Kiva – microfinance that strengthens entrepreneurs

Entrepreneurs know that a small influx of cash can really make a difference in their small business – and this is no less true for entrepreneurs in developing countries. Entrepreneurs living in countries facing poverty have a greater chance of success when they only have to worry about repaying a microfinance loan of a couple of hundred dollars, rather than a traditional loan of thousands of dollars. Not to mention, sometimes they only need a small amount of money to get their business off the ground.

In 2005, a young couple in their late twenties, Matt Flannery and Jessica Jackley Flannery, took the first steps in creating a pioneering internet-based microfinance solution. Two years before, they had attended a lecture by the founder of the Bangladesh-based microfinance company Grameen Bank. This talk inspired the couple and Jessica began consulting for Village Enterprise fund, a non-profit organization that helped to start small business in eastern Africa. In Africa, the couple interviewed several local entrepreneurs about the problems they faced in starting and growing their small businesses. They found that lack of access to start-up capital was a significant issue for the African entrepreneurs they spoke to. They returned from Africa determined to create a unique and innovative microfinance solution for entrepreneurs like the ones they had met.

The seeds for Kiva had been planted. Kiva, which is a Swahili word for “unity,” became the couple’s top priority. They believed that the microfinance process should be as easy as possible for both lenders and borrowers. They set out to create the world’s first online microlending platform.

Kiva was a hobby side project until a popular blog wrote a feature about it, which led to increased attention. They received an outpouring of feedback and support, which made them realize just how much they could scale Kiva. They both left their day jobs to concentrate on building the business, which combined their two career goals: technology for Matt and microfinance for Jessica.

Kiva is truly groundbreaking. Its website facilitates microloans, starting at $25. This is done through their Field Partners, existing microfinance institutions around the world, who collect local entrepreneur stories and needs and upload them on Kiva’s website. Then, lenders from all over the world browse profiles and lend to those they would like to fund. The relevant Field Partner disburses this loan and also collects repayments of the loan. Absolutely anybody can become a lender – all they need is an email account and credit card or PayPal account. Kiva is also the first organization which holds a free payment processing agreement, meaning 100% of all loan amounts reach their intended entrepreneurs.

At the time of writing, Kiva has 1,430,510 users. About 942,000 of these users have made a loan to 1,055,907 entrepreneurs. The total value of all loans has been nearly $440 million USD. Perhaps the most remarkable fact of all, however, is that Kiva has facilitated loans within and between countries commonly perceived as “developing” – in a recent interview, Matt notes there have been loans within Mexico, and from India to Cambodia.

Thanks to their forward thinking and application of technology to the current microfinance universe, Kiva empowers entrepreneurs in need, and is helping to blur the lines between the developed world and the developing world.

Visit Kiva’s website, or read more about microfinance.

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Entrepreneurial Inspiration – Opportunity International and microfinancing

When entrepreneurs in developing countries need to start or expand businesses, but either don’t need or can’t afford a large loan, where do they go?  Opportunity International is an organization that helps entrepreneurs in developing countries. They do this by providing small business loans, insurance, training and savings to clients in over 20 countries. Opportunity works with a mix of fundraising organizations, individuals, corporations, foundations and governments all over the world to build funds for these entrepreneurs. With this funding, entrepreneurs in developing countries can provide for their families and strengthen their communities.

The organization was founded in 1971 by Al Whittaker, former president of Bristol Myers International Corporation in America, and Australian entrepreneur David Bussau. It was one of the first nonprofit organizations to see how powerful microfinance loans can be to entrepreneurs in developing countries who can’t afford or don’t need a traditional large loan to get started. Thanks to microfinance, entrepreneurs in developing countries can do things they may not have been otherwise able to do – start a school, a sewing business or a small grocery store, for example.

In addition to providing microloans, Opportunity International offers microinsurance. This provides entrepreneurs with crop, life and health insurance to protect their livelihood against unexpected hazards. They’ve also built 15 regulated microfinance institutions, including seven banks. They have also used technological advances to allow ATMs, point-of-sale devices and mobile banks to operate in remote areas where residents are typically held back by reduced literacy or lack of formal ID.

As of December 31, 2010, Opportunity International had given out 2.8 million active loans (93% to female entrepreneurs), created 1.1 million savings accounts, and trained 2.5 million clients in business skills. The average first loan is in the amount of $178, and the loan repayment rate is 95%. Opportunity believes in developing staff within the countries it serves, and 99% of its employees are nationals of the countries where they work.

Loans from Opportunity can be as low as $60, but according to their website, “each loan impacts the lives of not just each client, but the lives of an average of five family members or employees.”

