Photo: Christolakis

Reading through Grace Boyle’s recent article on microfinance over at Small Hands, Big Ideas reminded me that I should post a quick update on my experiences with kiva.org. I’m happy to report that my original loan, to a woman starting a small bakery in Peru, in now 83% repaid. I’ve since used those repayments to make loans to three additional entrepreneurs:

• A cafe-owner in Ukraine to purchase new equipment;
• A woman in Ghana to expand her grocery business; and
• A group in the Dominican Republic selling fruit and vegetables.

Each loan’s repayment status is easily accessible on the “My Portfolio” page of Kiva’s site. Kiva does a great job of notifying you when you’ve received a repayment, and makes it easy to withdraw the funds back into a paypal account if you don’t want to make another loan.

I’m very excited to hear the financial results from the bakery in Peru once that loan is fully repaid next month (that’s the future-mba in me talking). Hopefully, my small loan was able to create opportunity and make meaningful change in someone else’s life.

Let me know about any experiences you’ve had with Kiva, or your other favorite microfinance institutions.

The Second Sudanese Civil War, lasting more than twenty years and killing an estimated two million people in Sudan before a peace accord was reached in 2005, is not as well-known as the more recent conflict in Darfur, Sudan. But the effects of the war are still being felt throughout southern Sudan. One of the most heart-wrenching aspects of the war were the nearly 27,000 boys orphaned or separated from their parents, known as the “Lost Boys of Sudan.” Many of the Lost Boys traveled hundreds or even thousands of miles by foot to escape to refugee camps in neighboring countries, with little hope of seeing their families or their homeland again. The award-winning 2006 documentary God Grew Tired of Us
tells the story of a few of the Lost Boys selected to relocate to the United States. One of the Boys featured in the film, John Dau, not only adapted to this new culture, but also excelled, putting himself through school and earning a college degree. Determined to make a difference, John then focused his attention on helping the people of southern Sudan, both in American and in his homeland.

In a country with a population of an estimated 11 million, there is only one trained doctor for every 100,000 people.

The John Dau Sudan Foundation works to build and support medical clinics and health care programs throughout southern Sudan. One clinic has already been built, and serves an estimated 20,000 patients.  Still, the health care needs of the region remain critical. I highly recommend renting God Grew Tired of Us and checking out the foundation’s web site to learn more.

Image via CrunchBase

The only way to end global poverty is to ensure that people have the opportunities to help themselves. Aid to emerging countries on a governmental level may do more harm than good, as Dambisa Moyo described in a recent article for the Wall Street Journal. Large banks may not see enough profit potential to bother with small projects. Popular charities may be too overburdened with administrative costs to make a difference on an individual level. Recently, microfinance institutions have emerged to help fill this void. These organizations provide the poor and near-poor with access to loans, savings or other financial services, often to start or run agricultural or other small business ventures. Access to even small levels of financing can make a tremendous difference to individuals, their families and local communities.

How can you get involved? Kiva is a non-profit organization that matches donors with individual or collective entrepreneurs from around the world, through partner lending institutions located in-country. These partner institutions screen applicants and charge prevailing interest rates on the loans. Each entrepreneur has a profile page on Kiva’s web site, where you can learn how much money they need, what they plan to do with it and the terms of the loan. The profile page also includes information on the partner institution originating the loan, such as their delinquency rate and how much money they’ve raised through Kiva. The entrepreneur profiles are searchable by a number of categories, including industry, geographic location and gender, allowing donors to select individuals in which they have a genuine interest.

Donations can be made for as little as $25, payable by credit card or PayPal. Loan principal is repaid according to the terms of each loan. It is important to remember that the donor (you) does not earn any interest on the loan, and there is no guarantee that the principal will be repaid. According to Kiva’s web site, out of over $31 million in completed loans, the default rate was less than 2%. Throughout the life of the loan, both the recipient and the partner institution can post status updates on the Kiva web site, allowing donors to follow along and get a sense of how the business is doing. When a principal payment is received, you can choose to lend the money to a different project, make a tax-deductible donation to Kiva or transfer the funds back to your PayPal account.

I recently made my first donation through Kiva to the mother of four in Peru, who borrowed $275 over six months to purchase supplies for her bakery. I’ll pass on any updates to her progress that I receive.

For those looking to earn a return on their investment, one option is MicroPlace, a for-profit company owned by EBay. Similar to Kiva, you can screen entrepreneurs by geographic region, duration of loan or social cause. Additionally, you can screen by the amount of return you expect to receive. I have not yet invested using MicroPlace, but a couple of things to keep in mind: first, the higher the rate of return, the riskier the loan. Second, MicroPlace is a registered broker-dealer, and accounts opened are investment accounts. Any interest received is income, so consider any tax consequences. Investments can be made with as little as $20, funded by PayPal or a bank account.

Have you had any experiences with Kiva or MicroPlace (or another microfinance company)?