Kiva is a USA charity that lends money to 2nd or 3rd world entrepreneurs. This allows them to break the cycle.
For example, a lady might be making baskets. She has to buy the materials at inflated prices because she owes money to her supplier. This means that instead of making $2 a day, she makes $0.20 because she has to buy materials at inflated prices.
It’s a loan – not a gift
I think a key difference to most other charities, is that the money is a loan. It is not a gift, it is money that has to be paid back (although it is a loan without interest).
I like this for a few reasons:
- You are helping someone who is after a hand up rather than a hand out
- You are helping someone to reach their own goal
- You get your money back and can loan it to the next person
How the loan process works
Say Ahmed from Indonesia wants $1,000 to buy and later sell pigs, or take a loan to increase his store, etc. The $1,000 is split into loans of $25 (40 loans in this case). He will likely repay his loan monthly in around a year. So if you lend him $25, each month you might receive $2.08 of the money coming back.
Eventually, you will probably receive the whole $25 back and you can make another loan.
Recycling your money – Loan again and again
When you make a loan, Kiva asks if you want to make a donation to help their running costs (of supplying the loans). However this is optional.
After making Kiva loans, you will be informed of when progress payments have been made on your loan, or when you have enough money in your Kiva account to make another loan (or take the money out if you wish).
What if the borrowers don’t repay?
Kiva currently has a 98.96% repayment rate. Meaning nearly everyone is so greatful to get the loan they work hard to make the repayments on time. They have probably also had a say in how much and often the repayments would be (for example I noticed one who had a higher amount every second month).
Only negative – not tax deductible in Australia
Although Kiva is a US charity, it is not an Australian Deductible Gift recipient (which you need to claim a donation in your tax return). But I think the idea of a loan makes Kiva a good charity to support.
Have a spare $25
If you have a spare $25 you can lend (or if you have more questions about how the process works) – check out Kiva now.