Kiva’s mission is to connect people, through lending, for the sake of alleviating poverty.
A friend recently wrote in his blog a post about Kiva, therefore I will refer you to it for a deeper explanation of what Kiva is (in Spanish), or to Kiva’s website to know about it in English.
For those of you who like statistics and facts, these are the ones shown in the latest newsletter:
- 53 months old
- $124,156,585 raised
- 98% repayment rate
- 312,345 entrepreneurs funded
- 681,527 Kiva users
- 193 countries represented
Kiva’s slogan is: “Loans that change lives”. I wanted to write about how it changes both borrowers and lenders lives.
I believe that the two main “selling points” that Kiva has are:
- The fact that you are lending money instead of donating it.
- Being able to chose one specific project to which you want to loan money.
The fact that you are lending money instead of donating it. This aspect is positive again in a twofold way: you incentivize the borrower to use the money in building a sustainable business and when you get the money back, you can lend it again, and again, etc… therefore with the same amount of money you may help many different people.
The minimum amount you can lend in Kiva is 25$. It’s obvious that if you lend only 25$ you will have to wait until this loan is fully repaid before lending these 25$ to someone else. But, if you are lending to several people the picture changes.
Let’s see an example in which you start lending 25$ to 4 different projects (e.g. handicraft in Peru, a food market in Tanzania, a grocery store in Viet Nam and a small restaurant in Nicaragua).
Let’s imagine that all four projects will repay their loans in 10 months, starting from the next month of the loan disbursal.
You can see in the graphic that since you are collecting 10$ in the first 3 months, in that third month you can already re-loan 25$; in the fifth month you will be able to re-loan other 25$… Before the end of the 10 months you’re already helping 8 different projects. From that moment on you will be always be supporting between 6 and 7 different projects at every time.
Loans repayment "money creation".
And believe me: it’s both entertaining and rewarding to read the stories of these people, trying to grasp how they’re trying to improve their business.
Being able to chose one specific project to which you want to loan money. We are attracted by this for whatever reason: we identify ourselves with the person, we find the business especially interesting, we think it’ll have a larger impact in the community… we “put a face” to the act of lending money.
Last year I went on holidays to Peru. Since I had funded some projects in Peru I thought it would be a good idea to learn from one of those business first hand and see how Kiva is making an impact.
Reynita de Belen de Ccorao is a community founded 7 years ago in the village of Ccorao, near Cusco. It is formed by more than ten people, each of them dedicated to a different business. Together they requested through Kiva 3,950$ to “purchase more supplies for their handiwork and to buy seeds and dry grains”. They would repay in the following 8 months.
Once I was in Peru I was quite flexible about the plan of whether to visit or not this community, since I didn’t know where Ccorao was and also in the Kiva description another name was given for the name of the village, “Corroa”, which didn’t appear in any map (it seems that Ccorao is a Quechua name, being Quechua mainly used in the Altiplano region).
Ccorao in the World.
Luca and I were going to spend some days in Cusco and surroundings, with an intermediate escape to the Amazon Basin. During those days we wanted to visit the city of Cusco with a guided tour including the ruins of Sacsayhuaman, we would go to Machu Picchu, and make an excursion to the Sacred Valley ending in the fortress of Ollantaytambo, all these under continuous threats of transport strikes.
The day of the Sacred Valley excursion, on the way to Pisac we passed through a village with a sign post that read “Ccorao”; that immediately rang a bell and I told Luca: “This is the place”. That day in the afternoon I went to an internet cafe to check the names of the people that we would look for the next day.
The plan was simple: we had 3 hours in the morning before taking the flight back to Lima, we would use them. The following morning we took a taxi and went back to Ccorao, and with the help of the taxi driver we tried to find that group. Of course, the taxi driver had never heard of it.
I tend to be lucky: although the first stop we made wasn’t successful, in the second one we completely hit the target. We reached Mariano Choque Raya, “Mariano”. We introduced ourselves as what we were: a couple of tourists that had lended money to a group through Kiva. Mariano had never heard of Kiva, or if he had he didn’t recall the name, but he knew very well Arariwa, the field partner Kiva works with in that region. He not only had taken loans from Arariwa but had received certain financial education from it.
Reynita de Belen, Mariano and our way to Ccorao.
The group had taken several loans from Arariwa and from other lending institutions. This particular loan was fully repaid in November 2009.
He showed us their handicraft exhibition and went on explaining how they had grown their business. The first loans he used were employed in buying grain and feeding cuys (guinea pigs) that he would grow to later sell them to restaurants in Cusco. Then, as tourism grew, they focused on the handicraft business and he advanced in the value chain of the cuy business: he continued to grow them but instead of selling them he started running an eatery post that opened only during the weekends and there he would cook and serve his cuys, retaining more margin for himself.
With time, more and more buses filled with tourists were stopping in Ccorao in their way to Pisac. Other groups started their handicraft exhibitions along the road, so competition became fiercer (though be sure that the items we purchased came from his shop).
Thanks to Mariano’s entrepreneurship and skills, and partially to the loans offered to him, as he said: now, his children are attending to school, something his generation couldn’t afford to, and he is able to save some money for his retirement as he won’t have any pension when that moment comes.
Kiva: loans that change lives.
The Blog by Javier 