Over the past few years, microfinancing has grown in popularity with a number of internationally focused entrepreneurs and international development workers. The concept of microfinance was introduced by Dr. Muhammad Yunas, who began an experiment in Bangladesh in the mid 1970’s. The professor gave a group of 42 women only $27 to start a bamboo chairmaking operation. He found that that $27 allowed the women to take care of themselves and their families, sell their chairs and repay their loans. In the early 1980s, Dr. Yunas began the Grameen Bank, which extended small loans (typically less than $300) to the poorest of the poor to help them onto the road of self-sustainability. The loan repayment rate is around 98% and the bank is now hugely successful, it’s worth having been estimated at nearly $2.5 billion. Grameen’s operations have been modeled by a number of similar microfinancing institutions in a number of other countries, including Nepal, India, Norway and even in the US.
Twenty-eight years after Dr. Yunas first loaned the $27 to the bamboo chair operation, a staff member of the Village Enterprise Fund, Jessica Flannery, along with her filmmaker husband, Matthew, learned that they could use Paypal to essentially wire loans to rural communities through a field operation volunteer who was with the Village Enterprise Fund. The couple worked tirelessly to figure out how they could get involved in microfinancing. They came up with this: an Internet driven microfinancing operation they named Kiva.
Kiva allows anybody with an internet connection, a credit card and an interest in getting involved with microfinancing to support business in developing nations. You can go onto 
the website and simply choose a business you wish to support. Individuals can loan as little as $25 to as much as $200. More than one person can support a single loan request. The usability of the site is phenomenal, considering that it makes the actual process of lending money not at all unlike buying a book off of Amazon. Yet $25 USD may go to helping a poor farmer in Uganda fix his roof or buy a refrigerator, or enable a little girl in Ecuador to attend school.
What Kiva also offers is ground support around the globe. Since Kiva partners with already existing microfinance institutions, loan officers and field operators are already well-established in the area and in charge of the loan disbursement. The course of the loan is anywhere from half a year to a year’s time, and the partner microfinancing institution handles the repayment remittance of the loan and keeps in contact with the individual lender. Lenders receive periodical progress updates from the loan officer.
The Internet has created a variety of opportunities for those who wish to donate to charitable causes. Kiva, and microfinance in general, is unique because it enables people to work with a flexible loan, the aim being to jumpstart a life of self-sustainability, and avoid the high repayment rate offered by local loan sharks.
Kiva founder Matt Flannery is also keeping in touch with donors, entrepreneurs and supporters through his own blog, which he started in October 2005. He is chronicling the highs and lows of creating a revolutionary social enterprise in The Kiva Chronicles.
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