Kiva: a social network for philanthropists

The world is not without good people, this is a fact. But to find such people sometimes becomes a difficult task, especially when it comes to material costs on their part. In small home-based enterprises, whose owners do not seek to move mountains, large investments are not required to support a business. But when it becomes necessary to expand the business or, for example, upgrade the equipment, there is simply nowhere to find a source of funding.

This problem occurs in millions of people around the world, mostly in developing countries. The issuance of small loans, or microcredits, is supported by large financial and humanitarian international organizations. The UN has even declared 2005 the Year of Microcredit to show the importance of this line of business in the fight against poverty and unemployment throughout the world.

The economic theory of microcredit was first developed and put into practice by Mohammed Yunus, a Bangladeshi educated in the USA. In 1976, he organized Grameen Bank, which for 30 years of its history has already managed to issue more than 4 million loans worth about $ 5 billion, mainly in Bangladesh itself. In the course of the work, the bank developed several schemes that ensured a guaranteed loan repayment and, in some cases, control over its spending: from simple circular bail to mechanisms based on various trust ratings.

Today in the world there are already more than 16 thousand financial organizations working with microcredits. Kiva, one of them, would have been unremarkable (she plans to cover only 25 countries so far), if not for her methods of work. Most of the communication between lenders, borrowers and intermediaries-guarantors occurs via the Internet, on the beautifully designed website Kiva.org .
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The scheme of Kiva’s work, which may well be called a social network, is shown in the figure below. On the website of the organization, everyone can see a constantly updated list of applications for a loan. If a potential creditor likes a certain project (well, or the person who runs this project - at first glance it is clear that girls are more willing to be helped), he can contribute to his fund in the amount of $ 25 with his credit card. At the moment, all loans are given on an interest-free basis, but by 2008, when the organization should become self-sustainable, the situation may change. But then the interest will be small.



The company's headquarters for Silicon Valley administers the site and communicates with local partners who communicate directly with borrowers in need of money. When the loan expires (or earlier), partners collect money from borrowers and send them to the main office, where they are distributed to all lenders.

Most lenders lend a little, but their decent amount provides a very quick accumulation of the necessary amount (usually not more than $ 2000). For each loan application, detailed information is available on the borrower (with a photo, a brief biography and a description of his intentions) and a local partner, as well as a list of people who have already invested. Automatically generated RSS feed allows you to monitor progress in real time. In addition, the system creates a banner code leading to the application page, which can be placed on third-party sites.

In general, in their work, Kiva welcomes the help of volunteers, who often act as translators and do other necessary work.

One of the recent applications came from Kokou Johnson from African Togo. He owns a small grocery store and needs a total of $ 1,200 to purchase goods and open another outlet. He plans to give money in 12-15 months. At the time of this writing, he had already received $ 850 from 23 people, mostly from the USA and France (Togo is a former French colony).

Those who doubt the integrity of borrowers should familiarize themselves with the statistics of the International Bank for Reconstruction and Development, which says that for 30 years of active work on microcredit, the worldwide return on loans was 96%. Kiva's experience says the same figure ...

However, conventional banks are still very suspicious of microcredit. Especially in developing countries where financial risks are especially great. Therefore, on the Kiva website you can see many applications from countries such as Bulgaria, Romania and Azerbaijan, countries of equatorial Africa and Southeast Asia.