I've often thought to myself, if I were born in Nicaragua or Zambia or Bangladesh, how exactly would I have ever been able to 'pull myself up by the bootstraps' (as Conservatives often claim poor people should) and get ahead in this world. I mean, you can be a hard-working guy in a country like Tanzania, but without an economy around you to take advantage of, you're basically limited to providing for your family - if that.
Get a second job? There are no second jobs. Save a little money for the future? There are no banks to save in. Get an education? In many third world countries, education is the biggest single expense for a family, so much so that most have no chance to get one.
Long time Kos readers may have already seen mention of an organization called Kiva previously on this site, and it's with the above dilemma in mind that I shine a little more light on this great organization today.
Never heard of it? Well you should, because Kiva makes it possible for you, sitting at home in your La-Z-Boy, to become a virtual venture capitalist for small businessmen and women in the developing world.
Richard started the business with his group of associates and was funded by VEF, in 2002. Their business is buying, making traditional Items and selling to the general public. In their Curio Shop in Dodoma town [Tanzania], they sell Knives, Pens, Fiddles, Mortors or mills, Chairs, Spears, Shoes, Drums, Calabash, and earings.
Through their business they have been making enough profit and they are to pay school fees for their children and meet other family needs. School fees are one of the most important, and difficult to afford, expenses in Tanzania. The majority of children cannot attend school because the families cannot pay these fees.
If they get $500.00 they will improve their business by buying more stock to expand their Shop, and this will make more profit for them to pay the loan and other profit for their own use.
That's Richard, a man living in Tanzania, pitching himself for a small business loan funded by people like you. Since there are no banks to call on, and even when there are, they generally don't lend out amounts as small as $500, Richard's only option is Microcredit. That's when NGO's loan small amounts of money to people in the developing world to help them get off the poverty line by starting a small business. In Richard's case, he's already received one loan to set up his shop, has paid that loan back, and now he's looking to expand. I loaned $25 towards the $500 he wants, and Kiva made that possible.
You're all familiar with peer-to-peer file sharing, no doubt. You have a file that someone else wants, and they use Limewire or Kazaa to get that file from you, then share it with others. Well Kiva does the same thing, only with microcredit. Here's how it works:
- They find developing world individuals who want to start a business but don't have the money to do it. Maybe it'll be a woman in Bangladesh who wants to buy a sewing machine, or a man in Bulgaria who wants to buy a tractor so he can increase his crop harvest, or a man in Tanzania who wants to buy a truck so he can buy fish at the docks and sell it 300 miles inland.
- Those individuals go through a training course to teach them the fundamentals of running a business.
- When they've completed their course, they put together a business plan, outlining how much money they need, what that money will go to, and how it will grow their business.
- Kiva then posts their request on their website (anywhere between $100 and $2000), and people like you contribute to that loan.
- When the loan is filled, the business operator grows their business, and they give you updates on their website every month or so, telling you how the money has been used.
- When they repay their loan, you can reloan that money to other people.
Give a man a fish and he eats for a day. Teach him how to fish and he'll eat forever... but if you buy him a truck, maybe he can get that fish to market and make a little coin, you know? That's microcredit, in a nutshell.
Now the benefits of this are huge. First of all, you know exactly where your money is going. Unlike many microcredit groups that take donations and put them into a giant pool, never to talk to you again of how that money is spent, with Kiva, you're seeing exactly where it goes, and even hearing directly from the borrower as to how it's benefited them, and their community.
And the community aspect of this can not be discounted. In many towns, nobody has any money, and banks don't deal in loan amounts anything like what these people need. So when you send over $500 to help a guy build a store, he employs local people to help build that shop, then a few people to help run it, then he buys from local suppliers, and soon enough that money is being reused by many other people who need help.
What you're doing is not lending one person some money. What you're doing is putting that money into circulation and helping build the local economy, so that everyone can benefit.
Now, I know what some of you might be thinking - how do I know they'll repay the money? Well, you don't. That said, many microcredit lenders find that their repayment rates are around 98%, because the entire community takes responsibility for ensuring the money is repaid. If someone welches on their loan, their neighbors know it will effect them all, so invariably the money is repaid.
Additionally, to quell any fears about interest rates, Kiva charges their borrowers 2% interest, and that goes into admin costs, so nobody is making money off these guys - at least they're making a lot less than local loan sharks, which are usually the only means of acquiring a loan for people in this situation.
You don't have much money yourself? Hey, I hear you. I'm kinda broke too (thanks George), but I try to muster up $25 every few months and add it to my Kiva account, because I know that as much as I'll miss that $25, I know that for a guy in Ethiopia, that's a whole boatload of cash. I may miss out on a night out, but that guy will be able to send his kids to school.
So far, I've loaned money to the following businesses:
Business: Azam Construction and Supplies
Location: Rafah El Sahabura, Gaza, Palestine
Activity: Paint, Tools, and Construction Supplies Store
Loan Amount: $800
Loan Use: To purchase goods to sell in the store
Business: Ipagala Curios Group
Location: Dodoma, Tanzania
Activity: Buying and selling curios (traditional items) in a retail store
Loan Amount: $500
Loan Use: To buy more stock
Business Name: San Juan Super Fashionista
Location: Siguatepeque, Honduras
Activity: Clothing Sales
Loan Use: Buy inventory
Loan Amount: $650
Business Name: New York Barber Shop
Location: Siguatepeque, Honduras
Activity: Barbershop
Loan Use: Remodel Shop
Loan Amount: $550
All up, I'm in for $100, and if I ever find myself in peril, I can get that $100 back. But I plan on leaving it in Kiva's system from here on, recirculating it whenever it's repaid, and making that $100 to thousands of dollars of good through out the developing world.
I know it's not much. I know Halliburton and Bechtel do more damage in a second to people like these than I could ever repair in my lifetime. I know that their schools are likely owned by American companies and that these people's small profits will end up paying for their children's education and be sucked right back to the USA, but it's something.
I have to keep thinking back to my earlier dilemma - what if I had been born in Bangladesh and wanted something better for myself? If that were the case, I have to say, that $25 that some schlub in Vancouver Canada just sent me to buy a few goats would possibly be just about the greatest thing in my life to that point. He gave up three beers. I got three goats. Fair trade indeed.
If you'd like to join in the fun and help Kiva's small businessmen get a leg up, go to http://www.kiva.org and register. Right now they have about ten loans to people in the Honduras waiting to be filled, and they fill pretty quickly, so you'll have to be fast. If you miss out, register anyway, so you can get an email next time there are some loans on offer.
UPDATE: Thanks to the commenters below who pointed out that, because Kiva works with on-the-ground partners, who have their own interest rates, that the borrowers actually pay more than the 2% I outlined above. These range from 3% to as much as 21%, which is still cheaper than banks and 'other' lenders in the area.
Since I posted this diary, half the open loans have been filled on the Kiva site, so thanks very much for those people who have joined in. Hope you find it as rewarding as I have.
UPDATE II: All loans are filled! Thanks to Kossacks, all the borrowers looking for Kiva loans have had their loans filled, but don't let that stop you from going there and registering an account. This way, when the next batch of loans come in, you'll be first in line to help out. Thanks folks, you're good people.