The Fruit of Our Loans: Students Give to Developing Nations

Kiva.org bridges the gap between lenders and entrepreneurs in developing countries. And students are jumping on board to help.

Steady droplets fall onto the treacherously uneven road as Mastula Ndagire travels from her one-room home in Kampala, Uganda to her vegetable stall in the nearby town of Kalerwe.  Around thirty people purchase vegetables from her before she returns home.

As a 48 year-old widower and mother of seven children, Ndagire continues to work hard to pay for the meals and schooling for her remaining four children living at home.  The modest living she makes from her small business is often not enough to cover her children's school fees, and she must ask her brother for help in paying the difference.  Times grow gradually more difficult as she must pay for medicine, transportation, and rent amongst an unstable economy.

In the midst of her hardship, Ndagire hopes to expand her business to make more money for her family.  An aspiration that would normally seem impossible is granted in the form of a $235 loan from the web-based organization Kiva.org.

Funded by contributions from volunteers, Kiva.org uses the strategy of microfinance to aid in the reduction of the world's poverty.  Microfinance is the supply of small amounts of money through loans, savings, and basic financial services to impoverished people.

Kiva uses this economic plan to promote businesses and entrepreneurs in poor areas by connecting them to lenders through a simple process.  First, lenders search for entrepreneurs on the website.  The lender then gives a minimum loan of $25 to the business, which the entrepreneur will pay back in a set time period.  When a lender is repaid, he or she can either reinvest in another company or withdraw his or her original contribution.

It all started in 2004 as a side project for founder Matt Flannery and his wife Jessica. Since its inception, Kiva has grown from a pilot project to an established online service with partnerships all over the globe.

"Kiva is a startup focused on connecting lenders with micro-businesses online," wrote Flannery in a blog entry.  "Kiva is all about connecting people."

Kiva is a chance for people in impoverished areas, like Mastula Ndagire, to expand their business and improve the economy without depending on charity.  In the time allotted for their loan repayment-usually six months-the entrepreneur carries out a specific business plan approved by the Kiva organization to bring success and profit.  The entrepreneur then pays off the loan with the newfound financial stability from the loan.

Unlike other organizations dedicated to alleviating poverty, a lender for Kiva can easily follow the money.  As the entrepreneur conducts business and uses the loan, he or she must update the lender. 

 "I know where the money is going," said Julie Palm, a student lender from Davidson College, who has given $9,100 so far to Kiva. "I have confidence that Kiva is connecting with reliable MFI's [Microfinance Institutions] who can attract trustworthy entrepreneurs."

Kiva's lending strategy has become especially popular among college students, who cannot afford to make donations.

Junior Garrison Harward from California State University at Chico has lent $125 to various businesses and continues to contribute to Kiva specifically because of the differences it makes without the sacrifice to its lenders.

"I liked the fact that I could help people without losing money," said Harward, "I can't afford to donate, but its easy to loan money."

For many students, the use of the microfinance to alleviate poverty is what sets Kiva apart from other organizations.  It is not a charity organization; it's a way to build the infrastructure of poor economies through the start of small businesses.

Ryan Leatham, a senior at the University of North Carolina at Chapel Hill, who raised $500 for the Kiva organization, believes that microfinance is necessary to bring economic success to the rest of the world and is the reason why he decided to lend.

"Intellectual capacity and entrepreneurial ability are universal and equal throughout all cultures," said Leatham, "but it is opportunity that separates us.  The developing world populace is highly able and they deserve the opportunity to lift themselves out of poverty via access to credit."

Kiva is changing the way people aid impoverished countries.  Instead of relying on the charity of others, Kiva works to create connections to people across the world to build a stable economic infrastructure.  It gives opportunity to people like Mastula Ndagire so that they can pay for necessities like food and their children's schooling.