Wednesday, December 15, 2010

Small Business Loans As Gifts

As I promised a couple of posts ago, I'm going to complete my story about unique holiday gifts.
A couple of seasons ago I decided to give something a bit out of the ordinary to some of my family members, something a little less materialistic. I had heard about this organization called Kiva Microfunds ( and thought that their service, if I understood it correctly, sounded like an excellent way to give a holiday gift and still do something a little bit charitable. As it turns out, I was right, but apparently I didn't realize just what a wonderful idea I had stumbled on to at the time.
Let me give you a few background details about Kiva.
Kiva Microfunds is a non-profit, charitable organization that was founded in 2005 by Matt Flannery and Jessica Jackley. Kiva's sole service is to provide small business loans to entrepreneurs in third world countries. The way it works is, an individual purchases a micro-loan unit for $25, and then either loans this unit directly, or gives the loan unit as a gift to someone else. Either way, the loan unit is eventually paired with other similar loan units and then given to a needy small business person. This person is expected to pay the loan back in full within a predetermined time frame (usually around one year). After the loan is repaid, the lender (in this case, your friend or relative who first received your gift) is then free to lend the loan unit to another needy recipient or, conversely, they can turn in the unit for the original value and take the $25 in cash for him or her self.
Sounds like an excellent idea, doesn't it? Farmers can buy seeds, shop keepers merchandise and so on and so on, and then repay the loan when the crops or merchandise are sold. The only drawback, and I feel that this is a small concern, is that in order to have a presence in all these third world countries, Kiva has had to enlist the help of local lenders. The problem arises, that though Kiva is non-profit and lends the money interest free, the local lenders charge an interest fee to cover their time, expenses and to make a small profit. Small price to pay for such a worthwhile service I feel.
Now let me tell you how this has panned out for me.
I think I gave three of these gifts a couple of seasons ago. One was to a nephew stationed overseas. Frankly, I'm not really sure what became of that gift. I would be surprised if that loan wasn't cashed out for the $25 as soon as it became available, but he's a giving young man, so who knows. Another of the gifts went to one of my sisters. She has told me that she has loaned the money two or three times now and intends to keep on doing so. The last of the three gifts went to one of my nieces. I just spoke with her about it and her gift is currently on loan to its third recipient. The first loan for this unit went to a pottery shop (my niece is a potter(?)) and then to some other entreprenuer and finally to a farmer purchasing livestock, who has it now. If I didn't mention it before, let me add that you get to pick from a detailed list of small businesses that are requesting loans. Kiva tells you what the loan is intended for and gives you a short personal bio about the requester. After that, it's up to you.
So my niece picked some people who she felt most deserved her loan and, to date, her loans have all been paid back in full and on time (as have my sister's loans). Both of these gift recipients have stated how much they have enjoyed giving these loans to deserving people who are struggling to make a better life for themselves and their communities. Both have also stated that they intend to continue lending their gifts as long as they can, until the loans are finally left unpaid.
I feel like I made a really good choice when I decided to take a chance on giving these Kiva gifts. My relatives have enjoyed getting to give the gift away themselves and the gifts continue to give again, each time that they are paid off and re-loaned. My family members feel good about it, I feel good about it, and somewhere in the world a struggling small business might just feel good about it too.
I suggest you give Kiva a try yourself.
Happy Holidays!

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