Microcredit… an alternative to a hand-out
I make a reasonable living, and I share a portion of my income with
those in need, both through my church and through
Heifer International. I like Heifer
because they do more than just give aid... they provide livestock
(cows, goats, chickens and so on) and training to the poor in
third-world countries, with a requirement that the first female
offspring be given to someone else in the community. Give a man a
fish and he eats for a day, give a family a cow and pretty soon
everyone in the village has their own cow. (Well, assuming there's a
bull around.)
Now I think this is great... my money doesn't feed a family for a
couple days, it helps provide the seed that can pull an entire family
or even community out of poverty by giving them an long-term
advantage.
A few months ago, I learned of another organization that I like for
similar reasons... Kiva. Kiva is a
microcredit (Wikipedia)
organization. Microcredit is the extension of very small loans to the
poor who are unable to get a loan at a traditional bank. In Kiva's
case, these loans are to small businesses in poor countries. (Made
through local microfinance banks in the borrower's country.)
And the really fun thing about Kiva is that you're not giving your
money away... you're just loaning it. You receive no interest, and
it's always possible that you may lose the money if a borrower
defaults on a loan. Barring a default, eventually your loaned money
gets credited back to your account. Then you can loan it out again,
or even (easily) request Kiva return your money. Out of the
eight nine loans (just re-loaned another $25) I've
made starting seven months ago, not one borrower has missed a payment.
One of the other fun things about Kiva is that you actually get to
pick which entrepreneur you want to support. You can loan as little
as $25, and your money gets pooled with other loaners to meet the
amount being asked for. You can view photographs and summaries of
what each business is involved in or starting up, how much money they
want to borrow, and why they want to borrow it. It might be a farmer
needing $300 to buy seed for this year's planting. Or a shop keeper
wanting to expand her inventory. Or a taxi driver who needs to repair
his car to say in business.
"It takes money to make money," as they say, and Kiva gives the poor
entrepreneur the financial leverage necessary to get their business
off the ground, take it to the next level, or get through a rough
spot. It's not a hand-out... the entrepreneur pays back the loan plus
interest, just like any other small business. The big difference here
is that traditional banks won't extend credit to these businesses.
The amounts are too small (sometimes only a few hundred dollars), and
the return on investment too low. The microfinance banks are often
non-profit and run to help this specific class of business. Kiva
loaners help the microfinance bank stay afloat and able to help these
businesses by providing interest-free capital to invest in helping
small businesses.
If you're looking for a non-cluttering Christmas gift for someone this
year, a Kiva gift certificate is a worthy choice. Unlike just
donating money in someone's name and giving them a card, the recipient
of this gift gets to choose how to disburse the funds, and when the
loan is paid back, can loan it out again. Instead of a card pinned to
a bulletin board, it's an ongoing involvement with an organization
that helps change people's lives.
(For the record: I have never received paper mail from Kiva. Heifer
sends me catalogs and regular requests for money, which can be kind of
annoying. Kiva doesn't do that.)
