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Kiva Adds India to Its Worldwide Microlending Menu

Premal Shah is president of San Francisco-based Kiva, which makes loans through microfinance partners to the disadvantaged and the poor in more than 60 countries around the world.
  • United States

    For Premal Shah, president of San Francisco-based Kiva, which works with microfinance partners in more than 60 countries making loans to the working poor and the disadvantaged, Aug. 15 was a red-letter day.

    After years of being bombarded with the question, “Why isn’t Kiva in India,” he can finally say “Now we are!”

    “This is personally really meaningful to me,” the former PayPal executive told India-West a few days before Kiva’s formal launch in India.

    Kiva Aug. 15 launched its partnership with three Indian nonprofit organizations — the People’s Forum and the Mahashakti Foundation in Odisha and the WSDS-Initiate in Manipur — to make microloans to underserved populations in geographically isolated areas in India.

    Shah said Kiva chose the three nonprofits because of their “holistic approach” to poverty alleviation. Besides making loans, they offer microfinance services, livelihood training and social support programs.

    A special focus in Odisha and Manpiur will be on the “working poor, widowed women, families affected by leprosy and disabled individuals,” Siva said.

    The Indian American social entrepreneur, who co-heads Kiva with co-founder and chief executive officer Matt Flannery, interrupted a rising career at PayPal about nine years ago to take a sabbatical to see if it might be feasible to use the Web for microfinance loans in India.

    Inspired by microfinance pioneer Muhammad Yunus and Grameen Bank, he visited Ahmedabad, where he observed SEWA (Self Employed Women’s Association) work with self-employed women and Gramshree organize women weavers of Kati silk.

    From an Internet café in India, he posted a listing on e-Bay seeing if Paypal could be used to fund microloans in India. “More than 40 people saw his “Buy It Now” listing, before it was “taken down” by the Web site’s legal department, he said.

    Under India’s currency regulations, because of the Reserve Bank of India’s concern over “hot money,” funds sent to India for a non-governmental microfinance institution must remain in the country for three years, before being repaid outside the country to the original lender.

    Shah, who graduated from Stanford University, returned to the U.S., met Flannery and decided to leave Pay Pal permanently to make a commitment to Kiva and socially responsible lending.

    As Kiva added more countries to its network, India remained the missing piece. “It was incompatible with the Kiva model,” the Indian American social activist told India-West.

    Shah pointed out that the Kiva lending community in India and worldwide has continued to show an avid interest in making loans in India. Over 800 Kiva lenders identify themselves as being from India and they have lent $160,000 to 29,500 borrowers outside of India.

    In 2011, there were over 400,000 visits to from people in India. Some Kiva lenders form lending teams on shared interests, and 15 of Kiva’s lending teams have expressed a “strong interest” in India.

    Kiva’s model allows field partners to approve and disburse microloans to borrowers in their communities, while seeking funds through Kiva. Partners work with borrowers to create profiles telling Kiva’s potential lenders about their backgrounds, business goals, funding requests, etc.

    Lenders browse borrower profiles on and select a borrower they want to help. Lenders then provide funds to Kiva using PayPal or a credit card in amounts of $25 or more.

    Disbursals happen up to 30 days before, or 30 days after a loan request is uploaded to Kiva’s Web site. Lenders don’t receive interest on the loans, and Kiva makes no money off loans they facilitate.

    Kiva said it relies on optional “tips” from lenders that they donate to Kiva to help operate their platform. If a borrower doesn’t repay a loan, lenders don’t get repaid.

    For most countries, the person getting the loan will pay off, for example, a loan of $100 in equal payments of $10 over 10 months.

    Now, to operate in India, lenders making loans in India won’t be repaid until 43 months after they fund the loan (slightly longer than three years because of the way Kiva’s fundraising and billing system works). Field partners in India, for example WSDS-Initiate in Manipur, will collect borrower repayments on a regular basis, but they may only be sent to Kiva lenders at the end of the 43-month term.

    The annual percentage rate on microfinance loans made in India is capped at 26 percent, according to Kiva.

    Kiva claims to be the “largest microlending platform” in the world, “where 800,000 individuals have funded $340 million in loans for 840,000 borrowers in 63 countries” (including India). Loans funded through Kiva have a 98 percent repayment rate.

    Although India has experienced tremendous growth in microfinance, most of the microfinance organizations are concentrated in India’s southern states, especially Andhra Pradesh. Many of the groups grew rapidly by offering only standardized loan products that didn’t always reflect the needs of their clients.

    Kiva, by contrast, Shah pointed out, is targeting underserved groups in Odisha and Manpiur, and underserved groups like “widows, transgender” individuals, and those with leprosy.

    “Kiva is the second most visited nonprofit site after Wikipedia on the Internet,” Shah said, adding that he has shifted from a top down approach in the corporate world to a bottoms-up model of social entrepreneurship.

    “People want to help people, but they want to know that their money is well-spent,” he said. “If people see another person and they connect with them, that creates empathy. And empathy creates generosity. And then they lend money to someone else.”


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