A Little Goes a Long Way
Author: Peter Krupa
Originally Published at Peace and Conflict Monitor on: 11/03/2005
“Finish your dinner,” our mothers would say. “There are children starving in Ethiopia who would be thrilled to eat that.”
The reply from many a smarmy 9-year-old was, “Then why don’t you send it to them?”
That little retort highlights a frustrating problem that has dogged humanitarians for decades: not the distribution of “wealth,” but the distribution of “enough.” How do you move a meaningless excess from point “A” to a person who needs it at point “B,” for whom that little bit can mean the difference between life and death, between prosperity and the most desperate poverty?
The conundrum is a bit like cold fusion and perpetual motion wrapped into one equation and combined with an inscrutable human dimension. On paper, the solution can seem obvious: If everyone in the rich countries took the money they spend annually on chewing gum or bumper stickers or pet supplies and sent it to the right people in poor countries, the problem of, say, malnutrition would be fixed.
A litany of attempts have been made to transfer that little bit from the “haves” on one continent to the “have nots” on another, and an equal litany of obstacles have cropped up: corruption, inefficiency, politics, selfishness, laziness, ignorance, and profiteering are just a few, and they come from donors, states and charity organizations alike.
The obstacle has remained not one of sufficient resources but of organization and space, how to get small amounts of money from one place where it’s not being used and won’t be missed to another place where it can literally save lives.
Which brings us to Kiva, a small internet enterprise with such a neat little idea you can almost hear people smacking their foreheads and saying, “Of course!”
Using the internet, Kiva solicits small loans in $25 increments from people in rich countries and transmits 100 percent of the money to individual small businesses in East Africa. Lenders choose from a list which small business they want to fund and then keep tabs on it through e-mail updates and the Kiva Web site. At the end of the term, borrows pay back the loan in full, and the 10-percent interest goes to Kiva to cover operating expenses.
Information on the business is available right on the Web site, complete with pictures and loan history. Justine Onyango, for example, lives in Tororo, Uganda. He wants to grow his business of buying and reselling livestock, and eventually open a butcher shop. A recent update reads:
This bussiness has made another move in the most recent sells that gave them a profit of 120,000 ugandan shillings. This is equivalent to $60. The schools are opening on monday 12th of sep and this marks another great opportunity for this bussiness. Most of all the parents in Tororo sell their cows, goats, sheep, and other types of big birds for raising school fees for their children. This bussiness is going to use this opportunity to stock as many cows as they can afford for better profit [sic].
Since he received his $500 loan in April, Onyango has paid back $400. Other businesses profiled on the site include restaurants, wholesalers, brick makers, and clothing stores.
Of course, microfinance is not a new idea. Grameen Bank, Opportunity International and FINCA are all good examples of successful microfinance operations. But Kiva differs in several important ways. One, through the use of internet and other information technology, Kiva cuts overhead costs to a pittance and basically assures that money gets from point “A” directly to point “B” with the most minimal processing in between. Two, lenders have the opportunity to lend directly and actually see the results. And three, once the lenders receive the money back from the borrowers, they are much more likely to lend it again, unlike one-time donors who may have a tendency to think they’ve done their part and that’s that.
It all adds up to a simple, sustainable, and satisfying way of linking up the haves and the have nots. Whether or not it will actually work remains to be seen. Although it operates with a well-established partner organization (the Village Enterprise Fund), Kiva itself has only been in operation since Oct. 11*. As such, it’s still a fledgling and small-scale operation run by a skeleton staff. Still in the middle of the incorporation process, it won’t be able to take tax-deductible donations to cover its operating costs until at least December.
But good ideas have legs, and this one looks like it could take off running, hopefully by creating many imitators in different locations around the globe. Maybe the process of moving “enough” to the right places has finally begun – that smarmy 9-year-old doesn’t sound so smarmy anymore.
* CORRECTION: Kiva formally launched in October, but it has been in opperation since March.
Bio: Peter Krupa is the editor of the Peace & Conflict Monitor