What is “microlending “? It’s the extension of small loans to entrepreneurs in developing nations. There is no interest charged, but the entrepreneur is expected to repay the loan fully within a predetermined period of time. Worldwide, there is a 97% repayment rate. This system has changed the lives of thousands all over the world. The Nobel Peace Prize in 2006 was awarded to Muhammed Yunus, the founder of the Grameen Bank, for their efforts in micro-lending.
Now, you can become a banker, funding specific entrepreneurs thanks to the website Kiva.org. The Kiva organization works with groups in the entrepreneur’s home area. The local organization interviews the applicants, evaluates their business plans, and determines their readiness to accept a loan. Then the entrepreneurs’ information is given to Kiva and listed on their website. That’s where you come in.
How you can become a lender in 3 easy steps:
- Take a look at the entrepreneurs in the Kiva.org website. Search for a particular area of the world, a specific gender or even a certain industry you want to support. Each entrepreneur’s page includes a photo, their business plan, a brief biography. Included is how much money they are seeking and how much has been raised so far.
- Select your entrepreneurs: lend as little as $25 to a single entrepreneur. Spread out $100 amongst several individuals to diversify your portfolio.
- Deposit your funds to Kiva using Paypal. You’ll be given the opportunity to make an optional contribution to the Kiva organization itself at this time. Remember that unlike other organizations, 100% of your loan money goes to the entrepreneur, so Kiva.org needs financial help to keep its offices and staff running.
Now you are a Microlender! What does this mean for the entrepreneur you selected? Once the entrepreneur’s loan has been fully funded, Kiva.org makes a bulk payment to the local support organization in the entrepreneur’s area. The money is quickly dispersed and put to use.
Over the specified period, the entrepreneur will make repayments. When the loan is completely repaid, you receive your investment back.
Once the loan is paid back, you can choose to cash out your balance and receive your money back, or you start the process again, and reinvest the money in another entrepreneur.
Kiva provides a “portfolio” to display where all of your funds are directed, and updates and photos are added to the journal of each entrepreneur describing their successes as they begin or expand their businesses.