Kiva's mission is to connect people through lending for the sake of alleviating poverty. Nearly 500,000 users have lent almost $65 million, interest-free, to developing-world entrepreneurs through Kiva.org. The nearly four-year-old site received a major advance during its early days from a wave of media promotion and the very public support by former President Bill Clinton. Could Kiva now start to help the lower class here in the United States and provide a substitute to payday loans? As we've discussed here in the past, a number of payday loan alternatives have been suggested … but none have really taken off.
With Kiva, media attention has waned in the last year or so, but growth has only accelerated due both to friend referrals and loyal users who repeatedly re-loan money rather than withdrawing it. The site dispersed $3.5 million last month. The organization uses microfinance institution partners to scrutinize entrepreneurs before allowing them to solicit funding. By asking a series of questions to assess roots in the community and the legitimacy of a business, Kiva is able to establish a risk profile for each entrepreneur. Lately, however, lenders are putting up more money than Kiva can dole out.
Now the plan is to bring Kiva to the United States in the next few months. They're signing on microfinance partners in the Bay Area and in the Northeast, and are targeting the 30 million or so Americans who don't have bank accounts and the 18 million or so "micro-enterprises" that often rely on high-interest loans or payday loans to buy materials, the need is for people who don't have a FICO score or a credit history, but run a small enterprise. Now with plans to make loans in the United States this could actually become an alternative to payday loans for this segment of the population.
The rules will be slightly different once the partners sign on. An American entrepreneur will be able to seek as much as $10,000 (versus just $1,200 in the developing world). And while Kiva has done very well in Africa and elsewhere, Kiva isn't totally sure how the effort will go over domestically. This is going to be a social experiment here in the United States, it is hard to understand the kind of impact that this may have. The potential is very high for people and small businesses that rely on paycheck loans and other high- interest loans to stay afloat, this simply may give them another attractive option for needed capitol.