Kiva: Allowing Individuals to Contribute in International Development

In his book, Creating a World Without Poverty, Nobel Laureate Muhammad Yunus proposes that charity is not a sustainable way to lift the poor out of poverty. Yunus suggests a better idea: providing loans to people at the bottom of the economic pyramid to finance money-generating activities. I used to think only philanthropists or large companies with a well-planned Corporate Social Responsibility agenda can contribute to this idea. I was wrong.

Enter Kiva, a non-profit organization that enables internet users across the world lend as little as $25 to finance small businesses in developing countries and United States. Potential lenders can choose a business they want to lend to by browsing through borrowers' profiles in Kiva.org. The borrowers' profiles themselves are collected by field partners, who are local microfinance institutions. Once potential lenders have made a preference, they can easily start lending by making a payment to Kiva through PayPal. Kiva will disburse the lender's funds to the field partner, who will then disburse it to the entrepreneur. Once the entrepreneur repays the loan, lenders may choose to relend, donate to Kiva, or withdraw the funds through PayPal.

How Kiva Works from Kiva Microfunds on Vimeo.

According to Premal Shah, President of Kiva, the organization's success is attributed to the application of 3 "Web 2.0" principles to Philanthropy: (1) create an "addictive" donor experience, (2) be "radically transparent" and (3) "Crowdsource" against constraints. In the first principle, Kiva tries to adopt the ease of Amazon and the fun nature of Facebook. Kiva.org is easy to navigate and transactions are quick and self-explanatory, even for people with basic knowledge of the internet. Also, by having real time, unedited journal updates and a randomized featured lender, Kiva.org has become an addiction to its users. In the second principle, users' trust is earned by being transparent and authentic. Data inaccuracy and defaults in the borrowers' profiles are explicitly shown in order to apply the second principle. The third principle is conducted by establishing a Kiva Fellows Program, which enables a select few volunteers to quickly gather progress updates and verify data accuracy from field partners. Furthermore, Kiva has strong partnerships with prominent web companies, including PayPal, Groupon, YouTube, Google and Yahoo, which makes Kiva more efficient and leverages Kiva's presence in the web.

Since Kiva's birth in April 2004, Kiva has disbursed over $200 million to more than 500,000 entrepreneurs in 59 countries, all through the screen of a computer. Technology, the internet and its community has revolutionized the way microfinance is being conducted. With the advancement of Information Technology, I think that microfinance has already been brought to a whole new level: a level where each and every individual can contribute to international development.

Reference:

http://www.slideshare.net/mrpremal/craigslist-foundation-kiva-presentation-presentation

http://www.kiva.org

Yunus, M. (2007). Creating a World Without Poverty: Social Business and the Future of Capitalism. New York: Public Affairs.