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crowdfunding is reducing povertyIn 1997, modern-day crowdfunding gained global traction as British rock band Marillion funded their U.S. tour entirely through fan donations. Since then, crowdfunding has transformed into a global market. It is capable of financing aid projects, resource distribution and business ventures. Thus, crowdfunding is reducing poverty in developing countries, as proven around the world.

What is Crowdfunding?

Crowdfunding is a fundraising method performed on the internet. Investors contribute small amounts of capital to finance an idea or aid individuals. Using social media networks, crowdfunding works to draw people’s attention to situations of need. Moreover, it creates an opportunity within which anyone with money can invest.

Crowdfunding is typically performed through loans and donations. The loan system helps businesses that are developing a product or resolving a conflict. In this regard, crowdfunding is reducing poverty by giving investors an incentive to have a stake in a business’s success. Additionally, donations are a way for individuals to raise money after being impacted by natural disasters or medical expenses. In both ways, crowdfunding improves fundraising accessibility on a global scale.

Crowdfunding’s Growing Popularity

Crowdfunding became a popular option for entrepreneurs at the turn of the 21st century. Sites such as Kickstarter and GoFundMe have expanded globally. Revenue increased “from $530 million in 2009 to $1.5 billion in 2011,” contributing to economic growth. Not only does crowdfunding allow individuals to invest in campaigns directly but it also brings attention to causes around the world as a catalyst for poverty reduction.

Market Potential

According to the World Bank, crowdfunding’s popularity is spreading from developed to developing countries. In order to boost profitability, global poverty reduction legislation has created an opportunity for crowdfunding to thrive. Due to advancements in income equality and job growth, there are up to 344 million households that can contribute small investments to crowdfunding platforms. This means that by 2025, nearly $96 billion can be raised just through crowdfunding alone.

Thus, crowdfunding is reducing poverty through its ability to connect people around the world. When observing diaspora remittances, education and housing funding, crowdfunding has the potential to increase capital by 25% more in developing countries. As such, in emerging economies that struggle to provide adequate healthcare, crowdfunding can alleviate some of that pressure.

Crowdfunding and Health

A 2018 study by the British Medical Journal studied poverty in India. The Journal found that 38 million people went into poverty as a result of self-financing healthcare bills. The second wave of COVID-19 hit India hard, and as such, many citizens relied on crowdfunding instead of insurance coverage. Through crowdfunding, nearly $1.6 billion was raised from more than 2.7 million donors. Thus, while developed countries have adopted crowdfunding as a method to support innovative business ideas, the developing world is seeing money channeled into small projects or helping others afford medical bills.

Leading by Example

As crowdfunding has gained popularity, several platforms are working to help those in need. Kiva is a loan-based platform that started in 2005. This website allows people to crowdfund loans that support more than 1.7 billion people who are unable to access essential financial services. Kiva’s work spans 77 countries, funding female-led businesses, youth education and medical expenses. In total, Kiva has supported $1.63 billion worth of loans.

A forerunner for crowdfunding sites in India, Milaap, offers investors the opportunity to contribute donations for causes they are passionate about without incurring any fees. Started in 2010, Milaap’s team has been a pioneer in providing funding to rural areas and small businesses. Now, crowdfunding is reducing poverty in healthcare, making Milaap the go-to platform to raise money for treatments and operations.

Similarly, Transparent Hands is the largest crowdfunding platform in Pakistan, which also assists the health sector. Those who are in extreme poverty can rely on donations made by people around the world to help cover the costs of surgery.

Overall, crowdfunding is an emerging resource that is positively affecting the scope of global poverty. Its potential to provide funding to low-income groups is an important step toward solving inequality.

– Nicole Yaroslavsky
Photo: Flickr

OpenTabs Browser ExtensionPeople are now able to help raise funds to provide loans to impoverished people all over the world through the OpenTabs browser extension. OpenTabs allows users to raise funds passively every time users open tabs in their browsers. Microfinancing proves to be an effective tool to reduce poverty, helping 139.9 million people in 2018 alone through loans and insurances. In particular, microfinance has a lot to offer low-income countries as 1.7 billion people worldwide remain unbanked, according to the World Bank’s Global Findex database.

