I am usually pretty thrilled with the announcement of new loan programs, especially for minority entrepreneurs. But this one caught me off guard.
Kiva is the organization that we have featured on our home page for several years now. Kiva's mission is to help entrepreneurs in third world countries, from things as simple as buying a new cow. I have personally supported Kiva, and have been glad to do so, knowing that I have helped hard working entrepreneurs in third world countries.
But beginning today Kiva will offer minority business loans to entrepreneurs in the US.
Kiva didn’t intend to raise money for aspiring businesses in the world’s largest economy. But the reluctance of U.S. banks to lend during the past nine months caused the San Francisco-based nonprofit to reconsider, said Premal Shah, Kiva’s president.
Kiva relies on “group-funding” to make its loans. People come to its Web site, sift through the business plans of entrepreneurs and then contribute in $25 increments. The money is pooled to finance loans that typically range from a few hundred dollars to several thousand dollars. The repayments don’t include interest; people either get their original $25, keep it in the lending pot or donate toward Kiva’s administrative expenses.
Since 2005, Kiva has raised more than $75 million from 500,000 people and lent the money to about 180,000 entrepreneurs in 44 countries. About 98 percent of the loans have been repaid on time, Shah said.
I know times are tough in the US. But are we truly so bad off that our projects can sit comfortably next to a poor family in Afghanistan or Uganda?
This minority business loan program will be interesting to watch.
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2 comments:
I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Sara
http://smallbusinessgrant.info
MaryAnn,
Thank you so much for your input regarding Kiva’s new domestic microlending program. Working for ACCION USA, one of the two Kiva field partners operating in the States, it’s wonderful to notice people writing about domestic microfinance. Unfortunately, Kiva has been receiving a lot of flak lately for their decision to begin facilitating loans to local entrepreneurs. Too often, this criticism stems from a misunderstanding of domestic microfinance—its mission and its mechanisms. AUSA believes passionately in the value of small business and accessible credit, having offered domestic microloans now for over a decade. With the ability to enrich communities, empower individuals, and increase economic opportunities, small businesses constitute a vital sector of our economy. Our partnership with Kiva has been exciting. Not only has it attracted new applicants and buoyed interest, but it has spawned a meaningful debate about the purpose and applications of microfinance.
One common criticism of Kiva US lending program is that it will draw funds away from needier foreign borrowers. Yet a recent report from Kiva indicates that lending has ballooned since they announced the support of domestic loans on their platform. Such loans do not take place at the expense of foreign borrowers. Moreover, by permitting loans to US microentrepreneurs, Kiva has allowed AUSA to provide access to credit for many poorer individuals who would have otherwise been without financial resources. Granted, these people might have higher incomes than “competing borrowers” in the Third World. But, as Kiva wisely acknowledges, poverty is relative, and income deprivation is only one component.
If you’re curious about the specifics of Kiva’s domestic lending program and the rationale behind it, please visit their blog. To learn more about ACCION USA’s operations, I’d encourage you to check out some of our resources online. In addition, you should feel free to follow our blog or our twitter account (@ACCION_USA)!
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