Kiva announced that today it would begin providing microlending to about 45 businesses in certain areas in the US. Kiva.org has provided innovative lending to 180,000 entrepreneurs in 44 impoverished countries over the past 3 1/2 years with 98% of loans repaid on time! Armed with a straight-forward approach which allows individuals to provide money online (in chunks of $25) to a specific entrepreneur, ordinary investors choose their project and expect payback without interest. They become “the bank” for the project.

Up until today, its lending was focused outside the US primarily in developing countries. The addition of microlending within the US can be seen as both an indicator of the state of this economy and the failure of standard bank lending practices to innovate. This is a perfect example of disruptive innovation in the financial market, with companies like Kiva (or Prosper.com in a more commercial sense) acting as broker or agent to fund a project in ways far more rational and efficient then borrowing from a commercial bank.

While the success of Kiva can be attributed to the generosity of its investors, it must also have as much to do with the wisdom of its staff and its ethical foundation. At a time where deposit rates barely break 1%, putting your money to work for an ethical dividend might make sense. As a borrower, who would your rather borrow from? As an investor, who would you rather lend to(deposit with)?

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Kiva.org
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