My Holiday Gift Recommendation: Microfinance

Searching for the perfect gift this year? Allow me to make a suggestion: Give microfinance gift certificates from Kiva!

What’s Microfinance?

Imagine you are a motivated entrepreneur (maybe you are!) Now imagine you have an idea for a business, something you are so sure of that you would happily take out a short-term loan to make it happen, knowing you’ll be able to pay it back with interest in short order. Sounds like you are just the kind of person this world needs to get the economy moving again, right?

Now imagine that you are exactly this person, but live in a country like Cambodia, Ghana, Peru, or Nicaragua. On the plus side, there are many business opportunities all around you, and you don’t need all that much money to get going. On the minus side, there aren’t that many lenders willing to give you a chance, either.

Microfinance puts modest amounts of money in the hands of motivated individuals who would otherwise not be able to make their dreams of running their own business come true. Groups of individuals vouch for each other’s loans, reducing risk to the investor. The concept was made famous by Nobel Peace Prize-winner, Mohammad Yunus of Grameen Bank, but has been taken up by many organizations around the world.

Why Should You Give Kiva Certificates?

Kiva Microfunds is a popular way to fund microfinance. The non-profit organization runs a web site where investors can select which entrepreneurs they want to help. Money is then sent from PayPal through Kiva to local micro-lenders to those exact individuals who have been selected – they’re real people, not marketing material. Selecting an individual to invest in is a lesson in how the world outside “Web 2.0” lives!

You fund a gift certificate with, say, $100. Then the recipient enters the certificate code on the Kiva web site and selects, say, 4 individuals to invest $25 in. Then, over the next few months, they get updates on that individual’s business and repayment progress. Once the loan is repaid, which can be as short as a few months, the recipient of your gift certificate can either withdraw the money or re-invest it in another entrepreneur.

There are other organizations, including Microplace, which is much more of an investment institution, but I have had good luck with Kiva personally, and felt that their approach is most educational for the younger children in my family.

Let’s Go!

Here are my top reasons to give Kiva certificates this holiday:

1. Most of my friends already have too much plastic and electronic junk in their lives
2. I love the idea of helping people who are trying to help themselves
3. We live in an interconnected world, and a rising economic tide will help us all
4. Kiva works – they have a 97% repayment rate overall, and most micro-lenders they work with are at 100%
5. Although you could just give money to someone like Save the Children, this is a gift that keeps on giving
6. There’s no return on your investment, but it’s still a heck of a lot safer than the US stock market right now
7. It’s important that everyone, and especially children, learn about the varied lives of people all around the world
8. Even if the recipients don’t “get it”, they can still get the money back after a few months’ investment which is more than you can say for a Circuit City gift card

So there you have it! Go get microfinance gift certificates from Kiva for your friends and family!