Kiva Microfunds (better known simply as “Kiva”) has taken charitable giving to a whole new level. They are the embodiment of the adage “Give a man a fish and he eats for a day; teach a man to fish and he eats for a lifetime.”
Kiva is a not-for-profit company which helps to match third-world entrepreneur borrowers with philanthropic individual lenders from around the world. It could be considered the “grown-up version” of World Vision or Compassion International, whose donors financially support specific individual children to go to school.
Here’s how Kiva’s program works: entrepreneurs from underdeveloped countries apply to Kiva to become a borrower in order to start a sustainable business. Third-world applicants are screened by Kiva’s local associates, known as “Field Partners.” Field Partners guide entrepreneurs through the application process, including how to budget and determine the amount of money that they will need to borrow.
Once an applicant has been approved by a Field Partner, an online profile is created for the entrepreneur. It includes a picture of the applicant, a little bit of background, and information about the type of business the applicant wants to start. It also lists the amount of money the applicant wants to borrow and how the money will be used once it is received.
Kiva then matches up borrowers with lenders. Anyone can be a lender, and lenders can provide loans as small as $25. Lenders are able to select the individual(s) they want to lend to.
Loans earmarked for a particular borrower accrue in the applicant’s account until the total required is received. Kiva’s Field Partners then release the money to the borrower and take care of the contractual and legal paperwork necessary.
The borrower is expected to pay back the loan just like any other borrower from a financial institution. Payments are typically made in monthly installments, like a regular loan. As the money is paid back, the individuals who loaned the money are paid back, including any interest they are due to receive.
Kiva was launched by Jessica Jackley and Matt Flannery in 2005 after Jackley was inspired by a lecture on microfinance at Stanford Business School in California. Its first loans were funded in April of that year.
Part of Jackley and Flannery’s vision was to forge a human connection between its borrowers and its lenders. They developed their program so that potential lenders could browse profiles of individuals wanting to borrow money and choose a person to lend to that they believed in. Lenders then receive periodic updates on the progress and success of the entrepreneur and her new business.
The model has proved to be a successful one. As of 2012, over 390,000 individual loans totally over $300 million had been disbursed.
Kiva does not make any money off of interest from the money that it collects and loans. Instead, it relies almost solely on charitable donations from other corporations. Kiva’s list of past benefactors includes Chevron Corporation, Visa Inc., Sam’s Club, American Express and the Omidyar Network. When its annual income exceeds its expenses, Kiva invests the difference in the same spirit that it desires from its own supporters.