Kiva.org is the on-line microlending network that
allows anyone to lend $25 or more to individual low-income borrowers around the
world for micro-enterprise and housing.
Kiva is an entirely different way of thinking about credit and financial
intermediation. While it may be small, it is an example of the real utopias
described by Erik Olin Wright in his 2012 presidential address to the
American Sociology Association.
Through kiva’s web site, anyone wishing to make a loan can
browse the descriptions of borrower projects. For example, a woman in Central
America has applied for $350 to buy bricks, cement, wire, sand, gravel and iron
to build on to her house, and proposes to repay over 15 months. NGOs prepare
the loan descriptions, disburse and collect loans and provide support services
The interest paid by the borrower
covers the costs of payment transfers, underwriting and supervision of the
loans and the administration of the program.
Lenders receive no interest. Those
of us with some surplus wealth can put it to productive use without insisting
on enriching ourselves as a reward for being (at least relatively) wealthy. This is especially painless at the moment
when interest rates for savers in the conventional retail banking sector are
low, but it can also give us an opportunity to reflect on the deep capture of
contemporary economic thinking by the idea that capital is entitled to, and
must always, earn interest for being put to use.
With its capacity to connect thousands of individual lenders
with thousands of individual borrowers, kiva also points one way to solving to the
maturity mismatch that creates so much risk for conventional banks. An individual lender/saver can browse a list
of thousands of potential loans of varying maturities, and match his or her own
cash needs with the borrower’s. There
are no 30-year mortgages on kiva (yet) but the possibility is there.
Whether microlending and microfinance generally are a net
welfare benefit for poor borrowers is a complex and controversial question, to
which there are a variety of empirical and theoretical responses. Other peer-to-peer lending and crowdfuding
experiments without the social mission have raised a host of problems,
including high default rates. I can say,
though, that I experience more happiness browsing my kiva.org portfolio (see picture) than
any of my other account statements.