Kiva’s person-to-person micro-lending; could it work here? (A Blog Action Day post)

kiva-logo kiva-donor

I discovered Kiva a few months ago and made my first $25 loan to Thon Ratanak in June. He lives in Phnom Penh, Cambodia and requested an 18-month, $1,200 loan. Here’s what I’m told about him:

Thon Ratanak is 26 years old, married and has one child. He works as a mechanic in a small garage not far from his house. About 80 percent of the people of Cambodia drive or travel in second-hand vehicles, most of which have to be repaired before they can be used. That is why car mechanics are thought to have good jobs. Thon’s wife stays at home to look after their child and cook food for the whole family. She also has a job renting out a pool table to villagers, earning a small commission from each rental. Thon has applied for a loan from Kiva to buy painting tools and a small motor to help him do his work.

As you can see from the screencapture image on the right above, Thon has repaid %17 of the loan thus far.

See the Wikipedia entry on Kiva, as well as their entries on microfinance and microcredit.

Kiva is so well-run that it’s made me wonder whether something similar could work on a local level, even though, according to one expert:

… microloans have less appeal in the US because people think it too difficult to escape poverty through private enterprise.

This post is part of Blog Action Day 08 – Poverty.


  1. kiffi summa said:

    Victor and I got a Kiva gift card ( so we could give a loan) from my sister and brother- in- law last Christmas, and can attest to how well managed Kiva is; as a matter of fact SO well managed that I’m going to tell them to accept my loan amount, when it’s repaid, into their general “coffers” and let them gift it however they please. In other words, I don’t want it ever paid back to me; I want them to keep rolling it over and over.
    This is a very good way to get kids connected to a giving situation, as you can deal with smaller amounts of money. A classroom could adopt a recipient, and follow their progress, because you get to pick the country, and then the recipient from many different stories of need.
    Kiva is a great concept.
    Yes, it could be developed locally, maybe through the CAC, which would have the management skills.

    October 15, 2008
  2. BruceWMorlan said:

    People think it is “too difficult to escape poverty through private enterprise.” Could that be because we have conflated private enterprise and the free markets private enterprise requires to thrive with “crony capitalism” which is the sort of protectionist mercantilism we have let evolve in its stead? It appears that the third world has not forgotten the lessons of Adam Smith even as we turn our back on those lessons.

    October 15, 2008
  3. Patrick Enders said:

    I’ve been quite intrigued about microloans from what I’ve heard so far – given the promising anecdotal results I’ve heard, and the frustrating lack of clear benefits from macro lending / investment through more traditional methods.

    Didn’t someone get a Nobel prize for pioneering work in microlending? And wouldn’t this be a great topic for Politics and a Pint? (…he says, hoping he didn’t miss a discussion of this in the very recent past.)

    October 16, 2008
  4. I suspect we could make it work here, but it would be hard.

    “Micro” is relative.

    A loan of “$1,200” in a poor country might capitalize a small business. Around here, it barely covers a month’s rent. It takes much more startup capital to make a comparable difference here. This isn’t to say it can’t work, but the amount of money needed to have an effect is quite different.

    October 18, 2008
  5. Linda Seebach said:

    The article on microcredit in the developed world linked above is worth reading for the context in which an expert pronounces that “microloans have less appeal in the US because people think it too difficult to escape poverty through private enterprise.”

    Apart from the fact that it typically takes a lot more capital in the US to start a business, almost everybody in this country no matter how poor at some time or other gets credit-card offers that would advance them as much as a microcredit loan, and on much less onerous terms. In fact, lots of businesses in the US are started by maxing out the family’s credit cards, and a lot of them fail. The shortage is not of people willing to take a flyer on private enterprise, but of entrepreneurial opportunities they have the skills to exploit. Anything easy and obvious is already being done, which isn’t true in Cambodia where few people can borrow even small amounts of start-up capital.

    October 18, 2008
  6. Bright Spencer said:

    Linda has a good point. The other factors which keeps people from starting up is the long term copyrights and the fear other types of lawsuits that might be filed for various frivolous reasons.

    October 20, 2008

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