Microcredit -II: KIVA – Online lending platform

KIVA is not a typical microfinance institution but an online platform that connects people who want to lend microloans of as little as $25 to finance destitute small entrepreneurs around the world.

It is a US based non-profit company founded in 2005 on a simple principle: Individuals can make loans across the internet.

The idea was born out of one of the co-founder, Jessica Jackley’s experience of living in Africa and meeting people who had greatly benefited by loans from microfinance institutions.

a. Approach

Kiva works in 6 steps:

  • Kiva partners with a microfinance institution (or field partner) with expertise in a specific area of microfinance that conducts the initial leg work assisting Kiva deliver the loans on the ground.
  • Field partners disburse loans and upload stories and pictures of the entrepreneurs in need of loans. This information is available on Kiva’s website for lenders.
  • Lenders browse and choose profiles and locations to whom they want to lend loans.
  • Kiva disburses lenders’ funds to the field partners who have already made loans available to the entrepreneur thus replenishing the funds.
  • Entrepreneurs repay their loans to the field partners and keep track of any default payments, currency fluctuations and other operating costs.
  • Kiva provides repayment to lenders and those lenders can further re-lend the money to other entrepreneurs or can donate or withdraw their money via PayPal.

b. Products

Kiva’s principal product is to promote happiness and self-realization in people’s lives by giving them small loans that encourage more accountability than donations. It supports charity in the form of zero-interest business loans by combining microfinance with the internet, thereby creating a global community of people connected through lending.

These small loans allow poor people to develop micro businesses in different fields such as agriculture, arts, clothing, education, entertainment, health, housing, manufacturing, retail, services, transportation, and whole sale.

Since Kiva doesn’t charge interest from its field partners, it primarily gets its funding through the support of lenders making optional donations. It also raises funds through grants, corporate sponsors, and foundations.

c. Scale

Kiva has grown in leaps and bounds in the past 5 years with more than 550,000 lenders from 210 countries lending close to $200 million in loans. These loans have been dispersed in 58 countries with more than 98% repayment rate. It works with 126 different microfinance institutions and 450 volunteers around the world.

d. Impact

Kiva is changing the dynamics of microfinance by linking people who have money to loan, with entrepreneurs in developing countries who need some capital, all over the Internet. What is considered pocket change for many people in the United Statescan go a long way toward helping a struggling businessman get started in another part of the world.

Kiva reflects three big trends in philanthropy:

  • Activities of the website’s users are global, with donors sending funds to far-off countries.
  • Donors are looking for feedback on the impact of their donations.
  • Technology is powering the transaction

Kiva is changing people’s lives – not only on the personal level, but also on the community and national levels.

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One thought on “Microcredit -II: KIVA – Online lending platform

  1. Hey Pankaj Arora,

    I must say you have a amazing blog you did a really good job. I have just bookmarked it for future visits. Keep up the amazing articles. I will be back again. 🙂 🙂

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