Barriers to Financing

Every day, financial institutions reject the loan applications of thousands of low-income people looking to escape the poverty trap and start their own businesses as these populations are labeled high-risk and high-cost customers. Crowdfunding loans offered by international nonprofit organizations such as Kiva are often the only means low-income people can afford to help them launch their businesses. Inspired by the impact that microloans have in combating poverty and hoping to make lending easier, 20-year-old Umberto Greco and his colleague Matheus Paro created OpenTabs.

The Story Behind OpenTabs

Umberto Greco told The Borgen Project that on a mission to make crowdfunding loans “affordable and convenient” for lenders in 2019, Greco and Paro created a free web browser extension that allows users to raise funds to provide microloans to people all over the world. Established as a nonprofit organization, OpenTabs allows its users to “passively raise funds” simply by adding the OpenTabs extension to their browsers. By replacing users’ tabbing pages with paid advertising banners, OpenTabs was able to provide more than 107 microloans in more than 18 different countries since its founding in 2019.

How OpenTabs Works

The 2019 award-winning startup, OpenTabs, generates revenue to provide microloans by placing non-intrusive advertisements on the corner of each tab users open. OpenTabs can raise on average one-tenth of a penny for every tab that OpenTabs users open at no cost to users. OpenTabs can transfer all the funds raised through advertisements and turn the advertisements into microloans by using universal nonprofit microfinancing platforms such as Kiva.

After a borrower pays the loan back, usually between 8 and 18 months later, the same funds go towards providing loans to new people. In addition to providing opportunities for underprivileged people by simply opening tabs on a browser, people who add the extension also help save trees. By partnering with Rainforest Trust, a nonprofit environmental organization, OpenTabs will help users protect one tree for every 10 tabs users open. Since its partnership with Rainforest Trust, OpenTabs browser extension has allowed users to save 453,265 trees.

OpenTabs browser extension aids people with busy schedules in helping to provide thousands of impoverished people with the opportunity to start their own businesses. Providing people with the opportunity to start their own businesses and provide for their families allows impoverished people to obtain a steady income. The income helps by improving their living standards and contributing to the local economy and national productivity. Yet, what truly makes the extension effective is its ability to grant financing at no cost for users. Users who would like to join the fight against poverty while lacking the funds to do it can now participate in fundraising by allowing companies to do the funding in exchange for non-intrusive advertising.

– Carolina Cadena
Photo: Flickr

Branch App The world of financial technology has a lot to offer low- and middle-income countries. Financial technology is essential to accelerate poverty reduction and enhance the growth and development of developing nations. One such innovation in financial technology is a mobile lending app called Branch. The Branch app has tapped into Africa’s emerging markets and the results are inspiring.

The Branch App

Branch offers mobile financial services that are accessible via smartphone. The advantage of this technology is that the app bypasses some of the restrictions that come with traditional institutions. Branch’s goal is to make money lending and credit building opportunities accessible to all people, which the company believes will “open new channels for personal empowerment and financial growth.”

Currently, Branch serves Kenya, Tanzania, Nigeria and India. Its user demographic targets members of the middle class in areas with emerging markets. Branch recognizes that people in these areas are often underserved and is dedicated to servicing them with customer-first products.

The People Behind the Project

Matt Flannery and Daniel Jung co-founded Branch in 2015. Flannery, the CEO, previously developed and led Kiva, a nonprofit microfinancing company. Flannery then set out to create a “branchless bank” for Africa, resulting in a financial app that would provide accessible services to low- and middle-income customers. Flannery is a Skoll Awardee and Ashoka Fellow, making him a highly acclaimed social entrepreneur. He was also part of Fortune magazine’s “Top 40 under 40” list in 2009.

Recently, in March 2021, Branch added a new member to its team: Dayo Ademola, who will oversee Branch’s Nigeria operations. Ademola has more than 15 years of experience working with consumer-centric companies and banking institutions. She has former experience with global fintech and much of her efforts in the field have been toward improving financial inclusion in Nigeria. Ademola is particularly excited about continuing this mission and working with Branch to help Nigerians simplify their relationship with finances. Fortunately, Branch provides a successful avenue to do that.

Branch’s Success

Since its launch in 2015, Branch has made significant advancements toward improving banking accessibility in Africa. Since its establishment, Branch has facilitated $350 million in loans. This is a significant accomplishment since Branch operates in countries with new markets and limited resources. Fintech investments in Nigeria have grown nearly 200% in the past three years, showing that these emerging markets are increasingly recognized as valuable.

