Wednesday, November 21, 2007- Kiva — A New Twist on Micro-lending.

The Micro-lend­ing Rev­o­lu­tion has done more to improve the lot of ordi­nary human beings than any oth­er social move­ment. It has many anti­ci­dents, since rotat­ing cred­it asso­ci­a­tions and fra­ter­ni­ties have a long, though most­ly undoc­u­ment­ed his­to­ry. The island of Oki­nawa, for exam­ple, has had mul­ti-pur­pose, demo­c­ra­t­i­cal­ly man­aged co-oper­a­tive asso­ci­a­tions called moai for cen­turies, which oper­ate as effec­tive micro-lenders. [1] The moai are such con­vivial and effec­tive insti­tu­tions that many Oki­nawans attribute their unusu­al good health and long lifes­pans to par­tic­i­pat­ing in them [2]. Nine­teenth cen­tu­ry pio­neers of sav­ings-and-loan co-oper­a­tives in Scot­land, Bohemia (Raif­feisen), and Cana­da (Des­jardins) were at first involved in the kind of small scale pro­duc­er-cred­it that is today called micro-lend­ing, and it was this ele­ment in them that helped cre­ate aston­ish­ing leaps in social equal­i­ty and pros­per­i­ty in those places, though the insti­tu­tions they found­ed grad­u­al­ly came to be con­ven­tion­al con­sumer-ori­ent­ed banks. In 1976, Muham­mad Yunus found­ed the Grameen Bank, which began as a research project by Yunus and the Rur­al Eco­nom­ics Project at Bangladesh’s Uni­ver­si­ty of Chit­tagong to test his method for pro­vid­ing cred­it and bank­ing ser­vices to the rur­al poor. The first loan was for only $27.  Mon­ey was loaned through self-gov­ern­ing cir­cles of five, and involved only small sums strict­ly for the improve­ment of a viable enter­prise (for exam­ple, pay­ing for a cart to bring pro­duce to mar­ket, or tools for a bicy­cle shop). The major­i­ty of lenders were women, whom Yunus found sta­tis­ti­cal­ly more respon­si­ble with the mon­ey than men. More than half of Grameen bor­row­ers in Bangladesh (close to 50 mil­lion) have risen out of acute pover­ty thanks to their loan, as mea­sured by such stan­dards as hav­ing all chil­dren of school age in school, all house­hold mem­bers eat­ing three meals a day, a san­i­tary toi­let, a rain­proof house, clean drink­ing water. Repay­ment rates, while slow, have proven to aver­age 98 % (far exceed­ing repay­ment rates in con­ven­tion­al bank­ing). The Grameen bank was spec­tac­u­lar­ly suc­cess­ful, and spread like light­ning through Bangladesh, and sub­se­quent­ly to 43 oth­er coun­tries. Yunus was award­ed the Nobel Prize for his work, one of the best-deserved of such awards. How­ev­er, the con­cept was “in the air” among those who had long suf­fered under the idio­cies of Marx­ism and the eco­nom­ic nos­trums of Big Pow­er insti­tu­tion­al ortho­doxy. Esther Afua Ocloo, in Ghana, and Ela Ramesh Bhatt, in India, ini­ti­at­ed the same con­cept with their Wom­en’s World Bank­ing asso­ci­a­tion in the same year as Yunus began Grameen. Orig­i­nal­ly viewed with hos­til­i­ty by most gov­ern­ments and finan­cial insti­tu­tions, micro-lend­ing is now a band­wag­on to jump on, so you can expect var­i­ous bureau­cra­tized, cor­po­rate and state-direct­ed per­ver­sions of the con­cept to be foist­ed on peo­ple. Be that as it may, the amount of good that the move­ment has done for the world is undeniable.

Now we have anoth­er, grass-roots twist on micro-lend­ing. KIVA is an inter­net-based micro-lend­ing sys­tem. Poten­tial bor­row­ers reg­is­ter on the Kiva site, describ­ing their micro-busi­ness. Field offi­cers, work­ing with exist­ing micro-lend­ing groups, ver­i­fy their bona fides. The aver­age loan is for about $600, but it is made up of small­er amounts, often $25, con­tributed by the pub­lic. Prospec­tive lenders choose their bor­row­ers from the inter­net pro­file. They almost always get their mon­ey back, and usu­al­ly re-lend it. To main­tain the non-prof­it sta­tus of the orga­ni­za­tion, the lenders can­not col­lect inter­est, but the sat­is­fac­tion of know­ing that a tiny dona­tion can do sub­stan­tial good over and over again is enough to sat­is­fy most par­tic­i­pants. Kiva’s web­site pro­vides a “risk and due dili­gence” page that demon­strates the com­bi­na­tion of ide­al­ism, hon­esty, and lev­el-head­ed­ness that human beings can bring to bear on the prob­lem of pover­ty if they step out of the old ways of think­ing into the mod­ern age.

[1] Lebra, William P. & Thomas W. Maret­z­ki — “The Com­mu­ni­ty Coop­er­a­tive in North­ern Oki­nawa” — Eco­nom­ic Devel­op­ment and Cul­tur­al Change, vol.1 #3, part I (April 1963). p.225–238.
[2] Buetnner, Dan — “New Wrin­kles On Aging”, Nation­al Geo­graph­ic, Novem­ber 2005.

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