Tuesday, June 27, 2006

Making a difference: Microlending through Kiva

Readers of the Eagle and Child may have seen my earlier posts touching on the idea of microlending (see post 1 and post 2)

Microlending is the concept of making very small loans to mom and pop type entrepreneurs in third world countries (think this size: a fruit stand seller who needs $500 to build another stand and stock it). Most banks don't handle such small loans, and yet this is a fine way to encourage economic development in the third world. There's been some discussion on whether this is a viable model for extending economic aid.

Some of the challenge is that until recently -- most microlending was done much like other large efforts -- we contribute to a foundation or fund and the managers of the foundation decide to make loans based off those contributions. What is lacking is the personal stake for the individual who wants to microlend.

Enter Kiva (thanks to Michael Kruse who tipped me off to Kiva -- I can't seem to find his last story on his Kiva loan, so instead I'll link to this Kiva story from The Orlop). The innovation that Kiva provides is this -- they work through organizations to screen loan applicants and then present the applicants to potential lenders via the web. You as an individual can sign up to microlend to an individual in the third world country. Kiva facilitates person to person lending. You can lend as little as $25 or as much as you want. You can pick the projects and regions that interest you and you will receive email updates from the field.

I like this approach because it puts a face on the work. Not being ones to be left out, Tammy and I put our money where my mouth has been and we decided to lend a modest amount through Kiva. I chose a gentleman in Uganda who is rebuilding his home in a more stable neighborhood where he can get a better job.

Now here are some great benefits -- the loan that I helped to make will cycle through the economy several times (the gentleman used it to buy supplies and hire help -- it was not siphoned off by corrupt governments). The loan helps people who are working their way up -- it is not a handout. In Uganda, the loans are administered through a network called Life in Africa which provides community accountability and support and encourages entrepreneurship. Thus we're contributing to the greater stability of a region that is very unstable. Finally, it has driven me to learn more about Uganda and to pray for this gentleman and his family.

Not bad for a modest loan. And the best part is, when I get paid back, I can lend to someone else, thus furthering economic development in the third world.

Soli Deo Gloria