get interest, but rather the satisfaction of seeing the money returned as the businesses repay the loans.
The brainchild of a husband-and-wife team from California, Kiva started when Jessica Flannery travelled to East Africa as part of a group that supports needy projects through $100 grants.
“Every single day, I would meet an entrepreneur, and hear about how $100 had changed not just his or her life, but also the lives of their families, friends and other community members,” Ms Flannery told the BBC.
“Take a goat herder in Uganda. If you give him $25, that’s two smaller goats. That’s a great start. With $100, you can imagine more goats, perhaps a small shelter, stock up on goat feed. So, that little bit of money can really help set someone out.”
Her husband, a computer programmer, seeing the need to help these entrepreneurs, star-ted the peer-to-peer microfinance. Kiva is a Swahili word for unity or agreement.
Kiva’s goal is at once simple and extremely ambitious – to reduce world poverty through small, person-to-person loans, known as microfinance. Poor people with access to savings, credit, insurance, and other financial services, are more resilient and better able to cope with the everyday crises they face.
Microfinance is also a good tool for empowering poor women. In fact, the number of Kiva loans to women entrepreneurs is a high 81.39 per cent. This sends a strong message to households as well as to communities.
So a pig farmer in Vietnam or a dressmaker in Uganda might receive $1,000 or more from a range of lenders, who might live anywhere around the world as long as they have internet access.
Lenders do not receive interest on loans, but the borrower does pay some interest, which helps pay some of Kiva’s costs.
Kiva’s influence has also reached Malta. Local entrepreneur Phil Richards, who has set up an online team of local people, informs me that in just two years, a total of 162 loans worldwide were lent by the Malta Kiva Lending Team, for a total sum of $4,150.
Within a matter of days, since I contacted the Malta Kiva Lending Team, the total number of members increased from 19 to 24.
“I started lending on Kiva in July 2009 as I saw that it was a great way to help consistently,” says Mr Richards. “As a businessman I wanted to help other business people help themselves.
“Through the Kiva portal, I decide where my loans could be made and what types of business I would be helping to fund. I have worked on my own lending patterns to ensure I am aiming for equality of my lending, and this has been useful for me.
“Each month I now receive repayments on my loans – in turn I loan this money again, and so the process continues each month. I aim to increase the funds I am loaning out each month by just $25, and the Kiva portal keeps me up-to-date on my loan portfolio.
“Kiva is a very powerful concept and it gives me great pleasure to see that the money I have placed with Kiva has been loaned many times over.
“Working together as a team from Malta is also an essential part of the Kiva experience – our common focus gives us a social bond which provides an additional benefit.
“So far we have never met up as a team but we decided that the team will be meeting up when the $5,000 goal is reached,” says Mr Richards with enthusiasm.
The idea of meeting up was raised by the founder himself, Phil Richards, Simone Cutajar and Joseph Caruana.
University student Joseph Caruana says he was introduced to Kiva through his friends who have promoted it on their university publication, Wink.
“I see Kiva as another way of being part of the solution to the world’s problems,” he says.
“I started off by committing to give out a loan of $25, the minimum one can donate, at the end of each month. Since November, I’ve already raised a total of six loans, which together add up to $144. This money will be paid back over a set period of time and the idea is to reinvest it in new projects once it’s paid back. I expect to have loaned at least $400 by the end of this year. If I find myself needing this money, I can easily stop loaning and withdraw it from the account without compromising the organisation.
“So far I’ve helped people from Mali, Ghana, Philippines, Peru, Colombia and Nicaragua and I am kept updated on the projects which I’ve invested in.”
Kiva is not the only website tapping into the internet’s power to directly connect would-be funders to would-be entrepreneurs. Dennis Whittle, formerly employed by the World Bank, and a colleague of his started a private, web-faced microfinance programme called Global Giving (www.globalgiving.org).
To donate through Global Giving, you just browse a list of small-scale projects and choose which one to support.
You can even e-mail project leaders for more information. Then, the donor can choose to give as little as $10 to a project. Some, though, have given as much as $150,000.
Global Giving and Kiva say they work with local groups to vet would-be entrepreneurs. Both organisations contend that is the best and most cost-effective way to make sure that the money collected is distributed efficiently.
Ms Dorekens is reading for an M.Sc. in Media Management at the University of Stirling. She was awarded a Steps scholarship which is part-financed through the European Social Fund.