I’m in NYC now. The reason I haven’t been blogging is because I’ve been writing a 30 page paper for an academic journal that is almost done. I’ve been writing 3 pages a night and it’s been intense!
We were in the NY Times yesterday. Nick Kristof wrote an interesting op-ed column that’s here.
This was a game changing moment for Kiva like the Frontline PBS moment in October. This time, our servers stayed up! Much props to Jeremy, Aaron, Zvi and MediaTemple. We did about $130K in loans and we were previously averaging $25K a day.
Nick just posted a blog entry that’s interesting about how microfinance works from the ground in Afghanistan. I’m going to take a risk and repost it here: Wow — I was blown away by the response on the Tuesday colum about Kiva (so were the people at Kiva!). Thanks to all who became newly-minted financiers, and let me try to address some of your questions.
Several people asked about terms and interest rates. In Kabul, the borrowers pay 2 percent per month. That sounds like a lot but it’s far less than money-lenders there charge. And of course some of that goes to inflation, so the real interest rate is lower.
The interest doesn’t go to you as a lender but go to the local organization, Ariana, that administers the process. It’s very important that these micro-lending groups become self-sustaining, and Ariana is expecting to become self-sustaining at an operational basis this year. That will enable it to expand much more broadly — and it’s far better to have interest-bearing lending that is self-sustaining than interest-free lending that requires subsidies and is thus limited. Right now Kiva is not allowed to pay interest to the lenders (under U.S. banking laws), but it is seeking permission to do so. Thus in the future you may find yourself getting a small amount of interest back as well.
A couple of people complained that I was taking a swipe at other aid groups when I mentioned that Kiva avoids bureaucratic layers. I didn’t mean to, for I’m a huge advocate of what aid groups do. In Darfur, groups like Doctors Without Borders, IRC, Care, ICRC, World Vision, AJWS, Islamic Relief, CRS and others do fabulous work. I’m a longtime sponsor of a child through Plan International, and I’ve seen their work on the ground. Ditto for Mercy Corps and many other aid groups.
But it is also true that the aid structure often involves top-down decisions, incredible bureaucracy and paperwork, and the dispatch of expensive American expatriates who have to drive around in SUV’s. Where possible I think it’s much better to support local groups rather than those expats. The locals cost much less than foreigners and they usually have a much better idea of what people need. So if Kiva can bypass expensive aid groups and lend directly to people who are screened (as in Afghanistan) only by groups like Ariana with an all-local staff, that really is a step forward.
One reader commented that micro-lending is not for the poorest but for the lower middle class, because the poorest don’t have the capacity to borrow. That’s just not true. In Afghanistan, Pakistan, Bangladesh and India, you routinely see the poorest and most vulnerable people (e.g. widows) borrowing $50 or so to buy goods from a wholesale market and sell them in a retail market for a mark-up.
Moreover, empowering women is an essential part of the micro-finance story, and you don’t find anybody more vulnerable than poor women in these societies. In Pakistan, I spent a day with Kashf Foundation (a superb micro-lending organization, run entirely by Pakistanis), and it was incredibly inspiring. The borrowers are often completely illiterate and barely able to buy food. And the stories are amazing.
One woman who had only had daughters told me that her husband had been about to get a second wife (on the theory that she would bear him a son) when she borrowed a bit of money from Kashf to start a small embroidery business in her home. The business prospered, and now her husband says he would never think of getting another wife. Another woman told me that whenever her husband beats her, she tells him that she’ll stop borrowing — and then he stops and goes off sulking, but doesn’t beat her.
Micro-finance isn’t a magic bullet. As readers know, I’m a big believer in medical interventions, such as fighting malaria and AIDS and maternal mortality. But it’s definitely a part of the solution.
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