Peer-to-peer lending websites provide a platform where individuals can lend to individuals. On the platform, someone requests a loan and takes the position of the borrower, and other people can evaluate the loan to take the position of the lender. These loans do not have any collateral and are therefore risky.
Kiva.org is one of these platforms that provides this service. It has raised $1.5 billion in loans from 1.9 million lenders to people from 76 countries. Contributing to Sustainable Development Goal 1 & 10: No poverty & Reduced inequalities, by enhancing financial inclusion.
Kiva differs from other P2P platforms which are mainly focused on maximizing investor value. Kiva is an international non-profit that works together with 3rd parties to offer people in 3rd world countries, who normally don’t have stable financial institutions, access to capital. So with lending on Kiva, you have a positive impact on someone’s life and get the possibility to make the world a better place.
The reasons for loan applications on kiva vary. For instance, María from Nicaragua wants to borrow $200 to buy wood for a coffee mill and two pigs to fatten and sell later on. While Mahmoud from Jordan wants to borrow $1000 to pay his university tuition fees for a Bsc in engineering. Millions of people from developing countries depend on these microloans. Thanks to digital platforms, such as kiva, people from developed countries can help lift these people out of poverty.
But be aware, there is a risk involved. Investors on these platforms do not make a profit, because the microloans are interest-free. The risk lays in the default rate, which is about 4% on kiva. Luckily, most 3rd parties do cover currency loss.
Kiva experiences direct network effects. The value for borrowers increases with the number of lenders on the platform, as this increases the likelihood of getting their loan funded. From the perspective of the lender, the more borrowers increase the likelihood of finding someone the lender would like to help.
So my question is: Are you willing to have a positive impact on the world?
https://www.kiva.org/lend/2026455 –> Find Maria’s loan here
https://www.kiva.org/lend/2024134 –> Find Mahmoud’s loan here
https://www.theguardian.com/world/2020/apr/09/nonprofit-microfinancing-poverty-good-news-loans
