How microloans starting at $25 can help change the world

How the money is distributed
Once you choose to lend, your money joins that of others who have chosen this recipient (unless, of course, you go whole hog and ante up the entire loan amount they are requesting!). The money is pooled and distributed to the recipient through an accredited local microlending institution (or “field partner” in Kiva.org parlance) that charges them fair interest rates and collects the repayment. (Allowing field partners to charge interest is key to helping grow self-sustaining microfinance institutions and local economies.)

How you get paid back
At the conclusion of the loan repayment, you’ll get your money back in the form of a PayPal credit. (Blow it on some shoes! Or, you could reinvest it in someone else’s project.)

Minor downsides
• You don’t get a tax receipt
You won’t get a tax receipt since technically, this is a loan, not charity. Also, while the local field partner charges a modest interest rate, that’s not passed on to you. (Remember, the goal is developing local economies, and that includes local financial institutions.)

• The recipient could default
If your loan recipient defaults, you’ve lost your money; however, this happens very rarely (applicants are screened on their credit history, the strength of their business plan, etc.). The default rate with Kiva.org, for instance, is a mere 0.2 per cent. You can reduce your risk by donating $25 to four people, as opposed to $100 for one person, if you’re worried.

All told, it’s a great option if you want to see the real people you are helping. (And your lender profile page is as fun to fill out as Facebook.)

Getting started
Kiva.org is a very user-friendly site and the website this author has been using. But other well-regarded microcredit sites operating on similar principles include:

• Grameenfoundation.org
• Globalgiving.com

Learn how African grandmothers are saving their continent.

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