Working for the World Bank’s infrastructure lending program, I deal with large projects: $500 million loan to Azerbaijan, $150 million loan to China, etc. While these projects make a major contribution towards the development of the country, and improve the living conditions of individuals, I have found a way to get even more involved: through microcredit. These are small loans made to poor individuals who normally cannot obtain funds through the traditional banking sector (for example they don’t have collateral or steady jobs). The amounts are small, but can make a big difference in people’s lives.
Traditionally, it was difficult for individuals to participate in microcredit activities. However, the Internet has changed that, particularly through the web site www.kiva.org.
Kiva partners with existing microfinance institutions in different countries. These partners identify qualified individuals seeking funds for business enterprises. They are located in the different countries and have people already in the field. What we do is provide the finance.
It could not be any easier. You can choose based on the region, the industry, the gender, or a combination of these. There is information on the individual, how much they want, what the funds will be use for, as well as the repayment rate of loans through the local microfinance institution. As with most well run microcredit programs, the repayment rates are usually on the order of 98% or better: social pressures are such that it is very rare to default.
My first loan was to Osman Tagiyev in Azerbaijan. He is my age with three children, and wanted $1200 to buy a cow to improve his dairy business. The field partner had an excellent track record with a 100% repayment rate on the over $1 million they had loaned.
So I joined a number of others and put in a small amount of money to buy Osman’s cow. He has been repaying the money regularly and his cow looks like it is doing its bit.
I’ve put the repaid funds back into other loans, and will continue to help out with new entrepreneurs. So if you don’t fancy going out to dinner one evening why not use that $25 to help someone out?