Money and microfinancing in the developing world (Part 2 of 3)

by mcampbell on December 11, 2012


Kiva Microfunds – Charitable lending through intermediaries

Kiva is designed for microfinancing. It allows people to lend money for the purpose of enabling small projects, usually in the developing world, that would otherwise not be able to secure funding. The system is internet based, and allows potential lenders to peruse a list of people and their projects in order to select one(s) that they wish to support. They can then make a loan to cover part of or the entire requested amount. Only the capital is repaid and the lender does not receive interest. Paypal is the primary method of transferring money into and out of the system.

Kiva is fundamentally a charity. The source of capital is mainly obtained from people in the developed world who are socially conscious. Kiva’s own operating costs are covered by grants and charitable donations.

The biggest weakness of the system is their reliance on intermediaries, or field partners, to handling the logistics of the loan. These intermediaries are moneylenders, using a traditional lending system, who charge huge interest rates (30% to 50% is common) in order to cover the cost of these small transactions.

It has proven quite successful in terms to providing capital to the developing world. Here are their published statistics as of Dec 2012:

Total amount lent through Kiva:                                           $380,352,525 (USD)

Kiva Users:                                                                                        1,303,869

Kiva Users who have funded a loan:                                       852,808

Countries represented by Kiva Users:                                   221

Borrowers funded through Kiva:                                              925,407

Number of loans made through Kiva:                                     503,669

Kiva Field Partners:                                                                        172

Countries where Kiva Field Partners are located:             66

Repayment rate:                                                                              98.98%

Average loan size:                                                                        $400.71

Average loans made per Kiva lender:                                    9.08




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