I have been reading about Microfinance for the past few days and here is my experience with Kiva.
Microfinance received its due recognition when Dr. Muhammad Yunus won the Nobel Peace Prize. Microfinance involves giving loans in small amounts (few hundred dollars, typically around $200) to poor people, thus providing them an opportunity to pull themselves out of poverty. People who take such loans rely on their traditional skills to either start, sustain, or expand a business. Since loan amounts are usually small, (compared to general loans given in banks), they are called ‘micro’. Hence the term ‘Microfinancing’.
The interface between loan donors and the loan borrowers are the Microfinance institutions. These institutions offer financial services such as savings accounts, and collecting loan amounts. They also provide insurance, and health care to loan borrowers. Microfinance institutions educate poor communities about how micro financing can help them improve their livelihood. Grameen Bank of Bangladesh, founded by Nobel Laureate Dr. Muhammad Yunus, is the world’s largest and most successful Microfinance institution serving close to seven million people.
To experience the concept of micro financing first hand, I donated a small amount through Kiva which is the ‘world’s first person – to –person micro-lending website.’ The most difficult part was to identify the person whom I wanted to ‘loan’ to. The website list profiles of borrowers (also called entrepreneurs)in the developing world who want to improve their lives. You can sort the listing either by loan amount or region. Finally, I zeroed in on an individual. Mrs Lula Samuel. She sells green vegetables in Buluk, Juba, Southern Sudan. With the help of the loan, she intends to expand her business. Once you enter your contact information, and payment details, you get an email. When the loan needs of each entrepreneur sponsored by you are met, you receive an email containing the exact date the loan term begins. At times, it may take a while to get this message after your loan transaction, as you may need to wait for other lenders to contribute before the total requested loan amount is raised. ( I was the last one to contribute to the total amount, and hence got an email within a day.)
You can also follow how your loan is being utilized. That is pretty neat! I look forward to reading about Mrs Samuels’ journey to a better livelihood.
Recycling of loans is integral to Microfinancing. Loans are generally repaid within six months or a year. Once the loan amount is repaid, the same amount can be lent to another individual. Thus, Microfinancing is a simple concept aimed at defeating poverty and improving lives.
Micro financing as an alternate development tool has caught the attention of non-profits, and other institutions in India. Today, there are several micro financing institutions in the country. India Microfinance publishes news and information with an emphasis on the emerging Indian microfinance industry. I will research more about microfinance institutions in India and post them in the future. (India is not one of the regions listed on Kiva. When I looked into it further, I found that Kiva is in talks to enter India. I will keep you updated if I hear more.)
For now, I am almost sure that I will never see Mrs Lula Samuel or meet her. But just the thought that I am helping someone in some remote corner of the world, is amazingly uplifting!!!! While I keep you updated about Mrs Samuel, do write to me about your similar experiences… It will be interesting to read them.
Have a wonderful day!