Small loans appeal to bootstrap crowd
Peer-to-peer lending websites have made it increasingly possible for everyday people to lend to entrepreneurs around the world. Rachel Dornhelm reports the down-to-earth businesses tend to get the most cash.
Baker Abdul Satar in Kabul, Afghanistan shakes hands with one of his benefactors from microlending website Kiva.org. (NYTimes.com)
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TEXT OF STORY
Doug Krizner: Microloans have become a trend in international development circles. This is where very small amounts of credit are extended to those not considered bankable. Typically, the giving is the domain of the U.N. But now, a growing number of websites are giving ordinary people the chance to get involved. Rachel Dornhelm reports.
Rachel Dornhelm: Kiva.org was the first of these peer-to-peer microcredit websites to launch. The idea is lenders give small loans to entrepreneurs of their choice in the developing world -- a Peruvian cheesemaker, a clothes vendor in Africa. The average total loan is around $600.
Kiva.org's co-founder, Matt Flannery, says the most down-to-earth businesses get the most funds.
Matt Flannery: Maybe one of the most unpopular loans would be something like a taxi driver, and the most popular loan would be something like fruit seller or a farmer.
Since it launched two years ago, Kiva has loaned around $17 million. A drop in the bucket compared to the multi-billions of dollars available in commercial microcredit each year.
Still, Elizabeth Littlefield, CEO of a microfinance industry group, says Kiva has inspired a new generation of peer-to-peer lending.
Elizabeth Littlefield: Microfinance's bootstrap capitalism really appeals to, you know, the entrepreneur in all of us.
Littlefield says one of the most interesting new sites is Microplace.com, an eBay company. Unlike the nonprofit Kiva, this site is registered with the SEC, and offers lenders a return on their investments. A similar site, globefunder.com, is scheduled to come online in January.
I'm Rachel Dornhelm for Marketplace.
