• Wealth Management

Microfinance in the Developing World

Microfinancing in developing countries is helping lift women entrepreneurs and their families out of poverty.

For entrepreneurs in developing countries, the idea of securing a loan to start a business is not just difficult, it’s next to impossible. This stark reality is faced by entrepreneurs in developing countries every day.

Worse, this reality disproportionately affects women—and the implications of this disparate impact are astonishing. However, by providing access to financial resources, women in developing countries can attain higher levels of education and earnings which, in turn, can lead to lower infant mortality rates, improvement in child health and nutrition, and higher agricultural productivity.1

Kiva, an international nonprofit microfinance organization, has been tackling this issue head-on since 2005. They envision a world where all people—even in the most remote areas of the globe—hold the power to create opportunity for themselves and others. Kiva’s mission is to alleviate poverty by letting individuals lend as little as $25 to people seeking loans in the developing world. One hundred percent of every dollar lent goes towards loans administered by one of nearly 300 Field Partners who have undergone an extensive credit risk and financial due diligence process. As a nonprofit, Kiva charges the Field Partners no interest on the loans they administer.

Since Kiva facilitated their first loan in 2005, the organization has helped an impressive 1.3 million people loan over $690 million to more than 1.6 million borrowers in 86 countries. Even more remarkable, Kiva’s repayment rate is over 98%. Approximately 70% of Kiva’s loans, totaling more than $500 million, have been directed to women. The majority of their loans have gone to women because, as Kiva’s Vice President of Global Partnerships Giovanna Masci notes, “Women tend to have been structurally removed or unable to participate in the financial system and have not been able to build up assets like homes or property—that is, if they even own them. Generally, assets are owned in the husband’s name, thereby limiting the opportunity for women to obtain loans because they are not able to guarantee the loan with property or other assets.”

Kiva’s approach to fighting this financial disparity has been twofold: raising awareness and launching targeted programs. To raise awareness, Kiva created the “Dreams Are Created Equal” campaign whose launch coincided with International Women’s Day 2015. The goal of this initiative is to demonstrate to potential lenders that the dreams of women in the developing world are valid. The campaign features stories of women who have successfully created opportunities for themselves, their families and their communities because of loans they received through Kiva. These success stories make the impact of a seemingly small loan explicitly real.

Take Lourdes, a young single mother from Paraguay, for example. She secured her first loan of $60 to open a business selling empanadas and snacks to support her son and herself. Over time, she repaid this loan and began taking out and repaying bigger and bigger loans. Most recently, Lourdes took out a $975 loan funded by 33 lenders located all over the world—from Norway to Australia—to increase her inventory and buy a refrigerator. This allowed her business to grow to the point where she could afford to move into a larger shop with a secured gate to prevent robberies and an attached home for her family.

Not only has Kiva witnessed remarkable success raising awareness, but it has developed partnerships with world-class organizations to launch new programs supporting impoverished women. In 2013, Kiva introduced CAMFED — an organization that has been eradicating poverty in rural Africa for over 20 years — as a Field Partner in Zimbabwe. Through this partnership, Kiva’s lenders simultaneously support women seeking to grow their businesses to become self-reliant and expand access to quality education for young girls. In exchange for receiving capital through Kiva’s lenders, women borrowers commit to repaying in social capital as volunteer teaching assistants in local high schools supported by CAMFED. This unique arrangement affords women the opportunity to repay the “interest” on their loans in the form of social change. Given the rapid success of the program in Zimbabwe, Kiva and CAMFED have expanded their partnership to Tanzania with plans to launch programs in Ghana in the near future.

Kiva’s focus on helping women lift themselves out of poverty through microfinance has clearly had a lasting impact on the lives of the women who have received loans through their programs. But Kiva’s positive influence extends much further than the loans themselves. According to a Harvard Business Review study, women in emerging markets reinvest 90% of every dollar earned into “human resources”— their families’ education, health and nutrition — compared to only 30 to 40% of every dollar earned by men.2 In other words, Kiva’s loans have helped countless families and communities in over 80 countries escape a vicious cycle of poverty.

Kiva’s mission of lifting individuals out of poverty through microfinance goes to show that the old adage “a little goes a long way” is especially true for the more than 1.1 million women it has reached over the last decade.

Ready to start a conversation?  
Find a Financial Advisor

*Invalid zipcode