Wednesday, September 26, 2007

Microloans

kiva.org

Kiva is included here for two main reasons:

1. To draw attention to what is in my opinion the coolest use of what is possible online nowadays

2. It has built in blogs throughout its interface, making it a blog in disguise

Kiva is a website that is bringing together as many non-governmental microloaning organizations and as many concerned individuals about the amount of poverty in the world and putting them together. Over the last forty years microloans have been the greatest revelation in the attempt to aid underdeveloped nations, and specifically, the impoverished people within. One of the first microloan institutions, the Grameen Bank, won the noble peace prize in 2006 for its effectiveness and innovation. The concept is simple, instead of giving aid to people in need, they are given small loans in order to start a business or improve their situation. This approach has been incredibly successful earning near perfect repayment and default rates.

Kiva applies a web 2.0 interface to this concept in what may be one of the most important uses of the concept of bringing together people from all over the world. Anyone can create an account and a profile on the Kiva site and make a microloan to an entrepreneur in need. The entrepreneurs are found by the NGO microloan institution in their country, at which point the NGO posts a profile for the entrepreneur, takes a pictures, adds a description of why they need money, and how much money they need. The blog part comes in because each entrepreneur has her/his own blog to report on progress of the project, repayment, and additional loan requests.

Lenders to the site get to choose who they lend money to using this profile (bloglike interface) and then loan up to a maximum of $25 to them (due to the overwhelming amount of lenders, Kiva is currently setting a max of $25 so that more people have the opportunity to participate, they plan on extending this in the future). Then, when the entrepreneur repays the loan, the lender gets the money back to either reinvest or remove from Kiva. This is all done in a paypal-like way free of taxing and interest making the money transfer and interaction very smooth. Remarkably, just like the Grameen Bank, the repayment and default rates have been close to flawless.

This is the opportunity that blogs and the web have created to help people help themselves, which is the best we can hope to do.