Flannery and others see the African markets for the significant opportunities they present. Fintechs, especially those with a background in social entrepreneurship, have the power to transform African markets and improve social and economic stability in these countries. As it stands, Branch has more than four million customers and has issued more than 21 million loans in the countries it operates in. If the  Branch app continues to spread across Africa and other developing nations, Branch has the potential to vastly improve financial inclusivity and lift millions of people out of poverty by providing financial solutions that cater to those with minimal resources.

Samantha Silveira
Photo: Flickr

microfinance empowers womenGender inequality has a significant impact on poverty and income inequity. Income inequality based on gender is lower in countries with policies that support women and facilitate the employment of women. These policies include maternity leave, paid sick leave and unemployment benefits. In countries where women receive larger incomes, poverty rates tend to be lower overall. Microfinance or micro-lending combats poverty by helping individuals in low-income areas kickstart small businesses. Microfinance institutions provide micro-credits to people who are struggling financially with the goal of helping them reach financial security. Most of these institutions work in developing countries. As a result, microfinance empowers women to succeed and escape income inequality. 

How Do Loans Help Women?

Women account for 74% of the clients of microfinance institutions, which provide credit to almost 20 million people around the world. These loans help women in developing countries gain autonomy while also positively impacting their children and the opportunities available to them. When women gain financial security, they are more likely to invest money in their children’s education or medical expenses. Microfinance for women can also have positive impacts on entire communities. For instance, through the prioritization of education and reduction of gender inequalities. 

Women’s Empowerment Benefits the Economy

Microfinance enables women around the world to start businesses and act on ideas that they would not be able to achieve without a loan. FINCA, a Microfinance institution, has stated that 72% of its female clients were able to provide for their families and send their children to school. Gender inequality has significant economic implications. According to Kiva, another Microfinance institution, there are 1 billion women around the world without access to a savings account and necessary credit. Women earn 63% less than men on average and over twice as many men are involved in the early stages of business planning. Kiva loans have helped 2.7 million women in 94 countries, and 83% of the institution’s loan recipients are women. Additionally, these loans impact communities by building confidence in young girls. Estimates have determined that by 2025 the global GDP would grow by $12 trillion if women equally contributed to the economy. 

Women’s Empowerment and Healthcare

Microfinance programs often require women to meet on a weekly or monthly basis to repay loans and deposit money. This allows women to come together and simultaneously provides financial security while building support systems. These meetings also create an opportunity to provide health education to women who lack insurance and access to health care. Specifically, HIV/AIDS prevention programs can increase the reproductive and sexual health of marginalized women. 

Therefore, in many different ways microfinance empowers women. It not only allows women to gain independence financially but it increases opportunities for children and positively affects entire communities. Enabling women to gain financial security and empowering young girls can help decrease gender inequality around the world and combat poverty. From this, it is clear that microfinance has a far greater impact on poverty and female empowerment than simply providing a loan.

Maia Cullen
Photo: Flickr

Microlending Organizations
In the fight against global poverty, one hot-button issue is how to provide aid without the implication of paternalism, the idea that one person or group knows the interests of another group better than that group knows its own interests. Tariq Fancy, the founder of the nonprofit The Rumie Initiative, recalls hearing a Kenyan relative’s view on problems with international aid, saying “don’t walk in assuming that from your perch in North America you figured out all the answers for Africa.” Putting resources and power in the hands of communities both provides aid and acknowledges that they can make decisions about local interests. Microlending organizations have the power to do just that

Microloans are small loans at low-interest rates. Individuals living in poverty often have difficulty securing loans from traditional financial institutions due to a lack of borrowing history and assets to use as collateral. Even when people can get loans, interest rates are often high. People often use microloans to finance small businesses in their early stages, enabling people to overcome barriers and progress toward lifting themselves and their families out of poverty.

Microlending organizations can also issue loans for community projects, like building wells or funding schools. Microlending organizations typically, but not always, issue loans funded by individuals rather than by banks or other financial institutions. Here are four companies and organizations that use microlending in different forms to empower people living in poverty.

