September 11, 2008

Social Lending

Earlier this week I received the following email:

Hi Joel,
We’d like to give you a repayment update on the loans you’ve made through Kiva.
A total of $3.14 has been newly repaid!

I chuckled to myself as I read the email because I was sarcastically thinking to myself  ‘Whoa, where am I going to spend the $3.14?’  But for Doris Nuhey in Ghana the $25 that we loaned to her several months ago was critical to her small business.  Doris owns a hair salon in Ghana and applied for a $750 loan through Kiva.  She has paid back almost 40% of her loan.  $3.14 won’t even buy a gallon of gas here in the US, but in her neighborhood, the money goes a long way.

I found out about Kiva about a year ago while watching a documentary on microenterprise loans in third world countries.  Three things stuck in my head that night.  First, Kiva allowed entrepreneurs access to funding that they would never get otherwise.  Two, the entreprenurial spirit is alive around the world, even in the most dire of countries and economies.  Third, the default rate on loans from Kiva was less than 1.5%  Since their conception several years ago, Kiva has loaned out close to $14 million dollars.

I was curious enough the next day that I decided to visit Kiva’s website www.kiva.com and scroll through the small businesses that were looking for loans.  Our family discussed each business carefully and finally decided on Doris.  We joined a dozen other people from the US, England, Canada and Australia to fund her business.  Shortly after she received her funds we received the following report from a Kiva field representative.

I wish my lenders God’s blessings. Entrepreneur: Location:
Sunyani, Ghana  Doris Nuhey, the beautician was visited at her business premise last week for news out about her business progress. She did not hesitate to express her gratitude to all her lenders for their kind gesture. She recounted the impact the loan has made on her business life. Doris says she now has lots of assorted weavon, hair creams, activators, shampoo etc. in stock to facilitate her service delivery. Her customers are now proud of her for the fast service delivery they receive whenever they visit. For these Doris is very grateful to all her lenders for that great change. She says many thanks to you all.
For us, social lending has been a smashing success!  While we don’t make a penny of interest for our loan, emails like the one above make the experience worthwhile.  I have a genuine love for all small businesses and enjoy watching them succeed.  I have often wished for an opportunity to serve entrepreneurs outside of my geographic area and Kiva allows me to do that.  When times get hard for your business, may I suggest making a $25 loan to a complete stranger in a third world country?  I assure you, it will put your problems in a wonderful perspective.
Joel Nielsen is a Venture Consultant for Funding Universe and can be reached at jnielsen@fundinguniverse.com