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The husband of a friend introduced me to Kiva some time ago (while introducing me to Facebook as I recall).  Kiva is a microlender to developing countries.  In short, it lends money to other lending organizations (Field Partners) in those areas, who then lend to people who have filed for a loan.  Loans typically vary from $500 to $2,000 in total need.

Why bother?  Well, there’s a “social consciousness” aspect that is at least somewhat appealing, which has to be weighed against a business aspect that is not.  First, the good part.

Upon visiting their site, you’ll see a wide variety of persons who are in need of funds, with a basic bio of their history and expected use.  Most seem to be individual proprietors, though some include groups of people.  In places like Honduras, Peru, Dominican Republic, Kyrgyzstan, Mongolia, and others, I really can’t imagine what it takes to survive from day to day, but I’m certain there are far fewer options for employment than in the U.S., even in our recession.  Businesses need cash for better equipment, goods, etc. – it makes sense.  Some loans are for personal needs such as housing or transportation, but those to me speak more of a charitable need than “investment.”

My friend suggested criteria which made sense - selecting business endeavors backed by a highly rated lender.  Kiva provides a lender rating, but there is also their length in the micro-lending business and total loan $ to be considered.  I’m also partial to those who borrow for a shorter term (~1 year) with monthly payments, if only to recycle my $25 that’s in the system (you can, of course, “donate” more than that). 

My first loan was to Nazira, in Azerbaijan, who used it for buying clothes to resell.  She has since repaid the loan, and I’ve now reinvested in Sanobar’s retail business in Tajikistan.  I really shouldn’t be calling them by their first names, though.  I don’t know them, and they don’t know me.  But that is part of what appeals to me – a certain anonymity when contributing to a greater good.  People are in need, and it’s an interesting way to help. 

There is a notable disclaimer.  In the fine print, Kiva actually pre-funds the loans, so my money may or not be going to the individuals selected.  But it’s close enough, as each loan has to be funded by someone and they track the percentage raised, as in the graphic below.

In that these loans wouldn’t be made without someone contributing, there is the potential for good.

The bad?  Well, I don’t live in those areas, and I don’t know what interest rates typically can be found there by small borrowers.  But the Lending Partners’ interest rates (not Kiva’s) tend towards the exploitative (often 20% – 40%).  As a factor in the next loan (I erred on the current one…), I’ll probably begin with a well ranked Lending Partner who charges 15% or less interest, then find a borrower that they’re representing.

Consider it if you like, but I find it satisfying to support a social need while promoting capitalism in places I’ll never visit.  Maybe it will help.

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