Photos, Social Work

Kiva.org – DIY Micro Lending!

16 May ’08

I’m not quite sure why it took me so long to discover Kiva.org – But I’m glad that I eventually did – because while we volunteer at StandUp for Kids on Wednesday nights, it’s a very different endeavor than loaning money to someone in a developing nation.

For those who have no idea what micro lending is, the main concept is that in developing (third world) nations, the people who need loans the most, are unable to get them because they do not have the credit/collateral and banks just don’t give loans for less than $1,000. Sometimes as little as $100 will make all the difference in the lives of an entire family – from generation to generation – simply because they got that small initial financial assistance that enabled them to bump themselves out of the perpetual trap that is poverty (and extreme poverty.)

If you think about extreme poverty where they’re surviving on basically pennies a day (in American dollar terms) – a loan of $5 all of a sudden makes their life exponentially greater – and gives them the chance to continue raising their quality of living.

A basic example would be a woman who weaves/makes baskets and sells them to feed her kids/do everything. She starts out with no materials, so she has to borrow materials from a supplier – who loans them out to her for $1. The amount she can earn from the baskets made from those materials is $1.50 – so she pays back the $1 she borrowed, and earns $0.50 everyday – and that’s just barely enough to feed herself and her kids – leaving her with nothing.

And so the cycle has to be repeated. She’ll always be in debt and without the ability to get ahead of the price of supplies, she and her kids will continually be poor. Now bring in the $5 loan. All of a sudden she has options. She could possibly buy better tools and become more efficient. She can start selling other items with a better profit margin. She has many more options simply because that $5 – that small amount of money actually represents opportunity – something she never had before.

Or even on the most simple level– using our above example rate – Say she buys $2 of materials for baskets, then sells them and since she was grossing $1.50 for one dollar’s worth of materials, now she grosses $3.00 – Minus the $2 cost of materials, she’s netted $1. Since her family was living on only $0.50 a day before – they have an extra $0.50 to save everyday, to accumulate and to eventually improve their standard of living.

So after I discovered Kiva.org – I signed us up and we ‘loaned’ out $150. Well, $50.00 to three people in three different countries around the world. I figured that we would spread out the risk instead of loaning the entire $150 to one person. These are loans and sometimes people do default on their loan – but the default rate is .3% – so the repayment rate is 99.7% – I’m much more willing to bet that these business owners will pay back their loans than that guy on the corner will actually buy food instead of alcohol with the money I give him.

What’s great is that when they do eventually repay their loans, we can just loan the money back out to someone else! Until we choose to take it out, the money we put in will always be helping someone. Sure there’s inflation but even still, the number of people that my initial $50 will reach is potentially great considering it can move from person to person.

So. While we had more ambitious goals – after reviewing the budget and also considering EVERYTHING that we’re doing in the next year (wedding, moving, Christmas, school, car repairs) we’ve backed off from our initial goal of $1,000 by year’s end. It’s now only $500 by year’s end. But at $50 each, that’s 10 people at a time that we’re helping out – forever until we take the money back.

Next year though, next year the goal is an additional $1,000 (total of $1500) – so that would be 30 people. Again, we’re choosing to only allocate $50 to each person so that our risk is spread out among many more people – so on the highly small chance that one does default (usually due to things like natural disasters, deaths, diseases), we’re not losing anything more than $50 – and this is important because believe me, we are not rich by any stretch of the imagination. And it’ll be even tougher since Leah is starting graduate school in August – so she’ll only have a part time job income.

So here’s our Profile at Kiva.org – you can see the people to whom we loaned money, (the rest of their loan requests amounts were fulfilled later that day) and when they start paying back the money (in accordance with their loan terms), you’ll also be able to view that.

And yeah, it might seem like a bit much – I mean $500? and then $1,000? But we’ve had much more fortune and good karma than we could hope for – so if it’s a matter of choosing to not buy a latte or not go to an extra happy hour in order to help someone earn a better life? – when broken down to a monthly basis it’s really a small amount and an easy choice – and believe us – this is an energy exchange and whenever we’ve put ourselves out there – we’ve been paid back much more than we ever gave out.

Give it a try. Click here to see our profile.

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2 Comments

  • Reply Jacqueline 16 May ’08 at 10:17 am

    This is incredible. Once I’ve moved and settled in with the new job and everything, I’m going to do it too. Even small amounts can make a huge difference, and I want to give back.

  • Reply Atlanta. Photographer. Kiva.Org. Micro. Lending. Wedding. Family. Children. Portraits. | LeahAndMark.com 27 Dec ’09 at 8:30 am

    […] We’ve been ‘donating’ to Kiva.org since May of 2008 (see here). […]

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