Kiva: Unity to Alleviate Poverty

Since its inception in 2005, Kiva, a non-profit organization developed to support entrepreneurs in poverty stricken regions around the world, has raised an astounding $100 million. Kiva, which is Swahili for "unity" or "agreement," was the first on-line micro-lending platform. In five short years, it has had a remarkable number of such firsts. Its mission is to connect people through microlending to impel productivity and entrepreneurship, enhancing the quality of the lives of borrowers as well as improving the overall well-being of their local community. Kiva is literally "changing the world, one loan at a time."

Co-founded by Matt and Jessica Flannery, Kiva partners with microfinance institutions and individual lenders from around the world via their website. At the time the trend-setting organization was founded, Matt and Jessica were only 28 and 27 years-old, respectively. Premal Shah, who now serves as President of the non-profit, previously worked at PayPal, the mechanism used to channel funds to those in need. Pay Pal provides Kiva with payment processing at no cost, a unique relationship PayPal originally applied only to Kiva.

Kiva was founded on basic principles of human nature, born of the following beliefs: people are generous by nature, willing to help others if given the opportunity to do so in a transparent, accountable way; poor people are highly motivated and can be very successful when provided opportunity; and, life-changing relationships that transcend financial transactions can be easily established by connecting people, thus building a global community expressed by mutual support and encouragement of one another. Through this process of connecting generous people with motivated "entrepreneurs" Kiva promotes dignity and accountability in a transparent format, namely their website, which also serves as an open platform for worldwide communication and exchange.

With a very modest minimum loan amount of $25, microlenders can be institutions or individuals. There is no interest charged or earned in the ingeniously simple microfinancing process. Virtually anyone with a desire to make a positive impact in the lives of others and an e-mail address can become a microlender. This peer-to-peer lending approach is truly unique, encouraging a real connection, a relationship, to evolve which surpasses a typical financial transaction. Kiva has amplified the concept of a global community by fostering personal connections that breed greater understanding and cooperation.

Kiva's significant results have been achieved through a simple yet powerful formula. Partnering with existing microfinance institutions around the world that are dedicated to alleviating poverty, Kiva serves as a conduit between funds and those in need. By collaborating exclusively with established field partners who are familiar with the local community and clients, Kiva loans are disbursed on an as needed basis. To ensure borrowers are a good lending risk, many of the field partners mandate a savings plan as a prerequisite to issuing loans. Kiva field partners then post the real-life stories of local entrepreneurs on Kiva's website. Lenders from around the world can visit Kiva's website, peruse these narratives and select a borrower to fund, in $25 increments. Kiva aggregates the funds received from on-line lenders, then provides these funds directly to field partners to reimburse them for loans previously disbursed to lenders. Field partners are also responsible for collecting payments, including a reasonable interest rate, which defrays operating costs field partners incur. Working on a net billing system, payments collected by the field partners are deducted from future funds provided by Kiva lenders for the next cycle of loans. Kiva then repays lenders, who can elect to fund another entrepreneur, donate the funds to Kiva or withdraw their funds from PayPal for their own use.

This ingeniously uncomplicated process enables people who don't have adequate credit or access to traditional financing a means to lift themselves out of poverty. Microfinancing does not, nor can it, provide basics which ensure liberation from poverty, including adequate infrastructure, health care, housing, inequity or inequality based on gender or social issues, however, it is an excellent means to provide populations in the developing world with the means, the opportunity, to develop their own enterprises and local solutions to poverty. Microfinance empowers borrowers, spurring motivation, solutions to personal and local social issues which plague impoverished people or those encountering social challenges, such as women, refugees, or members of minority ethnic groups.

As regions become saturated with microfinancing, the concept will continue to evolve, as will the monitoring, processes and scope. Kiva has also initiated an unpaid, volunteer basis Fellows Program, which offers individuals an extraordinary opportunity to travel abroad to experience and witness firsthand the impact and realities of microfinance. By working directly with a host microfinance institution (MFI), the Kiva Fellow position is designed to increase the organization's overall impact, while offering participants a unique, one-of-a-kind insider experience. Past participants have found the fellowship to be a great first step in a career in microfinance or international development.

Currently headquartered in San Francisco, California, Kiva now employees a full-time staff of 34. Its impressive history of innovation, growth and social impact have provided life-changing experiences as well as expanded the sphere and reach of social enterprise and entrepreneurship.

Photo Credit: Howard F. Schwartz