Four Microlending Organizations that Empower the Poor

  1. Kiva: Kiva crowdfunds loans from people around the world and uses partners to issue them. The nonprofit has enabled the funding of more than $1.33 billion in loans. Kiva emerged in 2005 and has partnerships with financial institutions throughout the world, where it transfers the crowdfunded money. The local field partners then loan money to Kiva’s lenders. Kiva has a 96.8 percent repayment rate and operates in 78 countries. On Kiva’s website, lenders can sort loans by region or category, such as agriculture, women and eco-friendly.
  2. Zidisha: Zidisha is the first direct person-to-person microlending service that focuses on entrepreneurs and job creation. Its name” comes from the Swahili word meaning “grow.” Unlike Kiva, Zidisha does not loan through financial institutions but facilitates direct lending between people. Zidisha’s loans total more than $16 million and have financed more than 240,000 projects.
  3. Building Resources Across Communities: Building Resources Across Communities (BRAC) is the largest non-governmental development organization in the world in terms of number of employees. Hasan founded BRAC in 1972 and it employs more than 120,000 people in 11 countries. BRAC has a microfinance program, primarily in Bangladesh, which has loaned to 5.6 million borrowers, 87 percent of whom are women. Unlike Kiva and Zidisha, which operate person-to-person lending services, BRAC distributes loans to lenders on its own using donations and other funds. BRAC also does work unrelated to microfinance, investing in schools and in water, hygiene and sanitation services.
  4. Women’s Microfinance Initiative (WMI): Women’s Microfinance Initiative (WMI) began issuing loans in 2008 and trains local women in managing loan hubs. WMI has loaned more than $4.5 million to rural women in amounts of $100 to $250 at an interest rate of 10 percent. According to WMI, 99 percent of its borrowers report doubling their income within six months of being involved in the program. WMI reports a 98 percent repayment rate.

The efficacy of microlending in pulling people out of poverty is up for debate, but some cases have shown promising results. A microfinance program in Uzbekistan resulted in 71 percent of participants reporting an increase in food intake quality. One study showed that when a microfinance program was put in place, there was an 18 percent decline in extreme poverty. While different studies report differing results, microlending organizations like Kiva, Zidisha, BRAC and WMI have certainly been a success.

– Meredith Charney
Photo: Flickr

GreenFingers Mobile Aids in Food Insecurity
Agriculture is at the center of many African families. With over 70 percent of African families depending on agriculture as their main source of income, 90 percent of them live on less than $1 to $2 a day. GreenFingers Mobile aids the food insecure to attempt to change that. This app provides small and emerging South African farmers access to the growing market to help reduce poverty and make Africa food secure.

How GreenFingers Mobile Works

Initially piloted in 2013, GreenFingers Mobile did not fully establish until 2015. Prior to 2018, the mobile app served three countries and assisted more than 5,000 smallholder farmers. Today, it serves more than 8,700 farmers across three countries. The goal of the app is to provide small farmers with access to the agriculture market. GreenFingers Mobile aids the food insecure by replacing the inefficient pen and paper system and supplying farmers with real-time data. Instead, it provides farmers with a variety of services that range from improving the yield of their harvest to a virtual profile to build their credibility within the market.

In addition to informing farmers of the wellbeing of their fields, GreenFingers Mobile also aids the food insecure by registering over 12,500 farmers in training courses. These training courses provide farmers with knowledge of the agricultural market and ways to improve the yield of their cash crops. According to the World Bank, in 2016, nearly one out of nine people living in sub-Saharan Africa, South Asia and East Asia suffered from chronic hunger. That same year, 27.4 percent of Africa’s population suffered food insecurity. With food insecurity on the rise, the app presents many small African farmers with the ability to fight back. Through GreenFingers’ efforts to ensure food security in growing communities, it simultaneously reduces poverty. With the threat of hunger erased, communities and countries will become self-sustaining.

GreenFingers Mobile’s Funding and Investors

In 2018, GreenFingers Mobile was a finalist in Google’s Impact Challenge and received $125,000 in funding. That same year, Kiva, an international nonprofit organization with the mission to expand financial services to developing countries, approved a $15,000 loan for the company. Many expect the app to grow the sub-Saharan agricultural market to five times its current size in 2030, going from $200 billion to $1 trillion. Within the next two years, GreenFingers Mobile hopes to have more than 30,000 farmers utilizing the app. In May 2019, GreenFingers Mobile launched the GFM Tree Tracking module, which will provide the farmers with over a million trees.

