A while back, I mentioned a “charity” called Kiva. They are a sort of grey area when it comes to charities. They are actually in the micro-finance world, the people that get this money need to pay it back. Some say that micro-finance is an awful thing, poor people should just be given money, no strings attached. I agree when it comes to life or death things, or things that are of a humanitarian nature. The people looking to Kiva for help are different, they are business owners looking to improve their business. They want to make more money, but capital is difficult to come by in developing countries. That’s where I come in…
I loan money to these folks and I do not collect any interest on it. That’s the charitable bit. Yes, the companies that administer the loans make money, and some people think that those rates are too high. I don’t. The fact is that whatever is being charged by Kiva’s partners in the field is still less than the alternatives available to folks in those areas. The other good thing about charging interest is that it eliminates free loaders and makes sure that the money is used productively.
What I love about this is that the money I put in comes back so that I can loan it again. I have done this for 10 months now. My finances have only allowed me to make one loan per month so far. So that’s $250 I have lent to folks in developing economies. I have now gotten $120 of that back so far. See how this works? If all goes well, I will be able to put $300 a year towards this a year, and I will get most of that back every year as well. So far, there have not been any defaults and the default rates seem to be very low according to Kiva’s numbers. By next year, I’ll have $600 circulating, the year after that, $900, etc.
It’s pretty exciting to have a growing pool of resources to lend to folks. If times ever got really hard for me, I could withdraw those funds and use them myself. What’s not to love? I encourage you to check Kiva out, it’s a worthwhile thing to do…