Kiva.org is an online person-to-person microlending platform that allows anyone with $25 and a credit card to make a loan to one of the many entrepreneurs, who are all over the world, on Kiva’s site. The loan is disbursed and serviced by one of Kiva’s field partners (which are microfinance institutions, or MFIs). Currently, Kiva is working on securing that the lenders receive business updates as the principal is repaid. At the end of the loan term, lenders can relend that capital to another entrepreneur, withdraw it, or donate it to Kiva’s operations.
What happens to the interest? In allowing its field partners to keep the interest earned on loans sold through Kiva.org, Kiva is giving them 0% interest capital. Many MFIs Kiva works with are created with a social mission and are not operationally self-sufficient. With this free capital, MFIs can originate more loans and expand their reach. Over time, if they can cover their operating expenses more easily, the interest rates they charge will fall, thus making credit affordable to even more entrepreneurs just like those on Kiva’s website now. In addition to fostering relationships with lenders and borrowers in all sides of the world, Kiva’s model encourages sustainability.
The following video, made by Kiva Fellow Kieran Ball, tracks the path of a Kiva loan:
