In just the past six years Kiva, an online microfinancing provider has managed to raise over $171 million dollars to help 445,000 entrepreneurs in 54 developing countries! Microfinancing is the process where local banks or lenders provide small loans to impoverished small business owners in developing countries, who would not be able to receive financing otherwise. What has been found, is because of the great debt these small business owners feel to the lenders, the repayment rates are much higher than bank repayment rates are.
What Kiva is doing, is connecting entrepreneurs in developing countries to lenders, primarily located in the United States. Entrepreneurs, or the local microfinancing institution they are working through, post a description of their proposed project and a brief bio about the person, group or family. Then lenders can search Kiva's website and look at all of these various projects in need of financing, and can select which ones they would like to loan their money to.
This project has been incredibly successful and helped enrich the lives of hundreds of thousands of people. I think it really shows some of the positive power of innovation to generate greater social welfare worldwide.
Below is a link to Kiva's website where you can learn more, and even make a loan today!
http://www.kiva.org/
What Kiva is doing, is connecting entrepreneurs in developing countries to lenders, primarily located in the United States. Entrepreneurs, or the local microfinancing institution they are working through, post a description of their proposed project and a brief bio about the person, group or family. Then lenders can search Kiva's website and look at all of these various projects in need of financing, and can select which ones they would like to loan their money to.
This project has been incredibly successful and helped enrich the lives of hundreds of thousands of people. I think it really shows some of the positive power of innovation to generate greater social welfare worldwide.
Below is a link to Kiva's website where you can learn more, and even make a loan today!
http://www.kiva.org/
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It would be interesting to see other support services be provided to these people to enhance their entrepreneurial experiences. How else can you invest in these local communities besides a financial contribution?
The great thing about Kiva is that they work through local microfinancing instituions that have local knowledge of the area they are working in. Additionally, you can contribute monetarily as little as $25, hence the name microfinancing.
If you would like to provide support that is non-monetary, there are many institutions that facilitate volunteering that you could look into. Here's a link to one: http://www.volunteerinternational.org/
Great post, Dylan. This is a great example of user innovation in financial services. Again, we see an example of individuals doing things, that until recently, were only done by firms. This is truly democracy in action.
So interestingly, after posting about this issue, the NYTimes ran an article about the possible collapse of the microfinancing sector in India due to complications with people defaulting on their loans and problems in dealing with for profit micronfinancing banks. Here it is.
http://www.nytimes.com/2010/11/18/world/asia/18micro.html?_r=1&scp=2&sq=india%20micro%20financing&st=cse
Micro financing is a great tool for starters or even established business to expand their reach and earn more profit. Specially in tough economic times where getting loans could be difficult, micro financing is solving that problem to a greater extent.