I am a great fan of micro-finance, granting small loans to entrepreneurs in developing communities that empower them to help themselves. Muhammad Yunus was an early innovator in making credit and technical assistance available on a large scale to people who otherwise wouldn’t have been eligible. When he won the Nobel Peace prize for his work with Grameen Bank in Bangladesh, I was elated. For me, it forged a link in the global mind between development and peace: the idea that by reducing the hunger, inequity and frustration of people with nothing to lose, you lessen the likelihood of conflicts that lead to the violence.

As micro-finance has evolved, organizations have sprung up to make it easier for individuals to contribute directly, bypassing behemoth nonprofits.Do you remember Sally Struthers on late night television pleading for money to support rural African communities, surrounded by doe-eyed children. Heart-breaking and vital in raising awareness – until reports revealed a shocking lack of oversight of donations meant to support the kids going for overhead instead. I know I began to tune out and look for alternatives then and there.

Kiva is relatively new on the scene, but has raised micro-financing up a notch. It’s the first person-to-person micro-lending website that empowers individuals (you and me) to lend to selected entrepreneurs in the developing world directly online. Inspired by a Yunus Mohammud lecture at Stanford, Matt and Jessica Flannery founded Kiva in 2005. For Jessica, working with a nonprofit in East Africa, it was a “call to action”. As they interviewed entrepreneurs, Jessica and Matt found that lack of access to start-up capital was their biggest obstacle. What became Kiva- meaning Unity in Swahili - is run today by an experienced micro-finance and technology team, and is actively supported by Bill Clinton and Oprah Winfrey.

It works like this: Kiva posts profiles of local entrepreneurs on its website. As a lender, you select who you’d like to sponsor and donate (via paypal, who waives their fees) through a Field Partner who administers the loan. You can follow your entrepreneur’s progress, with email journal updates, as well as track repayments of the loan (usually 6-12 months). Kiva uses interest on the loans for administrative overhead. (Lenders don’t receive interest because Kiva isn’t registered with the US Government as a broker.) When the loan is repaid, you can get your money back, or re-lend it to someone else.

Kiva’s loan repayment rate of about 99.7% is on par, or better, than other micro-finance projects. Late last year, Kiva raised the stakes again by partnering with the small business card banking company, Advanta, to introduce a credit card for business as well as individuals, with a 0% introductory transfer offer for 15 months, then a 7.99% APR with no annual fee, and a 3% (or $90 maximum) balance transfer fee. In addition, Advanta will match charitable contributions to Kiva up to $200 per month.

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