The notice in my inbox reminds me that my kids and I now have a credit of $31.62 to re-lend. We are a bank. A small one called “Northerners.” We are a small bank with a social conscience, and we make small, interest-free loans to people around the world. As the borrowers repay their loans, our credit adds up to the point where we can lend again to a different borrower.
In the email, Kiva – a microlending organization we belong to – highlights a few possible loan recipients among the thousands registered with them. I click on one and read the story of Hector Hernandez of Nicaragua. He’s approached one of Kiva’s 141 partner organizations for a small loan to finance a food stall he’s set up. I learn that his request is already 40% financed. Small loan requests from Kiva’s borrowers can often be financed in a matter of hours, though many take weeks. I call up our Kiva account and apply $25 of our credit towards his loan.
Microlending isn’t new, but Kiva’s approach to it is – the non-profit organization’s on-line presence amounts to banking through crowd sourcing. My kids and I are one of over 600,000 lenders that have supplied about a quarter billion in loans in 60 countries. Kiva relies on a global network of micro lending institutions, 450 volunteers and almost 50 employees at the head office in San Francisco.
Initially, I set up our family account with Kiva as a learning tool for my kids. I’d hoped they might learn about how people in other parts of the world live and work. I hoped they’d learn about lending people a hand, about the principle of sharing wealth, about the sources of human dignity, so I made them a deal. I’d start us off with $100. Every time one of our loans was repaid, I’d add that amount to our little bank and when they left home years in the future, they could either apply all the money in the account toward their education or keep re-lending or a combination.
When we started, the kids showed a lot of interest. They took the time to look carefully through the site at the various requests for loans from around the world – a cooperative store in India, a car repair shop in Mexico, a housing improvement loan in Mozambique. They selected the loans they wanted to make. As the loans were repaid, I showed them the reports and asked them to fund new loan requests. Although they eventually lost interest, I continued on with Kiva, reading the updates and making new loans. But we still talk about Kiva and the loans I’m making, so I hope that before they leave home after graduation, they’ll again get involved in the decision making. Because they were involved in the first place and we continue to talk about it, I believe the experience has given them many things to think about, in particular social justice.
Kiva’s goal is to help alleviate poverty around the world. Their website states, “We envision a world where all people – even in the most remote areas of the globe – hold the power to create opportunity for themselves and others.” While the idea and practice of microlending is not without valid criticism – some say that such loans have little impact, that perpetuate a cycle of dependency and an us-and-them mentality, and that they’re really about the lenders feeling good about themselves – I believe Kiva might just be the best we can do, as far as microlending goes.
For one thing, Kiva is breaking the mould when it comes to microlending. Kiva doesn’t operate only in what’s typically referred to as the developing world. Recently former US president Bill Clinton announced for Kiva the launch of a community coalition in Detroit to offer over half a million dollars in microloans. Partners include Michigan Corps, the Knight Foundation and ACCION USA. The development is the first in a series called “Kiva City,” a way for the organization to grow more quickly in the US. Kiva City creates alliances between Kiva, local civic leaders, local community organizations and financial institutions. One Detroit borrower started a newspaper made for and sold by the homeless and at risk, while another is employing high school students to build bike trailers for those who use bicycles to get around the city.
Here’s another Kiva innovation that relies on the power of the internet to connect people. Within the Kiva community, lenders are creating communities. They might be people from a particular country or people who share a particular political or religious approach to social justice. Within one team called “Friends of Bob Harris,” 661 members have loaned over a million dollars. Bob is writing a book about Kiva with the working title, The 1st International Bank of Bob. “I hope the book will get more people to feel attracted to Kiva, excited about microlending, and more connected to the rest of the world,” says Bob. As a travel writer, Bob says, “I saw so much poverty that I decided to turn all of those paycheques into Kiva loans.”
A few days after I make my mini-loan to Mr. Hernandez, an email notice arrives informing me that his food stall is now 100% financed. I’m not worried about the loan defaulting. The repayment rate for Kiva loans is 98.87%, higher than ordinary banks could ever dream of, and the amount is so little to me that default can’t hurt me. I’m not even concerned that, as with so many non-profits these days, a high percentage of my contribution might be going to administration fees. Every penny I lend goes directly to funding loans. Admin costs are covered through optional donations from lenders. In other words, it’s up to me whether or not I want to contribute to Kiva’s operating costs. Otherwise, Kiva relies on grants, foundation support and corporate sponsors for operating funds.
In the coming months, I’ll get notices that tell me what percentage of the loan Mr. Hernandez has repaid and the corresponding percentage of my $25 has been returned to my account. When my account exceeds $25, I’ll lend it again. A million others will do the same, and together we can provide funding for thousands of small improvements to people’s lives around the world.
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