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Lending and Befriending

Written by: Lynn Celmer

Article Overview: Can a $25 loan change someone's life? In certain countries, absolutely. Here's how Kiva lets you lend directly to entrepreneurs in the developing world.

Lending and Befriending

Like many entrepreneurs, Mariam Msangule has overcome many challenges, ranging from the need to expand to lack of capital, in order to create a thriving small business. The only difference is that Mariam lives in the Temeke District of Dar es Salaam in Tanzania. She is married, has eight children, and for over nine years, she has been selling charcoal in a store located in her family's small house. However, thanks to a $1,000 loan from Kiva, the world's first person-to-person micro-lending website, Mariam was able to expand her store and generate extra income to help pay for school fees for her children.

Inspired by Africa
Kiva was started by Matt and Jessica Flannery. The couple had recently been married when Jessica took a three-month trip to East Africa for the Village Enterprise Fund, a program that gives entrepreneurial grants to impoverished regions in Africa, to conduct impact evaluation surveys. Jessica felt compelled to pursue a career in microfinance after hearing Dr. Muhammad Yunus—founder of Grameen Bank and winner of the 2006 Nobel Peace Prize for his efforts to eradicate hunger—speak at Stanford University.
Over that three-month period, Jessica visited with entrepreneurs who had used small grants of $100 to $150 from Village Enterprise Fund to start small businesses. Matt visited Jessica for two weeks and filmed some of the interviews with these business owners, and they were able to see the huge difference that this little amount of money was able to make in their lives. The Flannerys realized that if any of their friends were standing in front of these people, they would gladly give them a small amount of money if they knew it would make such a large impact.
When Matt and Jessica returned to the U.S., they decided to create a way for the average person to give these hopeful entrepreneurs small loans. They built a website and did a test round with seven owners in developing countries, all of whom repaid their loans within six months.

Kiva in Action
Kiva works by partnering with microfinance institutions that vet and approve loan applications from low-income entrepreneurs. Approved loans are then posted to the Kiva website for funding. Internet users can choose one or more entrepreneurs to whom they would like to lend money, and then select the amount they would like to contribute to the loan (starting at $25). As repayments are made, each lender receives an e-mail notifying them of the progress of the loan, and journal updates are posted "blog-style" to the loan profile by the field partner. When the loan has been repaid, the lenders receive their loan amount to their Kiva accounts, which they can then withdraw or reloan to another entrepreneur. Kiva has a 90-percent reloan rate.
Because she knows what it's like to be on welfare, Kiva user Mickey Mikeworth felt compelled to help others in need. As a financial planner, national speaker and founder of Rich Chicks and Kids with Kash, organizations providing financial education for women and inner city youth, Mikeworth believes strongly in prosperity-based financial education. "Kiva really is one of the only organizations that have what I would consider a regenerative prosperity model," Mikeworth said. "The most amazing thing about the program is it's the only system that is regenerative. Kiva really is there to help people stand up on their own."
Mikeworth has given 40 loans so far through Kiva, including one to Msangule. She continues to give loans monthly, and once her loans from 2006 and 2007 are repaid, she will give loans on a weekly basis.
Mikeworth has lived in third-world countries, so she is aware of what everyday life is like in those areas. She chooses who she loans to based on what she thinks is needed in that particular country. "Sometimes that's coal, or it could be agriculture or even transportation," she said. "Sometimes the access to transportation means so much more than we could imagine living in a major city. Living in a city, I can take a bus or drive a car, but if there is only one car in a tiny village or one bus comes through there every day, it really changes the entire village if someone gets a loan to buy a motorcycle or car."

Making Connections
To date, Kiva has given out $25 million in loans and has garnered much attention from Oprah Winfrey, Bill Clinton and The Today Show. Kiva creates a way for people to relate to someone that's poor, someone they never would have been able to connect with before, according to Fiona Ramsey, public relations director for Kiva. "We just assume everything about them is so different that we couldn't ever really relate," Ramsey said. "We are really trying to knock down those barriers between how we relate to someone that's poor. People are starting to realize that these people are just like us in that they have the same dreams and desires that we have."
Ramsey added that Kiva's target lender is anybody with $25. "I received a letter from a woman who's on disability and she said that even though she can't work, she knows that her $25 is really making a difference," she said. "Our oldest lender is 100 years old, and there are also a number of school classrooms that are using Kiva as a language and teaching tool. It's really fascinating that we have such a wide range of age and personal wealth, but the one thing they all have in common is that they want to help other people and they want that special person-to-person connection."

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Article Tags: 2006 nobel peace prize, amount of money, average person, charcoal, dr muhammad yunus, east africa, evaluation surveys, extra income, flannerys, hopeful entrepreneurs, impact evaluation, kiva, mariam, matt and jessica flannery, microfinance, muhammad yunus, nine years, nobel peace prize, person to person, stanford university



Related Forum Posts
Securities - Lending guru: I assume your securities offering has been registered - since you appear to making a general public solication
How to get financed - We looked at doing the same thing. Problem is you own the truck out-rite, so most require a add on to your title or release of title to them for liability should you default. Contact Kevin at RV Lending, he assisted us with our stacker transporter, pretty easy to deal with and straight up with the answers before you give all you personal information. Good luck
Getting financed for conversion on an older truck - We looked at doing the same thing. Problem is you own the truck out-rite, so most require an add on to your title or release of title to them for liability should you default. Contact Kevin at RV Lending, he assisted us with our stacker transporter, pretty easy to deal with and straight up with the answers before you give all you personal information. Good luck
Re: Bad credit guaranteed home loan? - Lending money to people with bad credit was one of the biggest things that put our economy under and many lenders out of business. I'd say if you have this opportunity take it now before it goes away. Trust me, if there are any of these programs left (and don't expect a low interest rate if your credit is bad) they won't be around for ever. At ANY interest rate.
Free Commercial Lending Seminar - Holding Seminars is also a great way to get people into your sales funnel. It's establishes yourself as an expert in the field and builds trust. You can use direct mail or advertising to get the word out about your seminar. A Listing with the local Chamber is also good as you'll benefit from the trust they have built with their members. Offer the seminar for free and remember to hold some sort of door prize to capture peoples contact information. This method will require some creativity from you as your dealing with the Commercial Lending market but take an angle where you will show decision makers (maybe over lunch) how they can save thousands of Dollars on their current loans.


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