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Monday, January 24, 2011

Microfinance week: Kiva

The first microlending program I am going to talk about will be Kiva. In my opinion and personal experience, the success of Kiva, brought the idea of microlending into the mainstream. With the huge growth of Kiva, the number of people who had heard about and participated in microfinance multiplied exponentially.

Microfinance is a range of financial services to the very poor, and I am focusing on microcredit. Microcredit is the "extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit." It is banks, organizations, and/or individuals who give small loans, often just a few hundred, to people who are trying to start their own business, grow their business, or learn a new trade. It has been shown to be very effective and has very high rates of repayment compared to traditional large loans.

My favorite of these is the ones that are set up like Kiva, where you get to loan money to individuals and when they repay it, you can choose another person to loan too. It is a very wonderful feeling getting to look through different people and finding one that you want to support.  Here is a lovely video by them explaining how they work:

A Fistful Of Dollars: The Story of a Loan from Kieran Ball on Vimeo.

So if you want to vote for this one to be my choice of the week, comment below and let me know. This week I am doing contest and will give $25 to whichever post gets the most comments through out the week. :-) Details here.

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