Wednesday, October 15, 2008

Microfinance 2.0: Kiva changing the world

The original idea of microfinance came from pioneers like Grameen Bank. Led by founder Muhammad Yunus (author of banker to the Poor), it was among the first institutions to grant tiny loans to small-business entrepreneurs in the developing world, getting them the initial start-up capital to work themselves out of a life of poverty.

The next wave - kind of a Microfinance 2.0 - is person-to-person lending, where entrepreneurs won't have to deal with banks at all, but can acquire funding from individuals. Enter Kiva, co-founded by my friend Jessica Jackley Flannery. You choose the project you want to fund, make the loan, and then assuming the loan is repaid (which it almost always is), you actually get the money back to fund even more projects.

Makes you wonder why no one has thought of this before. In fact Kiva has been so successful, with over $46 million directed to projects around the world, that almost every single loan request on the site has been fulfilled. (Here's just one example, of a Balinese corn farmer.) Indeed, the site's desperately looking for new initiatives to fund. Goes to show that even in a troubled economy, and with people's own pocketbooks hurting, the right philanthropic idea can take off into the stratosphere.

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