Among many of the app’s investors is the Hivos Food & Lifestyle Fund, which Hivos provides. Hivos is an organization that focuses on “social change, digital activism and rural innovations in the sectors of sustainable food systems, renewable energy and governance,” as the GreenFingers Mobile website says. Natalie Miller, GreenFingers Mobile CEO, says the fund provided several cycles of seeds and helped lower the entry barrier, which assisted the app in cutting prices by two-thirds.

With nearly 60,000 commercial transactions completed, GreenFingers Mobile continues to grow. It is paving the way for technological innovation in Africa. Though it will take time for Africa to see an effect on its food security, GreenFingers Mobile is on its way to improving the lives of those in poverty.

– Emily Beaver
Photo: Flickr

Women Entrepreneurship Opportunities Many governments and companies around the world have come to realize that encouraging the advancement of women is essential to the development of communities as a whole.

Five organizations, in particular, are making huge strides to help women entrepreneurship through financing and training programs.

Kiva

Kiva is a crowdfunded lending organization that gives loans to those who can’t access fair and affordable sources of credit.

As an international nonprofit organization operating in over 80 countries, it provides opportunities for people who are financially excluded from the capital to become farmers, pursue an education, or develop business ventures.

It operates by pooling money from lenders that each pay a small part of the loans to minimize the cost to individual lenders while maximizing its effectiveness by joining resources with others.

Since 2005, Kiva has funded $1.22 billion worth of loans to 3 million lenders. While loans are available to both men and women, 81 percent of Kiva borrowers are women.

In support of Kiva’s values and success, Bank of America and the U.S. Department of State partnered with Kiva in 2017 to support the “Women’s Entrepreneurship Fund” that hopes to support 1 million women entrepreneurs by 2021.

Kula Project

The Kula Project is an organization that works out of Rwanda. It is designed to develop entrepreneurs through vocational fellowship programs.

These programs provide business investment training, tips on creating or improving business plans and industry training in artisan goods, coffee farming and agribusiness.

Another important part of the Kula Project’s resources is its one-on-one mentorships that provide information on financial planning, family health and business leadership.

Both men and women can participate in the Kula Project’s fellowship program, but women are particularly benefitting through the organization’s Women’s Centers that focus on training them to create their own sewing, weaving and agriculture businesses to sell handmade products on the local market.

With a business model that focuses on listening to the needs of the community, Kula Project is working to plant the seeds for future success and allow the community to sustain its own development.

Women’s Global Empowerment Fund

The Women’s Global Empowerment Fund (WGEF) provides both microcredit loans and vocational training for business and leadership development for women in Uganda.

WGEF aims to create sustainable human development through the use of social capital building programs that aim to alleviate poverty, empower women, strengthen food security and health among families and generate an atmosphere of self-determination.

The Credit Plus program created by WGEF has assisted women in opening restaurants, bakeries, hotels, construction projects and small to medium scale agriculture projects that also increase local food production, giving women entrepreneurs the opportunity to be new leaders in society.

These successes are even more impressive due to the nature of the post-conflict region.

The clients of WGEF have been former abductees, child soldiers and victims of gender-based violence and they have the full support of the Women’s Global Empowerment Fund.

Friendship Bridge

According to the United Nations and Harvard Business Review, when women earn an income, they invest 90 percent of it into their families and communities. In comparison, men invest 35 percent for the same purpose.

With this understanding, Friendship Bridge works with a mission to empower impoverished communities in Guatemala by supporting women entrepreneurs.

Friendship Bridge uses their Microcredit Plus Program, small loans to impoverished women, as a sustainable business model to lift women out of poverty.

The organization relies on a group lending model that they call “Trust Banks” to instill accountability but also to create support through social capital. Today, the organization helps to support as many as 22,000 women.

Friendship Bridge’s Client Continuum strategy believes that the combination of financial capital (credit), human capital (skills) and social capital (networks) accelerate the services they provide to not only become entrepreneurs but leaders as well.

Clients are required to undergo non-formal education sessions to accompany their microloans, with options for further mentorship and advanced training in business practices or technical training.

