Microlenders jump-start entrepreneurs

from the University Daily Kansan

Nonprofit group Kiva lets volunteers lend money to small business owners in developing countries.

After being featured in former President Bill Clinton’s newest book and on the Oprah Winfrey Show, the nonprofit group Kiva has seen an increase in the number of people desiring to lend money with it.

The nonprofit, microlending organization Kiva has experienced an overwhelming number of people providing funds for lending, thanks to former President Bill Clinton’s latest book, “Giving,” and The Oprah Winfrey Show. Clinton featured Kiva as a way for volunteers to help small businesses in developing countries through the Internet.

Kiva, founded in San Francisco in late 2004, allows lenders to select entrepreneurs on its Web site and use a credit card to loan them money. Kiva transfers funds to local partners, which are nongovernmental organization workers at microfinance institutions, who then disburse the loans to each qualified borrower. Kiva’s local partners collect repayments and e-mail updates to lenders about the progress of the businesses to which they loaned the funds. As the businesses succeed, funds are returned to lenders, who can then choose to re-loan to another business or withdraw the funds.

After Clinton and the founders of Kiva, Matt and Jessica Flannery, appeared on The Oprah Winfrey Show last month, the Kiva’s Web site posted a message stating that this year, for the first time, every business that applied had been funded. Kiva has loaned more than $11 million, and 99.6 percent of the loans have been repaid. Its donor membership has grown from 75,000 in June to more than 113,000 today.

Stephanie Bryson, a University of Kansas project coordinator of children’s mental health for the School of Social Welfare, joined Kiva after seeing a PBS “Frontline” special in April about the organization.

“I’m happy to see the recent publicity,” Bryson said. “I hope this new demand will bring more microlending organizations out.”

Kiva allows donors to lend as little as $25 to a specific entrepreneur in a developing country. These microloans are then used by the small business owners to lift themselves out of poverty with their own business models.

People in Lawrence have joined the organization and have loaned thousands of dollars to businesses in countries such as Mexico, Togo and Cambodia.

“My husband and I narrow the choices down to three people,” said Cheryl Holmes, a University project manager for the School of Social Welfare. “We then read each person’s story to our 6-year-old son, talking about the area of the world the person is from and what he or she wants to do with the loan. We then make a selection as a family.”

Kiva has funded 17,000 loans today compared with the seven it started with in March 2005.

Sam Snyder, a Motorola technician and 2006 University graduate, has loaned to 703 people, totaling at least $17,575, since he joined in January 2006.

“I loan because I believe everyone in the world deserves the opportunity to succeed and improve their lives and their communities,” Snyder said.

Snyder has lent mostly to female borrowers after reading Nobel Peace Prize winner Muhammad Yunus’ book “Banker to the Poor.” Yunus, who developed the concept of microlending in the 1970s, said women are more likely than men to repay loans, save money and support their families.

Small business owners in poor countries need capital, but because of a lack of collateral and credit history they are unable to acquire loans from traditional or formal banking systems. Nongovernmental organizations and private institutions such as Kiva supply microloans to these people in need.

“When a person lives in poverty due to either unemployment or under-employment, this person will search for opportunities to make a living,” said Rubana Mahjabeen, a University economics lecturer. “Microcredit gives these people an opportunity to pursue that goal. So, these people will try to make the best use of this loan.”

Grace Ayaa, whose peanut butter business received a microloan through Kiva, lives in Uganda where most people work in a local rock quarry for $1 a day. Her loan allowed her to buy a refrigerator and packing material, increasing her peanut butter production.

Ayaa’s loan from Kiva benefits not only her and her family but others in her town. According to Kiva’s Web site, www.kiva.org, other villagers have decided to start their own businesses with microloans from Kiva after seeing Ayaa’s success. Their business profiles are available on Kiva’s Web site.