Person-to-Person micro-lending

I chanced upon a brilliant model implemented at Kiva through a news article in Voice of America.

While organizations are being set up to provide microlending across the world, Kiva has a unique model.

It brings individual lenders and micro-lending organizations together. Kiva's partner microcredit organizations upload profiles of people who are looking for loan in their markets. Individuals anywhere in the world can then decide whether they want to fund any of these folks. You can transfer the money via Paypal and hence is instantaneous. The lending can be as low as $25, going upto $2,000.

The microcredit intermediary takes this money and lends the same to the end users, and charge an interest. Kiva does not charge any interest and I suppose the Internet lender also may not get any interest, but will get his principal back, and will also get an update of what the business is doing.

There is, of course, the risk of not getting your money back, but Kiva says its payback rate is 100%. Kiva's partner microcredit organizations have an average payback rate of over 96%. In the worse case scenario, you would have still helped poor folks across the world possible growth opportunities. Compared to giving your money to charity, this is a far better method.

We need a model similar to this in India!