These educational advancements have helped women open businesses in textiles, the food industry and has given people the opportunity to access education.

As an added bonus to this organization’s great work in alleviating poverty, it is addressing the largest group of immigrants coming to America, assist them in creating livelihoods and make them want to stay.

Women Entrepreneurs Finance Initiative (We-Fi)

The Women Entrepreneurs Finance Initiative, backed by the World Bank, works to address the financial and social constraints that small and medium women-owned enterprises face in developing countries.

This is a widespread collaborative initiative that includes 14 governments, 8 multilateral development banks and both public and private stakeholders.

Starting with $340 million for women entrepreneurs in the first year, the organization is expected to mobilize $1.6 billion in additional investment funds from the public and private sectors and development partners.

These funds will work to provide women with access to debt, equity, venture capital and insurance markets, link women-led small and medium enterprises to supply chains, connect women entrepreneurs with networks and mentorship and improve legal limitations that constrain women-led businesses.

These five organizations and initiatives have proven invaluable in changing the quality of women’s lives, and consequently, transforming the communities in which they live.

Advocacy remains an important part of this change in making sure that people are aware of these ideas and opportunities for change.

– Sara Andresen

Photo: Flickr

 

Important Poverty Nonprofits
The world is full of people trying to do good, some of whom are well known and acknowledged for the work they do. Many change-makers, however, fly under the radar and do not receive the recognition they deserve for the profound changes they have generated. Some important poverty nonprofits have been working to mitigate poverty and disease worldwide for years, and they are the ones who could benefit greatly from volunteers. The following are five groups whose efforts should not go unnoticed by the world.

Five Important Poverty Nonprofits

  1. Mothers2mothers – This group focuses on alleviating the HIV/AIDS epidemic in Africa while empowering women and mothers living with and/or around the disease. Africa is lacking heavily in healthcare workers. Mothers2mothers is an important poverty nonprofit that hires and trains HIV-positive women to fill these roles, thus providing them with the opportunity to gain financial security for their families and giving the community access to much-needed healthcare. Through this method, thousands of jobs have been created and hundreds of thousands of lives have been saved.
  2. Partners in Health (PIH) – Founded in 1987 by world-renowned doctor Paul Farmer, PIH has made great strides in eradicating life-threatening epidemics, such as multi-drug resistant tuberculosis, in third-world countries. PIH focuses on building lasting healthcare systems in countries that are severely lacking and providing this service to the poor, who would not typically be able to afford it. To do their incredible work, PIH relies heavily on donations.
  3. Kiva – Kiva is a nonprofit that provides low-income, entrepreneurial women and students with loans to start their own small businesses. They described their mission as “to connect people through lending to alleviate poverty.” Kiva has proven that even small loans can create lasting change in the lives of those who need it. Recipients of loans through Kiva have gone on to build small businesses that allow them to support their families and stimulate the economy of their communities.
  4. Charity: water – This is a nonprofit that works to provide clean drinking water to developing countries. Charity: water uses donations to build wells that would eliminate the need for people to walk miles away to get to a water source. They also provide sand filters and rainwater catchments that promote cleanliness in drinking water, which helps to lessen the spread of disease in impoverished communities.
  5. Concern Worldwide – This organization focuses on long-term solutions in third-world countries. Concern Worldwide responds to emergencies like environmental disasters and genocide. Their past projects have included providing food and nutrition to the starving after the 1973 Ethiopian famine. They are currently working with Syrian refugees in The Middle East.

These five are just a few of many important poverty nonprofits that work to make a positive change in the world, no matter how small. Contributions to groups like these have the ability to create a ripple effect in the lives and communities of those who truly need it. Getting involved can come in any form from promoting the causes online to volunteering time to help with projects. When it comes to making a change, there is no contribution too small.

– Amelia Merchant
Photo: Flickr

Micro-LoansFor many of the world’s poor, access to equipment, capital and necessities like basic healthcare are difficult to acquire. Kiva.org is a pioneer for online micro-lending that enables low-income entrepreneurs to do something they otherwise would not have been able to afford. Kiva facilitates connecting a lender to a borrower, who then helps fund a no-interest loan as low as $25 (USD). The borrowers are then held accountable to repay the loan. As of today, Kiva is working in 84 countries and has a 97 percent loan repayment rate. Essentially, micro-lending is working.

