In 2004 two Americans, Matt and Jessica Flannery, returned home from a research trip in East Africa gobsmacked by the resourcefulness and entrepreneurship capacities displayed by the poor in the rural areas they had visited.
The Flannerys discovered, much to their surprise, that being poor didn’t double for being helpless and, more importantly, how far small loans of about $100 could go in facilitating and encouraging further resourcefulness of small businesses in the fight against poverty.
Of course, micro-finance is not like buying a coke, so the Flannerys galvanised an ambitious plan that would promote sustainable development through linking small businesses in rural Africa to potential money lenders in the developed world.
Before long, Kiva was born as the first citizen-powered micro-finance scheme; lenders and entrepreneurs were featured from all over the world, taking the rock out of Bono’s Liveaid and GCAP poverty alleviation efforts, and making concerts and white band awareness campaigns to cancel debt, increase aid and grow more trees in the developing world campaigns seem like schmaltzy fetishes of the bored.
Without the glam of Hollywood endorsement, Kiva has been quietly connecting ordinary concerned citizens to aspirant entrepreneurs in the Third World needing start-up or pimp-up cash for their business.
”The idea of Kiva is rooted in democratising microfinance; the average person with just $25 can assist an entrepenuer and have the level of information regarding where that money goes,” said Fiona Ramsey, director of Kiva’s public relations.
Visiting Kiva online is akin to entering a sort of bio-social networking site; instead of selecting a mail-order bride, adding a Facebook friend or discussing a new gadget with a like-minded enthusiast in a geeky tech forum, Kiva allows the ”socially minded” to browse profiles, journals and select exactly whom you want to assist almost anywhere around the globe.
”Part of our vision and our philosophy as Kiva is to focus on the language. So this means instead of painting a picture of what people expect poverty to look like, we focus on things like family, business and vocation,” said Ramsey.
So if your grandfather was a fisherman your sensitivities might be geared towards a fisherman needing a loan to repair his boat in the Philippines, or if you are a feminist with women’s economic independence your calling in life, you might identify the mother with four kids who needs to expand her grocery store in Turkmenistan as the perfect foil to appease your generosity, and so the list goes on.
With loans starting from $25, Kiva bridges that erroneous gap between donor and beneficiary; not only can the lender follow the progress made by the entrepreneur in securing further funding, the lender has the option, when paid back, to loan another entrepreneur or withdraw the paid-back loan in full. Either way, the entrepreneur has to pay back, but the lender has the option of keeping the initial loan amount gyrating to different needy entrepreneurs.
”Essentially Kiva is a forgiving form of capital; a type of soft capital. It is socially crowd-sourcing the money over the internet. Financial institutions are risk averse, but we find that most of our Kiva lenders are attracted to risk. Our lenders are willing to risk their money on an entrepreneur in some conflict zone, where they understand that attaining
credit is difficult,” said Ramsey.
Browsing the site paints a human face to poverty and the resilience of the human spirit; even heightens the philanthropic possibilities of electronic networking. Almost 300 000 people have might have participated; lending money to about 40 000 entrepreneurs in 40 countries, but not everyone is quite so impressed by Kiva or microfinance in general.
”At this moment in history, with capitalism crashing everywhere, it takes a lot of nerve to promote more debt for poor people — but the microfinance hucksters certainly have a dogmatic belief in the righteousness of their cause, and Northern liberals who invest in Southern entrepreneurs through these schemes not surprisingly choose a feel-good diversion instead of structural change,” said Director of the Centre for Civil Society at the University of KwaZulu-Natal Professor Patrick Bond.
Bond said he is especially wary about schemes that make borrowers repay United States investors in US dollars, throwing caution on exchange controls to the wind. Exchange controls by all accounts protected South Africa from the worst of the world’s financial crisis in September-October 2008. Who is going to compensate the local entrepreneur for the dollar that goes up and down irrationally against the local currency when speculators run on a Third World country?
”This ”micro-finance hype” that Grameen bank brought here in the early 1990s is largely bankrupt as all the evidence from so many failed schemes shows. Scholarly studies show that bank expenses are too high and borrowers are too
poor to permit a standard microfinance market to operate profitably,” said Bond. But is micro-finance not the sexiest and almost unrivalled concept since the advent of the micro-chip and is 2006 Nobel Laureate Muhammed Yunus not its
Prophet bearing Grameen bank as the holy grail of the poor?
”Micro-finance is like any quick-fix, silver-bullet promise to a structural problem: it substitutes for the durable changes in power relations and reinforces the prevailing atomistic, capitalist ideology, of rags-to-riches,” said Bond.
But to say that Kiva’s larger ambition of mitigating poverty is a pipe-dream would be harsh; Kiva strives to make difference and while a $25 loan is less than what the average middle-class liberal would bet on a poker game on a night out with the boys, does it not offer a way out of poverty in places where small loans are almost impossible to secure?
Moreover, the fact that Kiva allows anyone with $25, an internet connection and an ambition to play more than casino capitalism with the poor must count for something?
”If we are seeking an alternative to the kind of orthodox banking that has ruined the world economy, perhaps the Venezuela model is the one to follow. You don’t expect the full interest rate repayment; there is a social return. That’s why the Venezuelan government is subsidising it with $1,6-billion this year, to empower local people with carefully directed subsidies on interest,” said Bond.