My coworker and good friend, Shane, recently gave me a $25 gift certificate to Kiva.com. Kiva is a person-to-person micro-lending website that allows the average person to loan small amounts of money to entrepreneurs in the developing world. In many developing countries banking, if available, isn’t like it is in the US. The terms and conditions of a loan are rarely fair. Kiva allows you to loan money to an entrepreneur in the developing world through partner organizations at low (relatively) to no interest. The partner organizations are responsible for finding the entrepreneur, promoting them through the Kiva website, and being the distributing the loan to them. The partner organization cannot use the funds themselves in any way..
Kiva is not without risk. A wise lender will research their entrepreneur and partner organization, and Kiva’s website will assist you with this. There is a chance that the borrower could default on your loan. I haven’t seen too many defaults. Most of the defaulted loans I have found were either the result of inefficient partner organizations or due to circumstances outside the borrower’s control (war, death, etc.). In order to help mitigate risk, donations are made for $25. This allows the risk of default to be spread across numerous lenders, rather than a single lender.
My loan went to a 59 year old Peruvian woman named Paquita. Paquita lives in a town called Pucallpa in Eastern Peru. Paquita has been making a living washing clothes for the past 20 years. She has been able to earn enough to help put her six kids through school and buy a house. She has always washed clothes by hand, but now that she is older she cannot wash as quickly as she used to. Paquita plans on using her loan to buy a washer so she can keep working. She is borrowing a grand total of $400 and plans to begin repayment in five months. This is Paquita’s second loan through Kiva. Her loan sponsor is PRISMA. PRISMA is a Peruvian, nongovernmental organization that’s purpose is to strengthen the capabilities and opportunities of Peru’s poor and vulnerable by giving them the tools for sustainable social and economic development. PRISMA has loaned over two million dollars through Kiva and has a 0% default rate. I can’t say that I’m exciting about the average interest rate of 58% that they charge, but I guess it’s better than the local Peruvian interest rate of 120%.
I’ll keep up with Paquita though the Kiva website and post any updates on the blog. I’m really interested to see how this pans out. I’ve committed to at least matching Shane’s gift to me if I like how things go.
GOOD MORNING, HERE’S A PANCAKE
4 hours ago