Recently, Kiva entered a new lending space: education. With its Student Micro-loans program, now anyone can lend as little as $25 to students. In 2010, Kiva launched in Paraguay, Bolivia and Ecuador by working closely with its field partners to find prospective students in the three countries and create a customized loan program that works within the countries’ educational systems. Kiva’s CEO Premal Shah stated that moving into short-term student loans was a natural transition for Kiva. Shah saw an opportunity for financing something that had a long-lasting effect, and education fit the bill because student micro-loans create an education option for students in poor nations.

Improving access to education should be a top priority globally. Investing in higher education is a must if a country wants to encourage economic development. Education shapes the next generation of innovators, inventors and experts. Kiva CEO Shah mentioned that a one-year certificate in accounting can mean a 200-300 percent income increase in the countries Kiva is serving. It is a practical method to break generational poverty, which is why many impoverished nations treat education as a necessity. International focus on higher education was prominent during the 1990s, when student enrollment in public education doubled in developing countries.

Another startup, Vittana.org, launched a micro-lending marketplace for students and has since partnered with Kiva to help students get into the workforce and marketplace after matriculation. In 2014, Vittana and Kiva hoped to help 20,000 students access micro-loans for their educations. As a practical matter, the organizations are focusing on countries where jobs are abundant, but most require some level of higher education, like a certificate or degree. The purpose of aiding the borrowers in getting jobs afterwards is to secure Kiva’s interest in repayment. The loan is a loan, not a donation. Once repaid, the lenders have the option to re-invest in another borrower, or in this case, another student.

In short, student micro-loans create an education option for students of poor nations. By enabling education, students around the world have the chance to pursue knowledge and skills, and they are more competitive in the workforce and have the opportunity to break the cycle of generational poverty. When even one person steps away from poverty, it benefits them, their family and their community at large. Facilitators like Kiva and Vittana make it easy for anyone with $25 to get involved. In sum, their strategy is to pursue solutions to the lack of access to school with a simple, working concept that student micro-loans create an education option for students in poor nations.

Taylor Elkins

Photo: Flickr

Business_Start-Up
Kiva, a micro-finance organization, makes small loans to individuals or groups in developing countries looking to build small businesses or fund other projects.

This type of financing allows the borrowers to potentially repay the lenders when a project has been successful, re-purposing the charity money to another group in need. Financiers believe that this type of lending supports economic and entrepreneurial growth unlike traditional charity.

By lending instead of giving, Kiva enables borrowers to engender societal change by providing them the start they need to create a profit. Seema Patel, a user of Kiva, shares what she has learned from the company: “Give a person a fish, you have fed her for today; teach her how to fish, you have fed her for a lifetime.” This effectively expresses the repayment feature Kiva employs.

Kiva has been the most successful organization in the micro-financing field. It works as an intermediary, posting ads from individuals or groups seeking loans and creating profiles that contain general personal information, a description of the loan needed, and a photo of the potential borrower.

Borrowers are rated on a scale of 1 to 5 stars based on their previous credit history with loans. 1 star means the borrower is potentially risky or newer and less likely to be funded, while 5 stars means the borrower is a safer investment.

Lenders are able to fund from $25 to $5,000 and the borrowers are only responsible for making their prescheduled payments once the loan has been fully funded. The average loan from Kiva based on their past 289,329 loans is approximately $694.

Most projects receive their funding within a day or less. Of all loans, 78 percent are funded within two days, and 68.17 percent are funded within the first day. There is no evidence to show that loans perceived as risky are funded slower than the loans perceived as safe. The popularity and success of Kiva allows for this fast funding rate.

Data show that lenders are more likely to fund projects that they believe will have a greater impact on alleviating poverty. Loans to men and to projects that request higher costs are often funded slower than loans to large groups of women.

This may be because lenders are looking to alleviate the poverty of groups or individuals who may be lacking a regular source of capital. In addition, loans that are financing education and health have the fastest rates of funding.

Although lenders fund loans with the knowledge that they might not be repaid, the default rate of repayment is only 0.7 percent. Loans to larger groups have higher repayment rates which make them more likely to be funded. The high repayment rate suggests that the loans are successful in spurring potential businesses and other projects.

Amanda Panella

Photo: Flickr