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February 6, 2008
Global Business, Kiva
The Kiva Connection: Our Adventure in Microlending
Posted by Tamara Schweitzer at 4:40 PM
Over the holiday season, Inc.com reached out to our colleagues at Mansueto Ventures -- the company that publishes the print and online editions of Inc. and Fast Company -- with an idea to sponsor an entrepreneur through an organization called Kiva.org. As you may know, Kiva.org is a website that facilitates microloans to entrepreneurs all over the developing world.
Since its launch in 2005, Kiva has partnered with 77 microfinance institutions in 39 countries. These "field partners," as they are called by Kiva, identify entrepreneurs in impoverished communities who are in need of loans to purchase the necessary equipment and supplies to sustain their businesses.
Through its Internet-based model, Kiva.org makes it possible for just about anyone to support an entrepreneur in a developing country. The site displays short profiles of all the entrepreneurs who have qualified for loans, so potential lenders can choose who their money will go to. Once the loan is disbursed, the microfinance institution posts progress updates to the Kiva site until the entrepreneur has repaid the money.
At Inc.com, we saw lending through Kiva as a unique opportunity for us to forge a connection with entrepreneurs in other parts of the world and to shed light on their experiences. While our sponsored entrepreneurs may be in a much different place economically than the U.S.-based entrepreneurs we cover, the trials and tribulations that they face as business owners are no doubt similar -- and we will use this blog to examine their challenges as well as their triumphs.
Our company was able to collect enough money to provide $25 loans to eight entrepreneurs. As we receive progress updates on our chosen entrepreneurs, we will be sharing them on this blog. We are selecting a diverse group of entrepreneurs -- by gender, business type, and location -- and we look forward to exploring the powerful role that microfinance plays in each of their lives.
For most of the people that Kiva helps sponsor, entrepreneurship is crucial to their survival. Men and women who may not otherwise have been able to feed their children or send them to school are now able to improve their lives as a result of running a business.
Yet microlending is not without its skeptics. The most common criticism of microfinance programs is that they fail to reach the poorest of the poor. Not only do microfinance institutions have to avoid high risk communities and populations -- those that are geographically secluded or where there is a high rate of illness and disease -- but these institutions must also charge high enough interest rates in order to survive. Some critics have even argued that microfinance institutions often operate in the interest of business first, ahead of their overall mission to tackle poverty.
Another concern has to do with the securing and dispersal of loans. Because many microfinance institutions loan only to women, some studies show that women have been asked to secure loans for other male relatives to go towards a business that they may not be running. We intend to examine these concerns throughout the course of this blog series, as they are part of an evolving and increasingly public dialogue on the impact of microfinance.
And, we have already begun to see the kind of positive effect that microlending can have at the front end. A couple weeks ago as we were browsing the Kiva site for new entrepreneurs to lend to, we were greeted with a message that Kiva was sold out of businesses in need. Meaning, Kiva could not load new loan requests on their site faster than the loans were being fulfilled.
A recent New York Times Magazine article written by Inc. contributing editor Rob Walker, reported on this very issue -- the juxtaposition that occurs when a charity's demand is greater than its supply. Currently, more than 230,000 people have been lenders through Kiva.org, for a total of almost $21 million in loans. The organization's supply has since been replenished, and our lending is already underway.
Check back next time for an introduction to the entrepreneurs we are sponsoring.
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This program seems to me to be fraught with an exorbitant amount of potential problems which would include sponsoring of: sweat shops, drug labs, terrorism, and all manner of illegal activities too numerous to mention.
Why not focus our energies helping our own poor and under-served populations first, before we try and fix others overseas.
That seems a very negative approach to giving.
Kiva is just one of many successful micro-finance organizations that have cropped up in the venture philanthropy boom. In fact, Muhammad Yunus received the noble prize for peace in 2006 for creating a successful micro-financing system for women to start businesses. In many articles Yunnus' success focused on the good that resulted in this loan system. It provided hope, and alternatives to crime. And the businesses thrived. The idea of this type of giving is really about creating opportunities for impoverished areas to help themselves, and in turn inspire community change. These organizations do have criteria on which loans are given and repaid. The repayment of loans is extremely high, which in itself is a measure of success. The number of people investing in these endeavors also speaks to the integrity of the giving model. I think it's also important to keep in mind that this isn't true altruistic philanthropic giving. This people are investors, investing in creative enterprise, and are receiving their money back- with the option to invest elsewhere or cash out. Domestic giving is much more charity driven. Venture philanthropy in the US is focused on the actually non-profits and there ability to build organizational capacity. In turn helping to further their missions, and actually help the underprivileged. The US model is much more focused on non-profits providing services for the poor. Kiva, and others are actually talking about cultivating social change. Developing countries. Being poor anywhere is awful, but being poor in America is completely different than being poor in Africa, or being a poverty stricken nation.
Certainly it's important to focus on our own country, and the people struggling for survival here. There is a very large non-profit sector here that is fighting such battles. This venture philanthropy trend, which really is more than a trend, is focusing globally. When you are looking for a social return on your investment and measurable results to charity it can be easier to see those results in countries that are seriously struggling.
For right now it seems that big-money donors are giving in more strategic, globally-reaching, high-impact ways. Therefore ordinary citizens must increase their roles in donating to domestic causes to insure no one falls through the cracks. The more money you have, the more responsibility you have give back. That's something that tends to be proportional. If you are Bill and Melinda Gates, the economic and social impact your funding can impart necessitates global giving. If you are the an upper middle class donor, your giving priorities are probably more locally focused.
Having said all this I think giving to humanitarian causes domestic or internationally is of critical importance. Social awareness and responsibility are becoming mandatory to being a good citizen of planet earth period. To say we should only focus on our country and its poor seems a bit too narrow in scope.
The initial blog is a great read but I have to say what was posted by Courtney was terrific. Despite all the reading I do on a daily basis I'd never heard of Muhammad Yunus. I just went off and did some reading and am absolutely fascinated about the man and his banking project. Thanks to everyone for sharing so much wonderful information.
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