Lending And Philanthropy In The Internet Age

Another way the Internet is having an effect on developing countries is by linking lenders and donors in developed countries with those in need. Microlending in particular has benefited from development of online tools.

Kiva.org is a relatively new Web site that lets people make microloans to specific individuals and projects. Microloans in developing countries generally go to people trying to set up or grow small businesses. They're initially no more than $100 and are repaid in a few months. After that, recipients might get larger sums and eventually have good enough credit to get a bank loan.

Kiva partners with microfinance institutions around the world--60 partners in 36 countries--that identify potential borrowers. They post funding needs on Kiva's Web site, and people interested in lending money can browse loan applications, check out using PayPal, and when funds are repaid, get money back, says Kiva public relations director Fiona Ramsey.

Kiva uses social networking capabilities, letting lenders and entrepreneurs post photographs and profiles. It also has a presence on Facebook and MySpace and recently partnered with Flip Video to incorporate videos on its Web site.

These facilities make lending a person-to-person experience. "There is a feeling with a lot of people in Africa of isolation, and the clients on Kiva feel like for the first time they have this international online ID," Ramsey says.

Kiva has to contend with a variety of cultural and infrastructure problems. "In Afghanistan, we can't put a picture of woman, just her husband or her brother, usually, and we write a note saying this is due to cultural reasons," Ramsey says. In Iraq, keeping entrepreneurs' identities hidden online can be a matter of life or death. "You'll see every Iraqi entrepreneur name is ID protected, and every face is Photoshopped out," Ramsey says.

More than 99% of loans are repaid, and Kiva has loaned nearly $20 million to date, according to statistics on its Web site.

EBay entered the microfinance market in October when it acquired MicroPlace. MicroPlace differs from Kiva in that it's a Web-based brokerage firm, says founder Tracey Pettengill Turner. Loans made through MicroPlace earn interest and can be traded.

Microfinance organizations used to get capital from institutions and big multilateral organizations like the World Bank, but by harnessing "the power of the everyday investor," Pettengill says, "we're on track to hopefully be a new source of capital for microfinance world."

Page 2: Cutting Out Middlemen
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