Find Us on Facebook
If you’re only vaguely aware of crowdfunding, you’ve likely heard of it through its more sensationalist examples. There was that guy from Ohio whose joke Kickstarter campaign to fund a batch of potato salad went viral and raised a mind-boggling $55,000. You may occasionally hear about well-established artists turning to crowdfunding sources to finance their latest projects, as both Spike Lee and Zach Braff have done for recent films. Even if you haven’t encountered these examples, you may have come into contact with crowdfunding via requests to chip in for your nephew’s Boy Scout troop, your coworker’s daughter’s soccer team or your neighbor’s small business run out of her garage.
While crowdfunding these pursuits may be noble in its own way (even the potato salad guy ultimately fed 3,000 people and set up a charitable fund), the practice of microlending has been a less visible but far greater force for good in today’s world. In developing countries, poverty is a daily reality and charity can only go so far. Even in the United States, there are disenfranchised groups of people who are systematically shut out of the traditional lending markets. What’s more, with so many crowdfunding platforms focusing on creative projects or small-business startups, needs-based projects can easily be pushed to the fringe of our collective consciousness and overlooked.
Unlike the crowdfunding that’s done through platforms such as Kickstarter or Indiegogo, microlending is not pledge and donation based. Instead, as its name suggests, microlending funds goals by spreading the total cost of modest loans across many socially conscious lenders who contribute small increments. Through the help of organizations coordinating these loans in some of the most cash-starved regions of the world, borrowers (often people who don’t have access to credit or more conventional means of obtaining loans) use the funds to improve their situations and then pay the lenders back. While funds in donation-based crowdfunding campaigns only flow in one direction, the microlending process allows for the money put into loans (and then repaid and potentially loaned again) to have an exponential financial impact throughout the world.
As the holiday season is upon us, there’s no better time to start thinking about the less fortunate. As you’ll see, getting friends and family involved with microlending can be a way to give a gift that literally keeps on giving.
Who You Can Help
One of the biggest advantages of utilizing a socially conscious microlending platform such as Kiva.org is the ability to target the specific causes that a lender is passionate about. If you care about green energy, you can help fund solar power in remote regions that are bereft of electricity, or you can lend money to efforts that provide clean energy alternatives to areas choked by dirty fuel such as coal. If you value the power of higher education, you can help finance loans that will allow students in regions without financial aid access to obtain their degree. Microlending can empower vulnerable groups such as refugees or widows in male-dominated societies, assist entrepreneurial efforts in agriculture or artisanal pursuits or even help families purchase livestock.
Searching through the thousands of borrowers on microlending sites can in itself be a moving experience, as one can see how only a few hundred dollars can make an enormous impact on a person’s life. Goals can sometimes be as simple as purchasing furniture for a family’s home or building a bathroom to improve sanitation or even purchasing cement and cinder blocks to make homes more habitable. Loans can fund medical treatment for serious health conditions, or irrigation systems to improve a farm’s productivity.
In fact, most loans are directed at not only improving the borrower’s quality of life, but also at enabling those individuals to enrich the lives of those around them. One sterling example of this is Catherine, a schoolteacher in Uganda who used a $300 loan through Kiva to purchase 10 solar-powered lamps to sell to neighboring families, so that schoolchildren could study after dark. Goals can also include preserving culture, as was the case with Laxmi from Nepal, who used a $225 loan to buy supplies in order to continue a thousand-year-old Nepalese woodcarving tradition that allows her to earn income to support her family.
How It Works
Through various microlending platforms, you can perform detailed searches to find individuals in remote areas of the globe who have specific goals to better themselves and their families and communities. The first and largest such microlending platform is Kiva.org, which operates under the mission of “connecting people through lending to alleviate poverty.” Through Kiva, you can provide microloans in increments as small as $25 to borrowers in mostly unbanked regions, where financial options are scarce and where credit may not even exist.
While the philosophy of microcredit had been developing for decades, technological advances allowed for a real breakthrough in the 21st century. With the internet allowing for peer-to-peer microlending, Kiva emerged as a premier platform to crowdfund for social good. Since its inception in 2005, Kiva has helped 1.4 million lenders provide $775 million in microloans to borrowers in 83 different countries, many of which are in the developing world. Through careful approval of loan recipients by field organizers and a vetting process by Kiva, some 98 percent of these microloans are repaid. At that point, lenders can either withdraw their repaid funds, donate that money to Kiva or (best of all) re-loan the same money to help achieve goals in other areas of the world. According to Kiva’s communication director Jason Riggs, most people choose to re-lend, which can happen many times over, to the point that “over the years, your original $25 could literally make $250,000 worth of impact in the world.”
Through Kiva and similar microlending platforms, anyone can help contribute much-needed loans to fund goals that run the gamut, from clean water and green energy to higher education and start-up businesses. As Riggs explains it, Kiva’s emergence a decade ago was able to help bring a credit market failure to light. “It’s less about creating another charity market,” Riggs said. Instead, Kiva strives to direct funds in a way that is “sustainable on the ground.” This means that the money received goes to use in a way that will empower the individual to not only better their own situation and that of their family but also cultivate conditions within the surrounding community that allow loan recipients to enrich those around them.
Closer to Home
While the majority of Kiva’s microloans are abroad, there are also opportunities to lend to borrowers in the United States. Kiva focuses these domestic loans exclusively on small businesses, and typically targets those individuals who are financially excluded from more traditional loans due to having little or no credit. One example of this is Renee, a woman in New Orleans who, with a $10,000 loan, was able to expand her construction business to the point of hiring three new employees. This success was in keeping with Kiva’s overall objective of empowering women, who constitute over 80 percent of the platform’s borrowers.
Microlending doesn’t only happen on a global level. In fact, organizations within Oregon have recently taken steps to promote in-state microlending. Oregon’s Kitchen Table has recently partnered with the Oregon Business Council’s Poverty Reduction Task Force and Community Sourced Capital to help combat poverty in our state. Through this partnership, Oregonians will be able to microlend to fellow Oregonians who are seeking to expand their entrepreneurial enterprises. With over half of the private-sector workforce employed by small businesses, the benefits of this development will be far-reaching.
Finally, those looking to give a meaningful gift this holiday season need look no further than the Kiva Card. By putting money (as little $25) on a Kiva Card, you can give a gift that will allow its recipient to send funds to an individual or cause that they truly believe in. As these microloans are paid back, the same funds can be loaned out for other important efforts, essentially in perpetuity. It’s hard not to lend a hand to a positive cause like that.