Microfinance is a big focus in the international development world. It's the process of getting small loans and financial services to the poor and underserved. And it's not just global institutions like the Grameen Bank that make those loans. There are a number of Web sites that help individual Internet users fund entrepreneurs from Kenya to Cambodia.
Now, one of the biggest, Kiva.org, is allowing users to make microloans to small business owners, like Vika Sinipata, in the United States.
An idea for a business is not enough
In January, the human resources professional fulfilled a longtime dream. She opened her own business, assisting the elderly. She got the idea for it after taking care of her own relatives. What she couldn't get was a line of credit.
"I've tried the route through the bank," she says, "and they want two years of experience, and especially for myself, I didn't really have much foundation in the way of experience other than my MBA and my background in sales, and it wasn't enough."
So Sinipata used her savings of $5,000 to launch her business, Island You a Hand. In March, she realized she needed another $10,000 for a license from the state and more marketing materials. And that's how she became part of an experiment on the microlending Web site Kiva.org.
New businesses in United States need capital
Kiva is a non-profit organization that allows individuals to lend to entrepreneurs around the world in $25 increments. Until today, all of its borrowers were in developing countries.
Its president, Premal Shah, explains, "The economy and the credit crisis was a big motivator for Kiva looking at the United States and realizing that, wow, there is quite a need for capital, domestically."
He says microloans can help someone in New York who wants to start a salon or someone in California who might want to start a day care center.
Microcredit has been available in the United States for two decades, but it gets less attention here than in the rest of the world. The average loan to an entrepreneur in the United States is $7,000, compared to a few hundred abroad.
Gender, location affect who gets loans
Shah says relative need may be perceived differently, too.
"I really don't know if people are going to say, 'Hey, my $25 goes farther in southern Sudan or Cambodia than in Queens, New York.' It will be really interesting to watch."
Shah says Kiva users do show strong preferences, and funding rates vary depending on the borrower's gender and geography.
"For example, a Kenyan woman farmer gets funded 10.2 times faster than a male Bulgarian taxi driver."
To test the waters, Shah invited two U.S. microfinance institutions - ACCION USA and Opportunity Fund - to include their entrepreneurs' profiles on Kiva's Web site.
Vika Sinipata's business proposal was posted by Opportunity Fund. Its CEO, Eric Weaver, says after the U.S. credit markets stopped lending so freely, his company has seen more interest in microloans.
"We're seeing more people come to us who previously were bankable, [but] they had their line of credit frozen, or their term loan was not renewed. They weren't able to increase the credit they're getting from the bank."
Reaching out to help a neighbor
So would current Kiva users be interested in the new U.S. option? The Rev. David Taylor, in Greenville, South Carolina, says yes. His Eastminster Presbyterian Church has contributed to about 150 Kiva micro-entrepreneurs in the last few years, and, he points out, "I think people have gotten excited and have continued to do loans on their own that we haven't even tracked."
Their loans have helped fund businesses in more than a half dozen countries, from Tajikistan to Uganda to Cambodia. But Taylor says he expects his congregants will also be interested in the new U.S. possibilities.
"Actually, on our outreach team, we've had conversations about how to do a Kiva-like loan to people in the community."
People all around the country may soon have that option. If all goes well, Kiva plans to team up with other U.S. microfinance organizations.
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