Disposable Income.

A while back I found a couple of sites offering "micro-loans" online - the kind of thing where you can set an interest rate and an amount and people who want loans can small amounts of money from lots of people to make up their loan amount, without having to go to a bank. Though the idea intrigued me, the potential gain of slightly higher interest on the money invested didn't seem particularly worth the risk of someone deciding to walk away with my cash.

So then, about five months ago, I came across a link to Kiva. Kiva is a micro-lending site as described above, but with the difference that it is intended to provide funding for third-world entrepreneurs rather than just anyone. Lenders are able to choose who to lend to and how much to lend, and the loans are paid back at intervals over several months. There is no interest on the loans, since the scheme is designed to help the entrepreneurs, not make money for the lenders.

I thought this sounded like a great idea, and signed up straight away, picking out a couple of women in Ghana looking for money to run their general stores, and lending them the minimum amount ($25) towards their respective totals. Throughout the loan period, I received monthly repayments along with occasional updates informing me what was happening with the money. Now, five months later, the first of my loans has finished, and my $25 has been returned in full. My initial plan was to wait until the first loans were returned before putting any more money in (to assess how reliably the repayments were made), but after a couple of months with no problems, I cracked and picked out some more entrepreneurs to back. According to Kiva's statistics, more than 98.5% of loans are paid back in full, and I've had no problems at all with my loanees so far.

The main difference between this and a regular charity, of course, is that you get your money back. This is no substitute for more conventional donation structures to impoverished regions, of course, since there are millions of people who cannot afford to repay the money they need to survive, but the supporting of local entrepreneurs and businesses in these areas is essential for any kind of future in which they can sustain themselves economically.

In addition, the fact that the money is almost guaranteed to come back encourages lenders to be more generous than with other charitable causes. I've certainly given more money to people via Kiva than I would have given to a conventional charity cause - not because I'm giving money to Kiva that I couldn't give to charity (I could certainly give a lot more to charity than I currently do) but because I'm weak and easily concerned by the prospect of giving away money that I might need in the future. With Kiva, though, it's like putting your money in a bank that promises to invest it in developing nations, with the added bonus that you can control exactly to whom your money goes.

Whether you think that Kiva is a worthwhile operation or not (I suspect there are people who would argue that money is going towards supporting failing businesses when it should be going towards feeding the people who can't afford to be entrepreneurs), I think that it is undeniable that it has generated a massive response, and diverted funds that would otherwise be sitting in middle class bank accounts and ISAs into the development of third world economies.

In the three years since it was founded, Kiva has distributed $42m in loans from more than 300,000 lenders to almost 60,000 entrepreneurs. If the idea that economic stability can be generated in this fashion, and that such stability is important in these regions, is one that appeals, then I'd certainly recommend checking out Kiva. Even if it does no good at all, the idea that so many people are willing to try to make a difference in this way has to be a little encouraging.

My Kiva Profile.