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How microlending makes a positive impact

May 11, 2022

At Kiva, we see every day how small loans make a big impact on individuals and communities.

Funded by our online community around the world, microloans have:

We also recognize that microlending is still often misunderstood. You may be wondering, why give a loan instead of a donation? How do I know people aren’t being taken advantage of? Is this even legit?

We’re here to answer these questions and show how microloans work—and why.

Is Kiva trustworthy?

We get it; there are a lot of questionable organizations out there, even a few that are just outright bad.

That’s why Kiva makes its operations transparent, celebrating successes and taking responsibility for what we can do better.

Founded in 2005, Kiva is a 501(c)(3) with a mission of developing innovations and solutions for financial inclusion around the globe. We want to give individuals and communities the opportunity to improve their lives and achieve their dreams, and we know it works—because we have the stats to back it up.

With the help of lenders like you, we’ve been able to do a lot of good in the world.

Kiva has funded $1.7 billion USD to 4.3 million borrowers since it launched in 2005. We work in 77 countries across the globe, an impact made possible by our trusted Field Partners (more on that in a minute.) Our lenders—2.7 million of them—are repaid at a rate of 96.3 percent, a rate comparable to traditional loans.

We make sure our partners are trustworthy, too. Kiva Field Partners—the microfinance institutions (MFIs) and social enterprises that disperse Kiva loans—are subject to intensive due diligence that ensures we only work with the most impactful, responsible organizations. Our rigorous vetting process analyzes organizational governance, social impact evidence, financial risk, and how well each organization aligns with Kiva’s mission.

It’s vital to know that 100 percent of funds lent on Kiva go directly to supporting borrowers. While some Field Partners do charge interest to borrowers to cover the costs of operating, Kiva’s due diligence process ensures these interest rates are appropriate for the location. Kiva relies on donations, grants, sponsorships, and fees from certain Field Partners to fund our operating costs and research. And though lenders are repaid, they don’t receive any compensation above repayment of the original loan.

Most importantly, Kiva helps its lenders track where the money goes—which is directly to the person who needs it. We hold coveted status as one of “Oprah’s Favorite Things” for the directness of our services, and the Huffington Post notes that “Kiva is not about investing money in the traditional sense; it's about using your excess cash to jumpstart a life somewhere else in the world." You can see more of what people are saying about us here.

We are very proud of our standing with Charity Navigator, the independent watchdog that monitors philanthropic organizations and continues to award Kiva a four-star “Exceptional” rating (the highest possible!), with extra marks for transparency and accountability.

Why would I make a loan instead of a donation?

In the case of many charitable organizations, donations are collected and the organization decides how it should be distributed. With Kiva, lenders determine who they want to fund and what types of enterprises they want to support.

Want to help close the gender gap? Fund a women-owned business. Looking to help the planet? Our borrowers do that, too.

Microloans also do more than pay one bill or buy a few meals for the table. They help create sustainable livelihoods by funding education and entrepreneurship in marginalized communities, including for refugees, women, and other unbanked and underbanked people around the world.

Access to microcredit introduces previously excluded people to the world of capital. As people repay their loans in a timely manner, they have the opportunity to expand their businesses or further their education by returning to the Field Partner to apply for another loan. This develops a financial track record that will continue to open doors to opportunities.

Along with other microfinance services, microloans provide a pathway to financial inclusion for people who have been excluded from traditional banking services like credit, savings accounts, insurance, and fund transfers.

While a donation may help someone in the moment, Kiva loans have long-term positive effects that increase financial stability. Microloans help people build a foundation that lasts long after it has been repaid.

How does relending work?

When you make a loan on Kiva for as little as $25, it contributes to funding the project of your chosen borrower. Once the loan is fully funded, the borrower receives the money through a Kiva Field Partner in their community.

On each borrower’s profile page, lenders can see which Field Partner is facilitating the loan, how much interest the borrower is paying, and their repayment schedule.

On each borrower profile, lenders can see the field partner, borrower's interest rate, and their repayment schedule.

When the borrower repays the loan, an average of 96.4% of funds are returned to the lender’s Kiva account. Many choose to fund another loan—helping us continue the cycle of positive impact. That same $25 can help someone start a business, fund a woman’s education, power a community with solar panels, and on and on and on.

We like to call this the “recycling effect”—one small loan can often be used to fund several borrowers to improve their quality of life or help them pursue their dreams. At any point after repayment, lenders can also donate or withdraw their money if they prefer.

“Just made my 11th loan to a single mother in Nicaragua. Constantly blown away by the impact from the same $25 being lent over and over again.” —Janae, Kiva lender

How do borrowers get the money to repay the loan?

After receiving their loan, many borrowers immediately put the money to work. Entrepreneurs invest in their businesses in a multitude of ways, including:

  • Purchasing more inventory for their shops to sell to more customers
  • Buying a truck that allows them to serve a larger region
  • Receiving training, fertilizer, and seeds to increase productivity on their farm

These investments lead to higher profits and increased incomes, allowing them to repay the loan as they take their business to the next level. Studies show that rural farmers in Kenya who receive their loans through Kiva Field Partner One Acre Fund see their incomes rise an average of 40 percent annually. In Bolivia, dairy farmer clients of MFI Sembrar Sartawi have increased their profits by 50 percent. In another impact study, 92 percent of surveyed clients of Bangladeshi-based MFI BRAC noted higher earnings after working with the organization.

Catherine’s story is a great example of how a microloan can help grow a business and have a positive impact on a whole community. Catherine is the owner of a cereal company in northern Rwanda who borrowed $35,475 USD to buy a new truck in order to transport the raw grains she purchases from local farmers. With the truck, she’s been able to hire more small farmers across the region and process more grain to sell, thereby increasing her income and enabling her to pay off her loan on time and with ease.

Another Kiva borrower, Manal from Palestine, says her loan, which was made possible through Field Partner FATEN, enabled her to increase her income.

Manal was able to use her loan to expand her sewing business.

“Their terms and conditions were not strict; I started paying the loan back after 3 months, and the interest rate was super low.”

Manal used the loan to buy sewing machines and started running her own business. She even hired her daughter to work with her.

“I made the right decision”, she says, “increasing my income and being able to work independently.”

Some loans fund other types of needs, such as tuition. They then have the ability to pay back the loan in manageable, fixed-rate installments—and gain the advantage of having a financial track record.

How can I choose a borrower to support?

We know most people’s resources are limited. With hundreds of loans to fund on Kiva, it can be overwhelming to choose who you’d like to help.

We recommend asking yourself the following questions:

  • What global issues speak to me most?
  • Where in the world do I want to have an impact?
  • Whose story do I want to be a part of?
  • You can browse all of Kiva’s loans, or check out our category page to help define your search. There are specific loans to women, for growing food, and helping refugees, or you can be a hero to someone who is running out of time to fund their loan.

You can narrow down your selection even further by exploring our filter page—focus on women who work in agriculture in the Philippines, for instance, or dial in on entrepreneurs in South America.

Every borrower has a unique story, and every Kiva loan makes an impact. We know it can be hard to decide who should receive your support. But no matter which loans you do choose, be assured that you’re going to make a difference.

“This morning I made microloans on Kiva to a bakery in Samoa and a general store in Rwanda. I've been lending on Kiva since 2009 and I'm excited every time I get an email that I've received repayments and can make another loan.”—Anna, Kiva lender

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