Microloans for All?

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The microfinance world is abuzz today after online microlending site Kiva.org kicked off an expansion program that will allow individuals to make loans to entrepreneurs in the United States. This is particularly newsworthy for the organization because it has been focused on facilitating loans in developing countries since its launch in 2005.

For the last year and a half, I have been writing about a select group of entrepreneurs around the world who have received microloans through Kiva, and I have been amazed by the impact of its online lending model. I have no doubt it will have the same impact for U.S. entrepreneurs who, given the current credit crunch, are strapped for funding too. However, I have some mixed feelings about the new offering.

I tend to think that U.S.-based entrepreneurs are on a different playing field than those who are trying to operate businesses in developing countries. Despite the reluctance of banks to give funding to entrepreneurs right now, it seems to me that entrepreneurs in America have more resources at their disposal, whether it be personal credit cards, or the possibility of starting a business from home to minimize start-up costs. This is not to discount the substantial segment of the U.S. population that is living below the poverty level, however, the reach that entrepreneurs have here -- even without access to funding -- is much greater.

Take internet access, for example. If you looked at the percentage of the population that is online in the U.S. versus those living in villages in Uganda or Cambodia, the difference would be drastic. I've written about entrepreneurs who've started businesses from their bedrooms and I would think just for the simple fact that they probably have internet access, they already have a greater chance of making it big.

I am not saying that I do not support Kiva's new initiative in the U.S. I am however pointing out that the needs of U.S. entrepreneurs and entrepreneurs living in developing countries are quite different, and to mix them in one place leaves me torn. Would I rather help entrepreneurs in developing countries, or some in the U.S. as well? If I give my money to a U.S. entrepreneur, is there someone more deserving of it elsewhere? I think what will be interesting in the coming months is to see where Kiva lenders feel their money is most needed and how overall distribution of funds pan out over time.

Since anyone around the world can give to an entrepreneur listed on Kiva, I wonder if lenders abroad will be more inclined to keep lending to entrepreneurs in developing countries and similarly, if those in the U.S. living with the very real impact of the recession, will be more concerned with stimulating their own economy over contributing to the well-being of others abroad. Or, perhaps it will be a mix. Of course, it's all a matter of the type of social impact individuals want to make.

What's really important, I believe, is the evolution of microfinance over the last few years -- the concept has really taken off and provided millions of impoverished people the opportunity to create better lives for themselves by running a business. Beyond that, the development of more peer-to-peer lending sites as a viable alternative for sources of capital, certainly bodes well for the growth of entrepreneurship in the United States. And, at Inc., that's what we like to see.

What is your opinion of Kiva's new offering? Are you an entrepreneur looking for funding? If so, would you consider applying for a microloan through Kiva?

For more information on Kiva loans in the U.S. and the process for applying, check out this announcement, or visit Kiva.org.

Last updated: Jun 10, 2009




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