I had heard about Kiva some months ago. It sounded like an interesting concept. In essence, it’s peer-to-peer lending for small businesses and entrepreneurs in developing countries. You need a PayPal account and at least $25, although when I tried it, Kiva seemed to take credit cards too. I don’t know if there’s a fee for that because I used my PayPal account that’s tied to one of the credit unions to which I belong.
I wanted to give it a shot because I’m very interested in peer-to-peer lending and I wanted to see how different it is from other foreign sponsorship programs. It appeals to me because it’s not a one-way street. The borrowers have to pay the money back. Granted, these are no-interest loans, but the repaid loan money can be put back into the system and lent to other entrepreneurs.
The site is brain dead easy to use. I picked Nataliya Bhanderovskaya. She was looking to buy bedding for children. I made my contribution and it shows up in my portfolio. That’s that. She’s got 6-12 months to pay the lenders back. Simple.
At least one credit union has written about Kiva and Filene has covered it too. This kind of program is terrific for credit unions to advertise. Kiva is definitely a kindred spirit to the credit union movement because it’s people helping people.
This is such a neat concept that I don’t want to express anything cynical about it. That being said, I did wonder about the potential for fraud. I also wondered at the default rate. At this point, it seems like the repayment percentage is amazingly high (they say that they’ve had no defaults yet) and that borrowers are being screened carefully against fraud.
My experience with Kiva was quick, easy, and, frankly, fun. It would be a kick to put a few hundred dollars into this and watch what happens. In any event, I’ll write again about my experiences with this site as things develop.