sustainable microfinance

kiva, which means "agreement" or "unity" in swahili, is a unique microfinance nonprofit that connects individuals with small businesses in the developing world:

By choosing a business on our website and then lending money online to that enterprise, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive monthly email updates that let you know about the progress being made by the small business you've sponsored. These updates include reports on loan repayment progress, photos of new capital equipment, narratives on business growth and standard of living improvements, and more. As loans are repaid, you will get your original loan money back.

anyone with a credit card and paypal account can loan much-needed funds in $25 increments. interest goes to operating expenses only (partly due to massive SEC regulations on interest-bearing loans), so investors receive only their capital investment when the loan is repaid.

so why would a nonprofit choose microfinance instead of donations? insisting that poor entrepreneurs repay their loans seems much colder than handing out grants. yet it seems to me that requiring repayment engenders a feeling of obligation and indebtedness, possibly making entrepreneurs work harder to succeed. kiva's answer is focused on our behavior rather than that of the entrepreneur - we are more likely to give money when we get it back, increasing the number of loans and people they can help:

There is a limit to the amount of money people can give; loans, on the other hand, can be repaid and re-loaned indefinitely. We believe in the power of creating a more sustainable option for people to contribute.

visit kiva's website for more information. the founders also have a blog.

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