Obidallah Azimi

This is Obidallah Azimi.  He is a university student in Afghanistan.  Obidallah owns a retail store and is looking to expand his business to provide for his family.  I loaned Obidallah $25 in order for him to expand his store.  He is repaying the loan in 12 increments and has already made the first three payments totally $6.39.

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This is one of many summaries that you can find at kiva.org, an online charity that manages micro-loans abroad.  Here is the concept in a nutshell:

  • Overseas entrepreneurs register loan applications with kiva.org.  For example, Obidallah needed $1,025 for his grocery story.
  • You make a micro-loan to one of the many entrepreneurs.  This can be as little as $25 or as much as you have to spare.
  • The entrepreneur receives the full loan once enough lenders have been found for his enterprise.
  • Over an agreed period (in this case 12 months) the entrepreneur pays back the loan in small increments.
  • Kiva then redistributes the funds to the micro-lenders.

Kiva are a none-profit organization that take 0% (that’s none) of the loan in overhead or processing fees.  100% of the amount loaned gets into the hands of the business owner overseas.

A little over one thousand dollars is sufficient in developing countries to expand a fledgeling business, not as a donation but actually as a loan.  These are hard-working people who require a little up-front investment in order to become self-sustaining and generate a steady income of their own.  So far Obidallah has hit every one of his repayment dates; a man with a business that is profitable.

I chose to lend $25 for my first micro-loan because I wanted to see how the system worked.  I’m now confident enough to loan larger amounts of money because I’ve developed faith in the Kiva system.

The important difference between Kiva and other charities to me is the fact that with loans I am able to help out in ways I couldn’t hope to with donations.  I donate money several times during the year to charities that perform very necessary and very worthwhile work.  However, like all of us I have a limited amount of money that I can spare.  With a loan I am simply deferring posession of the funds to a later date.  It’s very similar to sticking money in a mattress.  Consider that you want to save up for a sofa, for example.  The sofa you would like costs $1,000.  Ouch!  In the back of your mind you think “I should save up $100 per month for that sofa and in ten months I could buy it.”  Others think “I could spend $1,000 on a credit card and pay it off over ten months” (although more often than not the “paying off” but fails, and you end up spending $1,400 for the sofa by giving $400 to VISA).  Not only that but it lingers on your credit card for what, 2 years, 3 years?

What if there was a different solution?

It might require a little more patience, but consider that each month you loaned $100 to an entrepreneur overseas via Kiva.  That would take ten months to complete but would be a total amount loaned of $1,000.  Assume then that the payoff period for each loan is twelve months.  After twelve months from the date of the first loan you’d get back your first $100.  You put this in a savings account.  Next month another $100.  This would continue until 22 months from your the day you made that first loan.  At this point you’d have about $1,080 in your savings account (assuming you made about $80 in interest over the year).  Now you can go buy your sofa and you still have $80 to make another loan with!

In just 22 months you’ve saved up for that new piece of furniture instead of putting it on credit.  During that time you’ve helped 10 (ten!) different entrepreneurs start their own businesses and provide for their families.  That’s ten other families that got a break by you exercising a little patience in buying that sofa.  I guaran-damn-tee you that is a much better use than VISA would put your $400 of “convenience charge” to.

We have great wealth over here and the amazing part is that a very, very small portion of that wealth can do amazing things in other countries.  I can’t even fill my gas tank for $25 any more.  In the right hands that money can be used to rebuild an infrastructure that is in very dire need.  There are entrepreneurs who are willing to put in the long hours and hard work it needs to build a future for themselves, they just need a little help getting started.

Meaghan and I are saving for a wedding next July.  We’re going to celebrate our life-long union with our friends and need to save several thousand dollars to pay for the ceremony and celebrations.  What a nice thought that the process of saving for the celebrations of our life union will pay for dozens of families abroad to get their lives started too.

Just a thought.

Stuart Thompson

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