In 2008, a small person-to-person lending company called Kiva launched. The person-to-person lending company has now added green loans and student loans to the financing portfolio. With these new products, Kiva hopes to hit $1 billion in microloans lent by 2015.
The basics of Kiva
Kiva was the first major online microloan site. The nonprofit organization matches investors with entrepreneurs and individuals who need small loans. Usually loans through Kiva are for amounts between $100 and $500, and the repayment rate is incredibly high, between 90 and 98 percent. Currently, Kiva members loan about $1 million every five days. Kiva is the only not-for-profit microlender, though there are other lenders who offer bad credit loans and microloans for a profit. There are borrowers in 59 countries that have used Kiva loans, mostly in low-income countries. Kiva also allows some loans in the U.S. , but not every type of loan.
Kiva adds green loans to lending options
In addition to the small-business loans and personal loans , Kiva now offers green loans. These loans are intended to be used for projects such as solar power, drip irrigation, converting farms to organic production and the creation of biofuels. The criteria for these loans remains the same as every other Kiva loan, and the investment amount also remains the same – $25 increments. Green loans can be personal or business-based and have the same repayment terms as every other loan offered on the site.
Student lending through Kiva
In three countries, Kiva is now also offering student microloans. Students in Bolivia, Paraguay and Ecuador are now able to get student loans through Kiva lenders. Students are given one to three years to pay back their loans, and lenders can track the progress of the student all the way to repayment. The program is stil considered to be in pilot status, but appears to be doing well.
The growth of microfinance
Prosper, Lending Club and several other microlending services launched at the same time as Kiva, in 2008. The Securities and Exchange Commission shut down these for-profit companies for not registering properly. These companies are mostly back up and running, properly registered. Microlending companies are starting to cut into the business of big banks and credit cards. These microloans are still relatively new, but as long as there is a market for small-dollar credit extended to individuals that may have bad credit, financial innovation in that industry will continue.