If you feel you can’t make a difference in the world, you’re wrong. Microfinance provides banking services to the poor who normally can’t qualify. And helping the world’s poor this way costs you, relatively, pennies. These services usually involve such small amounts of money that traditional banking considers them inconsequential. But to people struggling to work out of poverty, any amount is significant.
In the 1970s, economics professor Muhammad Yunus began visiting the poorest women in Jobra, Bangladesh. He found they were able to borrow only from moneylenders at exorbitant interest. Without loans, the women could not buy the bamboo to make goods for market. After selling those goods and paying the high interest, the women had nothing left.
Yunus, who eventually created and popularized the modern idea of microfinance, began lending to the poor out of his own pocket and later founded the Grameen Bank. (In 2006, the Grameen Bank and Yunus won the Nobel Peace Prize for creating the simple yet revolutionary microcredit system.)
In 2003, Yunus spoke at Stanford Business School to an audience that included Matt Flannery and Jessica Jackley, who two years later co-founded the nonprofit lending organization Kiva (“unity” in Swahili).
Kiva helps alleviate poverty in developing countries – as well as materialism in developed nations – and works with carefully selected field partners in 76 countries to manage loans.
Once Kiva collects enough money for a loan, the funds go to the field partner. Over the course of the loan, entrepreneurs gradually repay the loan from profits. As repayment accumulates, the money flows back into a user’s account. Users then withdraw the funds or provide the money again to another entrepreneur.
Kiva holds the rates and practices of field partners accountable. If a partner charges too much or complains about lending practices, Kiva finds other partners. Users also hold field partners accountable to make honest loans to worthy borrowers. Kiva accounts are free. Over 1.1 million users are Kiva lenders, each averaging fewer than 20 loans, or about $479. The total value of loans through Kiva still exceeds $550 million.