Kiva

Matt Flannery and Jessica Jackley started Kiva in 2004. Kiva is an internet website where you can give money for as low as $25 which will be pooled to reach a specific amount that will be used in a microfinance loan.  In the website you can choose the borrower you want to lend to.  There are a list of borrowers with their pictures and a short write-up about the borrower and the intended use of the loan. Most of the borrowers come from developing countries.

Kiva sends the money to an accredited microfinance institution (known as Field Partners) who will lend the money to the intended borrower. The microfinance institution charges interest for the loan since this is a business transaction and the lending institution has to survive. Once the loan is repaid by the borrower, the money is paid back to you through PayPal.  You do not get interest on the money you lent out, after all your intention is to help and not to make a profit. Kiva is also sustained by funding from other sources, so all of your money goes to the loan and not towards Kiva’s operational costs.

Kiva has its critics. Some say the presentation is not correct since the Field Partner had already made the loan to a borrower while the amount is still being raised by Kiva. So the money that is eventually given to the Field Partner may go somewhere else. There are also stories of fraud by Field Partners. While it’s something that every institution tries to guard against, it does happen.  Fraud happens even in large banks like UBS where a billion dollar fraud occurred right inside the bank, in London; not by an entity in some far-flung country. The world is far from perfect.

Kiva has a high 98.9% repayment rate.  What is nice about the $25 set-up is the amount is small if it’s not repaid. In fact people are willing to give $25 donations; here you have a 98.9% chance of getting all your money back.

If you want to know more about Kiva visit their site. You may even be inspired to lend $25!