Tuesday, July 3, 2007

Go Agnes! The Tranformative Power of Money

My last post featured an inspiring couple, Carol and Harry Saal, high net worth individuals who are engaged in philanthropy at a scale where it is transformative. There are many of us who are eager to share our resources to help change the world but lack zeroes on our personal balance sheets. Much of charitable giving is incremental; our donations help an organization meet their budget commitments to do their goodwork. But microfinance is truly transformative, and the exciting thing about it for normal people is that you can help change a person's whole situation with a modest loan.
A few days ago, the following appeared in my inbox:

The business you have loaned to, Agnes Gikonyo, has made a repayment of $30.00. The total amount repaid up to now is $300.00. The payment was collected and deposited by Women`s Economic Empowerment Consort. This repayment will be divided amongst all the lenders who helped to fund this business, depending upon the percentage each lender contributed. Note that you cannot actually withdraw or reloan these funds until after the loan term is complete.
Last summer I loaned Agnes money, through Kiva, to finance a cow shed to help expand her herd's size and productivity. I was one of 10 lenders, and only was in it for $50. She has repaid the entire loan! Early!
Kiva is a very simple system, harnessing the talents of the internet. Kiva partners with microfinance agencies who loan small amounts to low-income entrepreneurs to help them increase their earning. The recipients belong to supervised collectives where they have access to help, advice, and moral support. Their repayment rate is an astonishing 99.77%. You pick which loan applicant you want to support on their website and use PayPal or credit card to send your payment. (As an Ebay shareholder, I am proud that PayPal, which is owned by Ebay, has waived the transaction fee for Kiva transactions.) You loan the money at no interest; Kiva receives no interest income either. The loaning agency charges fair interest to the borrowers to pay the overhead; prior to microfinance the only source of money was loan sharks. (I'm sure the world's loan sharks are not very happy about Kiva!)
What you are contributing is the theoretical return your contribution would have generated over the term of the loan, usually a year. So you are giving a third world woman $5, in order to let her use the whole $100. The $5 might help her feed her family for the week, but the $100 helps her expand her tortilla kiosk's offerings, and getting to the next level of income generation. Some of the happiest stories about microfinance are entrepreneurs who eventually employ others, expanding the benefits to even more.
There is a miniscule risk of non-repayment, so Kiva suggests dividing your loans between several recipients, "diversifying", in effect.
My goal is to loan $100 a month, money from my own business. Since I am a sole proprieter, I like the idea of being able to help other women expand their business and earning potential.
By the way, microfinance clients are overwhelmingly women, but not on the Kiva website. Women are apparently more reluctant to have their images published internationally on the web.
If you are a frugal sort who doesn't imagine your few dollars can make much of a difference, Kiva is a fabulous opportunity. If you are affluent, think about how much you'd be willing to donate, and multiply it by the amount of the total loan, and feel great about how little it is costing you to magnify the change your money is making in the world! If you'd be willing do donate $100, and are receiving a 5% return, that means you could loan $2000, enough to finance 2 complete loan proposals, on average, for the same cost to you. Note though that you cannot take loans to Kiva as tax donations. If the loanee defaults, you can write it off, though.
You can even give Kiva Gift Certificates and your friends can choose where to loan the money.

Anyone out there have anything to add about Kiva or other microfinance opps?

PS I just loaned money towards Patience Uwadiae in Benin City, Nigeria for expanding her food kiosk's inventory. You can see this person, along with her funders, on line!

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