Kiva.org - Loans that change lives

by diwakergupta on Sep 10, 2007      Category: Economics & Business Tags: microfinance

Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.

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nitiniitk's picture

I love this idea; the fact that you are not donating but lending! As has been seen in several micro-credit programs, people actually like to pay back the loans, and I think that can make this program really sustainable. I can't think of anything bad with this scheme.. can you?

aaditeshwar's picture

I think this is trying to solve a non-problem. It is trying to provide more funds to the people, but funds are already available to quite some extent. What is more problematic is having the capability to make good use of the funds. All microfinance institutions are struggling with exactly this problem. And I would consider the 99.99% repayment rate statistics with quite some grains of salt -- 24% interest rates, poor paperwork for recording transactions, absence of formal audits of reports -- all these facts considerably weaken the high repayment rate claims.

All the same, it is great because it does awaken the social consciousness of people, and helps create much needed linkages between the poor and the rich.

parul8ue's picture

I found the concept pretty interesting too. Esp. these are significant paradigm shifts in the way existing charities/mfi orgs work

1. Using internet to reach out to a much bigger resource pool
2. Like Nitin pointed out - Lending instead of donating is great. more lender confidence, more self respect and responsibility at the borrower's end, more sustainable overall.

Don't know much about microfinance but I thought often getting funds is an issue also as mainstream financial institutions are hesitant about lending because of poor/no credit records and no steady/alternate income sources that could guarantee payment. aadi, am i missing something?

parul8ue's picture

observations i found interesting -

amongst requirements for partnering institutions was 'regular internet access'. There are many partnering orgs in many parts of Africa - it indicates existence of many mfi's as well as 'pervasive' internet access (i would have thought otherwise!).

OTOH, only one in India. I wonder if it is a publicity/awareness issue or there aren't too many MFIs? internet is quite pervasive in India these days.

aaditeshwar's picture

I am really no expert myself! Please don't believe what I say!

Anyhow, my reasoning is as follows. Microfinance has become more like an industry today. The efficient MFIs get lots of funding and the inefficient ones do not. Why is that MFIs such as Acumen Fund and SKS India are not partners with Kiva? I think it's because they already have tons of funding! I randomly picked a few Kiva partners and searched for the size of their asset base. Most of them are small players -- couple of million $, or not even that. Some of them did not have any funding sources other than Kiva. All this raises doubts in my mind about the efficiency of MFIs connected with Kiva.

Let us look at it from another point of view. MFIs are normally funded by large foundations, the World Bank, governments, etc. All these organization definitely review MFI performance before making their decisions to give out funds. The Kiva argument says that these large organizations do not do a good job because of corruption in their decision making process. But by the same argument, why should we believe that Kiva's assessment of these MFIs is any better? Or for that matter, why is the assessment of "nice" people who "lend" money to the "less fortunate" any more credible, especially given the lack of information needed for correct decision making?

All the same, I don't think I can argue against the fact that this is an excellent method to increase outreach. But before accepting the "goodness" of this method, we should be slightly skeptical and examine if the goodness really outweighs the badness. It's all very puzzling, or maybe I am just in an annoying mood these days...

nitiniitk's picture

Adi, it's quite likely that Kiva MFIs are less efficient than other ones.
However, the fact that Kiva allows anyone out there to pool in their money for microcredit is interesting. It would be all the more beneficial for everyone, if the other MFIs like Acumen or SKS that you mentioned, open up a website to allow public participation in this way. I just looked at the Acumen website.. they allow "Donations"! So here, Kiva scores over them.
http://www.acumenfund.org/Community/SupportOurWork/

seedadha's picture

HI friends , This is Sriniwas, I want to be part of your discussion group. it is quite interesting discussion .. Mr. Adi,I agree bit with your argument. but even sks , ASA, grameen koot, many ngo turned MFI, how they started, their microfinancing, by getting support of many individual philonthropist, small doners,like Kiva.. that is how they build their capacity, brought some professional system. of course, today they may be having tonnes of funds. I feel it does not mean all startup/ small initiators doesnot have accountability. But certainly the microfinance sector has opened another ray of returnable investment to help the poors, instead of donating amount. it is understanding, how do U feel..

seedadha's picture

I am associated and cofounder of SEEDA ngo Dharwad working for Livelihood support activities, to the selected poorest families. E.mail seedadha@yahoo.co.in / give2seeda@gmail.co.in Cell: 9880226745

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