Click and change the world: Microfinance for the masses

Kiva harnesses IT to revolutionize microfinance

Yawa Aziaka, a hardworking but uneducated entrepreneur in Togo, needs a loan to buy chickens and feed to expand her poultry business. This will enable her to better support her four children and two foster children. She will repay the loan in 15 months. If you could change her life with a $25 loan, would you?

Well, now you can.

Kiva, a San Francisco-based start-up, is using technology to connect small-stakes lenders around the world with impoverished entrepreneurs in developing countries — a feat that’s helping to change the nature of microfinancing and global giving itself.

Kiva’s approach is straightforward. Entrepreneurs working with established local microfinancing institutions, or MFIs, put their business plans, financing needs and photos on Kiva’s Web site. Investors from the U.S. and other affluent countries visit Kiva.org, choose which entrepreneurs to back and then finance the loans.

The organization, which incorporated as a nonprofit in November 2005, has already raised more than $2million in loans from 26,000 lenders. The idea is simple, yet Kiva insiders acknowledge that it’s only feasible with today’s technology.

“Five years ago, it wouldn’t have seemed possible,” says Jeremy Frazao, Kiva’s director of technology.

“They’re using the Web to shorten the [lending] cycle and increase the flow of information among people who wouldn’t otherwise connect,” says Peter Bladin, director of the Seattle-based Grameen Technology Center, part of the Grameen Foundation, a Washington-based nonprofit that promotes global microfinancing.

Beginnings

The idea for kiva, which means “agreement” in Swahili, dates back to early 2004, when co-founder and CEO Matt Flannery was using e-mail and text messages to communicate with his wife, Jessica Jackley Flannery, while she worked in East Africa through the Village Enterprise Fund, a San Carlos, Calif.-based nonprofit that provides business training, seed capital and mentoring to people in that region.

Inspired by her experience, the couple tried to invest in microfinancing ventures only to learn that they were priced out of the market. (The minimum investments for MFI funds are generally $50,000 or $100,000.)

“We had seven businesspeople in Uganda we wanted to invest in, and we didn’t find any organization that could help us do that,” Matt Flannery says. Read more . . .

Kiva Group.  Photo by Timothy Archibald

Kiva Group (left to right): Olana Khan, chief operating officer. Jeremy Frazao, director of technology. Jessica Jackley Flannery, co-founder. Matt Flannery, CEO and co-founder. Fiona Ramsey, community and operations manager.

Photo by Timothy Archibald

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