A year ago my wife and I were struggling to find ways to teach our children the importance of helping those in need, and lamented the fact that despite our knowing there are millions of families around the world who need help, we felt virtually powerless to make any significant difference in their lives. And although we were grateful for the opportunity to make monetary donations to the Church’s humanitarian program, we felt that writing a check quite wasn’t enough to help our children understand the challenges so many of the world’s families face; nor did it allow our children to witness the results of our family’s contributions.
At the time, I was reading Muhammad Yunus’ book, Banker to the Poor, in which he relates how he, as an Economics professor in Bangladesh, helped create a micro-lending bank that makes small loans to the poor so they can quit their exploitative jobs, start their own businesses, and climb out of poverty. Yunus explains how traditional aid programs, which typically rely on the UN and government agencies as “middle men” to administer aid, have a proven track record of gross inefficiency and failure spanning several decades. His micro-lending operation, and many others like it, cut out the bureaucratic middle-men so that the money intended for the poor actually makes it to the poor. By working with impoverished communities around the world, Yunus learned first-hand that the poor are willing and able to work, but simply lack the capital needed to start their own businesses. By providing loans that must be repaid, rather than giving away handouts, Yunus and micro-lenders like him “teach a man to fish” by enabling the poor to break out of the poverty cycle and support themselves.
When I discussed all this with a friend, Stephen Wellington, he told me Kiva.org was exactly what I was looking for. And he was right. Kiva builds on the work of Yunus and others by taking their micro-lending model to the next level. Using the Internet, Kiva enables regular people like you and me to make micro-loans as small as $25 to people all over the world who want to lift their families out of poverty by starting their own businesses.
Here’s a typical example of how Kiva works: a family in Cambodia grows rice, but is barely subsisting. They could greatly increase their rice production if they had a new plow and some fertilizer, but they don’t have the money for it. So they submit a loan application for $600 to a local mico-lending agency in Cambodia that partners with Kiva. The family’s loan request is then posted on Kiva, and that’s when the loan fund-raising begins. With just a few mouse clicks, regular folks like you and me all over the world can pool our contributions of as little as $25 each to reach the $600 total that the family needs. Once the loan money has been raised, Kiva sends it to the local micro-lending agency, which disburses the loan funds to the family in need. Every month, the family makes small re-payments to the local micro-lending agency in Cambodia, which are sent back to Kiva and put in your Kiva account. When you receive a monthly repayment, you can either cash out and get your money back, or re-loan the money to another family in need.
This month is our family’s one-year anniversary with Kiva. A year ago we spent a Family Home Evening with our children reviewing loan requests on the Kiva website. Because we were new to Kiva and therefore a little uncertain about its reliability, we decided to loan an amount of money that we thought could make a difference in a few families’ lives, but that was small enough that we could accept losing completely if it all turned out to be a scam. So we took $500 and divided it amongst a few families from a few different countries: the Cambodian family already mentioned; a mother in Peru needing funds to expand her door-to-door grocery business; a father in Mongolia needing funds to repair his mini-bus for his transportation business; a father in the Philippines needing funds to expand his small hog farm; a mother in Senegal needing funds to buy ice-cream making equipment, etc.
As we received the monthly re-payments, we immediately re-loaned the money in $25 increments to other families. We also received Kiva video updates from the field about the families we were assisting. (See an example here.) These video updates provided our children with a window to the world, showing them how families around the world struggle to support themselves, and helping our children develop a greater awareness of, and desire to help, those in need.
So what were the results of our family’s first year experimenting with Kiva? With just our $500 initial contribution of loan funds, which we re-loaned to other families in $25 increments as loans were repaid, we were able to:
- Make a total of 40 loans . . .
- in a total amount of $1,275 . . .
- to families in 21 different countries (Azerbaijan, Bolivia, Cambodia, Dem. Rep. of Congo, Dominican Republic, Ghana, Indonesia, Kenya, Mongolia, Nicaragua, Pakistan, Paraguay, Peru, Philippines, Rwanda, Senegal, Tajikistan, Tanzania, Togo, Uganda, and Ukraine) . . .
- $783 of which has already been repaid . . .
- with a delinquency rate (late payments) of 7.38% . . .
- and a default rate of 6.25 % (higher than the Kiva average of 1.65%) . . .
- meaning our total loss after one year has been only $25 (one loan in the Dominican Republic).
Our family’s contribution has been just one tiny drop in the ocean of Kiva lending. Just last week on Kiva: 3,629 new lenders joined; 11,207 lenders made a loan; 2,344 entrepreneurs were funded; and $752,850 was lent, at a rate of one loan every 23 seconds.
Overall, our family has fallen in love with the concept of micro-lending, because we’ve discovered that by re-lending funds as they are repaid, we were able to do $1,275 worth of good with our $500 initial contribution of loan funds. Over the coming years, the amount of good that $500 initial contribution does will only multiply. And with a loss of only one $25 loan that defaulted, we’ve learned that Kiva, its field partners, and its borrowers are trustworthy enough to continue lending to them for years to come.