3c hapter - Index of

Pennies from Many 129
a 27- year- old woman in Tanzania who wants to open a café, or
a taxi driver in Mongolia who needs a bigger vehicle to expand his
business. Average loans requests are under $400. The human connection
resonated with lenders, and the site made it easy for them
to act with the click of a mouse. By all measures, Kiva has been
a phenomenal success. In its fi rst fi ve years, almost 500,000 people
have lent more than $160 million to individuals in 54 countries to
help them start self- sustaining businesses. Kiva doesn’t make the
loans directly, relying instead on a network of microfi nance institutions
based locally to vet and make the loans. Like Grameen, its
default rates are teeny, around 1 percent.
The loans can be very lucrative: Microfi nance institutions
often charge interest rates of 40 percent or more (Kiva’s partners
charge an average of 38 percent). A high rate is necessary to cover
the considerable costs of vetting far- fl ung borrowers, but many
organizations are making cushy profi ts—one reason the microfi -
nance sector has gotten a black eye. In a sign of investor appetite
for such fi rms, SKS Microfi nance, an Indian company, raised more
than $350 million in a public stock offering in August 2010. 4
Kiva’s individual lenders see none of that bounty, however.
They get their principal back (assuming no default), but nothing
more. That’s because if Kiva were to promise a profi t, suddenly
those microfi nance loans would become securities in the
eyes of the SEC. Jackley and Flannery originally envisioned a site
that would allow lenders to earn interest, but the SEC regulations
proved too daunting given their limited resources. So Kiva became
much more about philanthropy. Profi ts are kept solely by the microfi
nance institutions that vet and handle the loans. (On the other
hand, MicroPlace, a similar microfi nance site launched by eBay, had
the deep pockets to fully register and therefore can offer interest to
lenders.)
Still, at least Kiva lenders get their principal returned. That’s
more than the people fl ocking to popular funding sites like
Kickstarter and IndieGoGo get. On those sites, which raise money
for music, fi lm, and other creative ventures, it’s strictly donations.
Donors are often rewarded with perks—a fi lm credit, a copy of
a CD, a tchotchke, or simply bragging rights. In perhaps the most