Kiva – Personal Micro-Finance

Kiva.org puts a face on micro-finance.

Micro-finance means small loans. Not very remarkable, except in comparison with direct aide to developing countries. It turns out that bottom up grass-roots investments at the local level is more capital efficient and more effective at generating economic sustainability than top-down grants to governments and international NGOs. Loans rather than grants are made to individuals, communities, or businesses. The loans are usually made without any capital security or any interest on repayments. The only security is existing social ties, which works well, as evidenced by Kiva’s current repayment rate of 97%.

What makes Kiva special is the extension of those social ties across the internet – with a picture, a project proposal, and progress updates. Rather than a donor investing a sizable amount in a faceless fund, they can become an individual micro-financier building a portfolio of investments in $ 25 units.

What excites me about Kiva is that it makes micro-finance accessible to everyone, and it embraces the idea that entrepreneurs are a primary source of creative change and wealth creation. It’s also not positioned as charity, so much as it is positioned as social entrepreneurship – perhaps a more appealing way for the young and wealthy of the west to redistribute their wealth.

Posted on Monday, December 11th, 2006 at 3:53 pm. | Filed under Entrepreneurship.
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