the tech post

This blog is about technology, software and social media. It's aimed as much towards 'normal' people as the tech savvy. The author is Tony Gallacher.

Fighting a War of Inclusion

Kiva (organization) (via Wikipedia)

Microfinance organisation Kiva is ‘fighting a war of inclusion,’ according to founder Matthew Flannery.

It facilitates loans for small businesses, usually in developing countries. Finance is generally in the £400 to £500 range. Maybe that’s not a lot in US or European terms but it can make a critical difference to entrepreneurs in some parts of Africa, Eastern Europe, Asia and South America.

Microfinance organisations invite people with first world money to loan it to those in or near poverty. Typically, lenders choose someone to support on a website, like

Kiva Site

Kiva Site (Photo credit: consnam)

The process starts with an NGO (Non-governmental organisation) or bank in a developing country. It locates someone who needs financial assistance, carries out some vetting and agrees terms. The client’s profile and loan requirements are then posted on the microfinance organisation’s website. Lenders can choose to support the client, from among the site’s borrower profiles.

The loans are crowdfunded, which means the total amount is often contributed by a number of lenders. Individuals can lend as little as $25. In the case of Kiva, they are asked to make a donation as well. It is a non-profit organisation; this is its only source of funding.

Keeping the sharks at bay

One of the benefits of microfinance is that it provides an alternative to local loan sharks who will charge rates of up to 1000%. The banks and NGOs do charge interest, rates of 30% are not atypical but their costs, to following up and collect repayments, are much higher than they would be in the developed world.

Financial success

Image representing Matthew Flannery as depicte...

via CrunchBase

Even though Kiva has helped 750, 000 borrowers to date, repayment rates are very high, around the 99% mark. It follows up with a spread of clients, to measure the social impact of its work.

There are currently 3 billion people in the world who don’t have a bank account. Microfinance reduces the number of people in the world who are financially excluded. As Flannery puts it: ‘One by one, we are including more people in the global financial system.’

Kiva is currently offering a free trial of $25, sponsored by Reid Hoffman, co-founder of Linkedin.

[Update: (24 March, 16:30 GMT) you still have some time to invest Reid Hoffman’s cash. Help someone make a living at ]

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This entry was posted on March 24, 2012 by in Comment, Crowdfunding, Microfinance, Tech and tagged , , , , , .




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