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Kiva’s Secret Project To Let You Give Peer-To-Peer Loans

Kiva’s Secret Project To Let You Give Peer-To-Peer Loans

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Published by: Crowdsourcing.org on Jan 13, 2012
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Kiva’s Secret Project To Let You Give Peer
-To-Peer Loans
That’s what you thought Kiva did already? Not quite. But the new Kiva Zip
lets you lend directly to a real person
, with a higher chance it won’t get paidback. It’s a vast experiment in online trust and it could change the face of 
Microlending website Kiva’s original proposition was simple: Make an
interest-free loan to someone who no bank will touch. The site, whichlaunched in 2005, became wildly popular, as people gleefully gave a fewdollars to struggling businesspeople in the developing world, and thensaw that business grow and had their money repaid.But many lenders assumed--
not surprisingly, given Kiva’s marketing
and web design--that the smiling face on the other end of the PayPaltransaction got the exact cash they lent out. Aminor kerfuffle ensued in
2009 when a blogger broadcast the fine print of Kiva’s website,
revealing the nuance that a donation actually goes to take on the risk of aloan already made to that person by a microfinance institution. In otherwords, the person you chose to fund already had his loan. You just makeit possible, retroactively.
Now Kiva is launching a program to do, essentially, what everyonethought they were in the first place. WithKiva Zip
,it’s cutting out the
middle man for real and offering direct lending Americans to poorentrepreneurs
around the world. But it’s not to shut up the confusedcritics, it’s to reach the people even those microfinance partners won’t
cut a check to.
“This is very much a pilot,” Kiva president Premal Shah proudly admits
of the new project that his microfinance organization launched quietly
this month. “Microfinance is meant for the edges of the banking world,”he explains. “Kiva Zip is on the edges of Kiva.”“It’s really expensive to reach rural Kenyans,” he offers as an
-five percent are outside the reach of microfinance institutions and
 banks. Literally outside the reach of a branch.” Kiva Zip uses mobile
money transfer to cut the cost of loan delivery, and an evolving systemof trust ratings to screen the potential borrowers.
The pilot is up and running in Kenya and in Kiva’s home city of San
In Kenya, the loans are distributed via M-Pesa,the ubiquitous system of  mobile phone money transfer. No home visit needed, or fewer anyway.In the U.S., Kiva Zip will use PayPal.But turning to new tech to lower loan costs is only part of the pilot. Theother is how a web surfer in the U.S. can sort out which Kenyan farmer--or Mission District baker--
is the right bet. Borrowers can’t just signthemselves up for loans on Kiva Zip; a Kiva approved “trustee” has tonominate them. “Instead of using a microfinance institution, we’re usinga trust network,” Shah explains.
 Zidisha,a smaller microlender, has been using the peer-to-peer directlending model for poverty fighting with a default rate of 0.38 percent.So far the
y’ve distributed about $100,000 since 2009. Kiva moves $1million every four days. If anyone can make direct lending work, it’s
Kiva.Shah sees the company as artists moving into a blighted neighborhood.
Kiva will go where other large lenders won’t, to show it’s safe and spark 
other companies to expand the reach of the industry.

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