Kiva Loans to Help Small Business Entrepreneurs in United States

by cyn.khoo | June 11, 2009 at 03:08 pm

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Kiva, the innovative microloans organization, launched a pilot expansion in the United States on Thursday, June 11. The website Kiva.org, presided over by Premal Shah, is a peer-to-peer (P2P) microlending platform that aids aspiring small business owners and low-income entrepreneurs in starting or improving their businesses.

Anyone may sign up on the website to be a microlender, and loan $25 or more towards supporting an entrepreneur or business of their choice. The microlender may track the progress of the loan and project, and upon repayment, receive their microloan back to keep or to lend to another entrepreneur.

While Kiva originally intended to and has to date only supported extremely low-income entrepreneurs in developing countries, the current recession and financial market deterioration from the economic crisis revealed that the Kiva microloans system could be of equally valuable aid to struggling entrepreneurs and small businesses in the United States.

In April alone, Kiva members loaned $4.5 million to entrepreneurs, a 56 percent year-over-year increase and a record month for Kiva. Since the microfinance platform’s birth in 2005, over $75 million has been loaned through Kiva.org to support more than 180,000 individuals from 44 developing countries. Kiva’s president, Premal Shah, says this new initiative to include U.S. businesses increasingly made sense as the financial markets deteriorated and traditional lending began to dry up even in the U.S.

According to Kiva, over 10 million business owners could not easily obtain capital even before the economic crisis hit. The organization also states that at least 87 percent of all businesses in the United States are small businesses, which provide approximately 900,000 new jobs each year.

While a previous P2P microlender in the US, Prosper, has met with controversy and conflict with the SEC in the past, Kiva does not expect to encounter problems as lenders earn 0% interest on their loans. According to Shah, as far as the SEC is concerned, Kiva clearly operates for charitable purposes because there is no opportunity for lenders to receive a rate of return for their loans.

The idea for expansion was introduced to Shah by Maria Shriver, journalist and wife of California governor Arnold Schwarzenegger, during a visit in 2008. The Kiva microloan program will be available to 45 small business and entrepreneurs in various fields, across New York, San Francisco, Boston, Atlanta, and Miami.

Lenders may come from other countries as well as from within the United States itself, allowing Kiva to be a global "enabler of economic development".