More Microlending Comes to the US
Published June 10, 2009 @ 09:00AM PT
(Kiva borrower Amato Loma-Yindja, of Village D'Afrique day care)
Several weeks ago, I wrote about Bentley College students launching a microloan program for U.S. entrepreneurs. The competition just got more fierce. Kiva, the well-known internet-based microloan program targeting developing country entrepreneurs, is expanding to the U.S. Kiva, based in San Francisco, cites the economic downturn as preventing thousands of domestic small businesses from accessing bank loans. But as I wrote weeks ago, there have always been small and micro- enterprises in this country that lack access to traditional credit. Recession or not, it's exciting that Kiva is bringing its business model home. Beyond the individual economic benefit of small business lending, a less tangible sense of reciprocity goes a long way towards poverty alleviation.
In my prior post, I wrote about the individualistic anti-poverty prospects of microlending. One way to expand the opportunity for poverty reduction is to cluster the loans geographically. Kiva has targeted 18 entrepreneurs in Bay Area and 18 in NYC, and though these entrepreneurs may not be proximate to one another, concentrating investments in specific places can have an exponential effect. One reason Kiva has chosen these two metro regions is because they worked with Opportunity Fund in San Jose and Accion USA in NY to identify potential entrepreneurs - joining a network of small business lenders and loan recipients.
This points to another anti-poverty spillover effect that's important here but less tangible is the sense of reciprocity and community generated in Kiva's model: it's "person-to-person economic stimulus plan." In the link prior to this one, Bay Area recipients were previously lenders. No interest is made on Kiva loans, thus encouraging participation from those more interested in charity and giving back. This personalized, reciprocal model appears to create a sort of "pay it forward" spirit, which spurs on-going activist momentum, I hope.
Here are some heartwarming examples of Kiva loan recipients in the U.S. Let us know if you've given a Kiva loan in the past, and what your expectations are for their person-to-person model here in the U.S.
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Comments (1)
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Author
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Leigh is a PhD candidate in urban planning at MIT, and a consultant on U.S. Gulf Coast recovery. She sits on the Board of the Allston-Brighton Community Development Corporation in Boston, and has worked with non-profits, foundations and local governments on policies and programs aimed at reducing urban poverty and inequality.
Leigh,
Thank you for this wonderful review of Kiva's new domestic microlending program. I work at ACCION USA, one of the two Kiva field partners operating in the States, and it's exciting to hear so much discussion about US microloans. AUSA believes passionately in the value of small business and accessible credit, having offered domestic microloans now for over a decade. With the ability to enrich communities, empower individuals, and increase economic opportunities, small business constitutes a vital sector of our economy.
By permitting loans to US microentrepreneurs, Kiva has allowed AUSA to provide access to credit to many individuals who would have otherwise been without financial resources. As Kiva wisely acknowledges, poverty is relative, and income deprivation is only one component. As you state, credit has always been scarce for small business owners, but in the heat of the financial crisis, it has all but evaporated. Compounding this, many of our borrowers have suffered from medical debt or labored in a difficult job with little potential for advancement. The chance to own a prosperous small business is a massive opportunity for them.
Yet this still begs the question of whether microfinance truly helps alleviate poverty. As I'm sure you're aware, a number of recent studies examining microfinance overseas have concluded that, at least in the short term, microfinance has limited impact on the recipients' incomes. However, AUSA's own data make the case for quite a different conclusion. Our studies show that not only do borrowers tend to report an increase in household income, but our loans help create jobs-a substantial spillover benefit for the community. Furthermore, as you state, the sense of reciprocity generated by a Kiva loan should not be ignored. It seems highly plausible to me that once an entrepreneur has benefited from a loan, as an expression of their gratitude, they would likely begin lending through Kiva themselves!
If you're curious about the specifics of Kiva's domestic lending program, please visit their blog. To learn more about ACCION USA's operations, check out our online resources documenting the impact of our loans. Also please feel free to follow our blog and our twitter account (@ACCION_USA)!
Posted by Sam Hocking on 08/18/2009 @ 02:18PM PT
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