Founded in 2005 by Matt Flannery and Jessica Jackley, Kiva Microfunds (Kiva) is a non-profit organization whose mission is to connect people through lending to alleviate poverty. By providing affordable access to capital, people around the globe (even those in the most remote areas), have the capability to create better lives for themselves and their families.
I would like to first provide some background information on microfinancing. The history of microfinance can be tracked back to the middle of the 1800s. Theorist Lysander Spooner wrote about the benefits from small credits to entrepreneurs and farmers as a way of getting people out of poverty. Microfinance institutions, however, began arising in the 1970s when organizations, such as Grameen Bank of Bangladesh, began loaning small amounts of cash to the poorer people within their regions. The phenomenon expanded when people realized that the poor could be relied on to repay backs their loans. According to the World Bank, more than 7000 microfinance institutions serve more than 16 million people around the world today (World Bank).
- The lender selects what type of loan they want to make (which is then sent to Kiva)
- Kiva sends the money (via pay-pal) to a microfinance institution (close to where you want the money to go)
- The microfinance institution will deliver money to the borrower directly
- Borrower can then repay back his/her loan to microfinance institution
- Microfinance institution repays Kiva
- Money is then returned to the lender
Here is how Kiva’s lending works in practice: (The Pedro Story): http://www.youtube.com/watch?v=meVAPscrGsI
Despite being a non-profit institution, Kiva received criticism for its lack of transparency. Many lenders feel deceived that their money was not being sent to the borrower directly, but that borrowers had already received loans from microfinance institutions. David Roodman, a research fellow at the Center for Global Development, wrote a blog post about Kiva’s lack of transparency. The content of his blog was elaborated in a November 9th 2009 New York Times article. Essentially, the “person-to-person connections” described by Kiva were not necessarily true, which upset many of Kiva’s lenders. Despite this backlash, there has been no negative impact on Kiva’s business. (I also would like to point out, as you saw above, that Kiva throughly explains its loan process).
After knowing all of the positive (and negative) aspects of Kiva, I believe that the organization has greatly benefited from globalization. Even though its main headquarters are located in San Francisco, the company (thanks to its nearly 700,000 lenders) has been able to improve the lives of millions of people on five continents around the world, thanks to globalization. Lenders in developed countries have been able to form indirect relationships with borrowers within developing countries that otherwise would not have been possible. Many complain that globalization has made our world smaller, but Kiva, on the other hand, uses it as a gateway to reach out and help the poor.