The word ‘kiva’ means “agreement” or “unity” in Swahili. It is an appropriate name for a nonprofit group that uses its website to allow individuals in the developed world to loan money directly to people in the developing world who want to start small businesses. Microlending, or small-scale lending, is widely considered one of the most effective tools available to help people out of poverty. It is estimated that more than 100 million of the world’s poor have access to microloans today. Since Kiva began its work in 2005, it has facilitated over $2 million in loans to more than 3,500 small business entrepreneurs in the developing world. Monte Leach interviewed Matt Flannery, co-founder and CEO of Kiva, and Premal Shah, president of Kiva, for Share International.

Share International: Could you describe what Kiva does?
Matt Flannery: Kiva is an online lending platform for microfinance. If you were to come to our website, you would see profiles and photos of entrepreneurs in the developing world who need loans to start small businesses. It might be a clothes-selling, a tailoring or a goat-herding business. These are people who can’t access financial services elsewhere, and are getting loans sourced on the internet from people like you and me in the developed world. All you need is a credit card to make a loan. If you loan to one of the entrepreneurs, you will get paid back over a 12-month period. You can then withdraw the money or loan it to someone else.

SI: What need is Kiva meeting in the world of microfinance that wasn’t being met before?
MF: Before Kiva, there was no way for an individual to participate in microfinance at a low price point. There are two primary innovations that we’ve contributed. One is that you can directly send money to a borrower the first time that you see them. Another innovation is that instead of just a donation, you can make an investment or loan, so you get your money back. Kiva is essentially a technology company. We’re not on the ground like Mohammed Yunnus’ Grameen Bank in Bangladesh, actually lending to people in the community. We’re sitting here in offices in San Francisco building technology to create and facilitate connections between people in the developed world and the developing world.

A loan for Elizabeth in Uganda

SI: Can you talk about a specific microloan that has had an especially dramatic impact on someone’s life?
MF: My family and I loaned to a woman named Elizabeth who lives in a village outside Turora, Uganda. She sold fish on the side of the street every day. Before the loan, she was selling three or four fish a day for a small profit. We traced the flow of money in her business and found that she was buying fish from a distributer who would come every day from the Nile River and deliver the fish to her. But he was selling the fish at an extreme markup.
We gave Elizabeth a loan of $500, which was a very large amount for her. She was then able to get to the Nile River, which was only a $10 bus ticket away. With the extra money, she could buy not only three or four fish but dozens, and also an apparatus like a freezer in which to store the fish. This allowed Elizabeth to have a longer term inventory and to increase her profit, because she was going to the source and buying fish at a much reduced price. She would sell the fish for the same price as before, but make three times the profit she used to make. That enabled Elizabeth to send her kids to school. Because she was making more money, she was able to save some and invest it in her family. She could buy medicine and prepare for emergencies. She has built an entire financial structure for her family to smooth out their lives so that the events that happen to people in poverty aren’t as extreme.