By Premal Shah, President, Kiva.org. More than 2.5 billion people around the world have no access to financial services. They can’t open a bank account, take out a loan or save securely — basic services that many take for granted. As a result, they are denied much more, including the ability to cushion themselves against financial uncertainties, act on a desire to start a business, send their children to school, or simply plan for a better future for themselves and their families.
The uncertainty and irregularity of this lifestyle has far-reaching consequences. Sacrifices must be made, extending to regular food on the table, electricity, clean water or tuition fees. To fend off these shortfalls, many of the unbanked borrow money wherever they can, often from informal money lenders with sky-high interest rates and unreasonable repayment policies. It’s all too easy to fall into a cycle of over-indebtedness, constantly borrowing to repay.
Kiva’s goal is to change this picture. By connecting lenders to borrowers around the world, Kiva supplies flexible, risk-tolerant capital through microfinance institutions (MFIs) and other field partners. These loans are made available to some of the poorest people on the planet, allowing them to break the cycle of bad debt and smooth out life’s financial pitfalls.
Microcredit and savings programs give people the tools they need to prepare for and protect against unexpected events like family illness, a poor harvest, or a natural disaster. A Zambian seamstress who consistently saves a little at a time will have the funds needed to repair her home after monsoon season. A Lebanese cab driver will still be able to pay for his daughter’s wedding if he can take out a small loan to pay for car repairs.
In many cases, microfinance provides more than a buffer. It also makes optional, life-improving expenses possible, like doubling a shop’s inventory to keep up with increasing customer demand, buying a car to ease a commute, or repairing a leaky roof to better protect and comfort your family.
This is a major part of Kiva’s mission: to give people more financial options to steadily improve their lives. This is why we have introduced our lenders to products like agricultural loans, housing loans and personal use loans — to tailor financial services to borrowers’ diverse needs, lifestyles, and repayment capabilities.
At Kiva, we’re always innovating to expand opportunity for our borrowers and promote social good at the same time. That’s why we choose to partner with microfinance institutions and other organizations that actively promote savings, anti-poverty programs, support for families, clean energy, and more. Last year, we debuted our Social Performance badges to call lenders’ attention to these field partners that go the extra mile to give their clients stronger safety nets and springboards.
In addition to financial innovations, Kiva is also tracking how new technology — particularly electronic and mobile payment services — could be used to make microfinance even faster, more efficient and more affordable for millions worldwide. Mobile phones are already gaining serious traction in the developing world, giving more people than ever before the tools they need to borrow, send and manage money from anywhere in real time.
I was delighted to share my opinion on all of these issues with Visa as part of its new Perspectives on Progress series. Check out the video for more insight into what I’m doing, along with the whole Kiva staff, to enable more lenders to connect with more borrowers and make the world a better place.
Posted by: Premal Shah, President, Kiva on February 23, 2012 at 6:00 am
