What is Kiva?

Well from the website it says this:

“Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can “sponsor a business” and help the world’s working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you’ve sponsored. As loans are repaid, you get your loan money back.”

It says it has been featured on Oprah and has been in Bill Clinton’s book. Surprisingly because this is very capitalist program.

Benefits:
In developing countries, they may not have the financial institutions that are needed to help their small businesses.
It lets investors not have to go through banking fees to loan money and still gain interest.
It lets investors supply as little or as much as they want to the small businesses (even though I think there is a $25 dollar minimum.)

Possible problems:
With any loan there is a possibility of default.
You can only look at profiles and you a trusting the companies in that country to only allow the good people to ask for loans.
This one may be the biggest to most liberal/populists; you don’t know where the money is being spent. They could be buying drugs and selling them and paying you back.

As Economics would suggest people are rational and self-interested so that may not matter.

For an experiment, I am going to loan $25 dollars to one lucky small business owner in a poor country.

Here is the info on my person: Martha Enriqueta Castillo Aries
” Martha is one of many mothers that are alone in raising their children due to the fact that her husband went to the United States to work. She has to struggle to raise her children well. Since there are long periods of time where her husband can not find a stable job in the U.S. She does not recieve enough money to pay for the needs of her children. That is how she began to sell cosmetic supplies to her friends and neighbors by catalog. Later she began to sell shoes and crafts. Presently she has more clients.

However, she has taken a special liking to the selling of clothing products and for that reason, she has decided to buy winter clothing, that way she can offer them to her clients. This is why she is asking for a loan of $650 that she will repay in 6 months. With this loan she will be able to buy clothing to sell, like jackets, jeans, and sweaters. With your help Martha will support her children even though her husband is so far away.”

The total loan amount is $650 dollars, there was $625 of it raised and my $25 completed it for her. The loan is for six months. It says the average interest that is paid to the company that brokers her is 54%. That’s huge.

This is also $7,133.42 in pesos that she is getting for the loan.

I will keep you readers updated as I get progress reports.

~PCCapitalist

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Published in: on November 28, 2007 at 3:20 am  Leave a Comment  
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