Kiva.org: Beating Global Poverty with a Click

Unlike most charitable organizations Kiva.org doesn't give away anything to anyone. They exist to create connections between entrepreneurs in impoverished countries and the people in the developed world who are willing to lend them money to expand their operations. This is a revolution in lending. No longer is the micro-lending process tied up in bureaucracy (i.e. the United Nations). Kiva makes it simple. If you are willing to lend, Kiva has an established way to administer the distribution of your funds to credit worthy borrowers in many impoverished countries all over the world. This isn't some internet scam...Kiva.org has received positive media coverage from the Wall Street Journal, NPR, and BusinessWeek.

There are various estimates of the size and growth potential of the microfinance industry worldwide. Unfortunately, the demand for micro-credit services among the world's poorest is still largely unmet. Estimates show that donor agencies spend between $800 million-$1 billion per year, serving 13-16 million poor -- just 4-10% of the potential market. There is a lack of capital being directed to microfinance institutions, and therefore a significant opportunity to redirect this capital to distribute as micro-loans, which have default rates of 5% or less. The microfinance industry has grown 25-30% annually over the last five years, and is expected to continue to grow.

What is unique about the Kiva.org story is that Kiva is the first micro-lending Web site designed to connect people with people. Founded in 2004 by Matthew and Jessica Flannery, Kiva's goal is to reduce poverty in developing countries by giving entrepreneurs the ability to build their businesses through flexible loans with six-to 12-month terms. Kiva allows individuals to act as a "micro VC" by loaning directly to entrepreneurs with feasible business plans. In other words, they have democratized the lending process. They are looking into expanding into the US market but, as I understand it, there are legal roadblocks to their providing micro-loans in the US at the present time.