For more information about microfinance and the benefit it can have to entrepreneurs in developing countries, check out  So what is microfinance, anyway?

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So what is microfinance, anyway?

We’ve all heard the saying “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” That’s all well and good, but if the man has no fishing pole, those fishing skills aren’t much help. Microfinance can get him that fishing pole. Odds are that this fellow will catch more fish than he can eat. He can sell a few, pay you back for the pole, and become financially self-sufficient. That’s a win-win situation all around.

Microfinance – banking the unbankable

Microfinance, sometimes called microcredit, is providing credit, savings, and general banking services to the millions of people who are unable to qualify for these services from a regular banking institution. Generally, this means a person lacking a certain amount of collateral – assets or money used to “secure” regular financing. Banking the “unbankable” is made possible with community-based approaches to lending because in general, banks are for people with money, not for people without (van Maanen, 2004).

A microcredit loan might range from under a $100 to perhaps a few thousand dollars, depending on the situation. These loans are also beneficial to the creditor- they are a manageable amount for the client, and easier to pay back than a regular, large loan. These microloans tend to have an extremely high success rate when it comes to being paid back, and several organizations providing these loans report a success rate around 97%.

The concept of microfinance began as an alternative way to assist developing countries. The concept is nothing new; the term “microfinance” became a buzzword in the 1970s and has been slowly developing and evolving for decades, but the positive impact of this service isn’t limited to the developing world. There are plenty of “unbankables” right here in Canada – people who have valuable skills, fantastic ideas and the drive to succeed, but who are trapped by their financial situation. We at GoForth Institute believe that to build a nation of successful entrepreneurs, these super-humans need access to three things:

  1. Entrepreneurship education
  2. Mentorship, advice, counselling and support
  3. Access to microfinance and loans

Microfinance can mean the difference between being dependent on aid and being self-sufficient. It can mean the difference between small business failure and entrepreneurial freedom. It can be the differentiating factor – the tipping point – between the world as we know it now, and the world as it could be, if every person’s skills, drive and potential had the opportunity to flourish.

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Are you a business accelerator?

Last week I was doing a little housekeeping of the computer kind – creating folders, organizing or deleting old files, disk defrag (yes I’m a nerd). I had the opportunity to open the original business plan I wrote in early 2009 for GoForth Institute (then called Small Business Innovation Centres, or SBIC). At the time, I was still a professor teaching entrepreneurship and hadn’t committed to leaving my cushy job yet to pursue my grand idea. I was still in dream mode.

Looking at that original business plan two years later, what struck me was how little the company I founded and run today resembles the plan. My plan for SBIC was a series of retail, street-level “innovation centres” across Canada where small business owners would find classroom-based education and small business training, face-to-face counselling, networking opportunities and access to microfinance.

Great in theory. Until you run pro-forma financials and discover your chances of ever being profitable are zero. End of that business model!

Fast-forward two years. Now, we have the leading online education program for entrepreneurs in Canada (no street level storefront for us), our education is delivered in partnership with the federal government and strategic partners (who provide the face-to-face counselling and access to microfinance functions), and because we’re online, our education can reach entrepreneurs in every corner of Canada (something the original SBIC concept couldn’t).

What’s the point of this post, you ask? How come the business I run today isn’t anything like the one I planned? The simple answer: I wasn’t married to the original concept. My original business model sucked, actually. It wouldn’t have worked. But I was willing to start and to accept the very real possibility of failure.

Here’s how to be a business accelerator

  1. Be willing to follow your nose to cashflow, wherever it might be.
  2. Be flexible and adaptable – don’t stay married to your ideas if they are not producing results.
  3. Be willing to admit defeat – move on knowing that the right business model will be discovered eventually; hopefully in your lifetime!
  4. Be positive.
  5. Be proud – only one idea out of every 2,000 business ideas is ever acted upon – if you’re an entrepreneur you’ve already taken action. And that’s a good thing. The trick now is to continue to accelerate your success, not prevent it.
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What is microfinance?

In this month’s GoForth Institute newsletter, we’re answering the question, what is microfinance?

Basically, microfinance (also called microcredit or microlending) is a way of providing credit, savings and general banking services to  millions of entrepreneurs who may be lacking collateral or a good credit rating. Often, a person thinking of starting a small business just needs a bit of money to get started – to buy a computer, farming equipment or other supplies. They don’t need or want a loan for tens of thousands of dollars and, sometimes, they don’t have access to traditional sources of funding. In these cases, microfinance can help them start their small business on the best footing possible.

Read more about microfinance in our June newsletter, including why it’s often referred to as “liberation capital” and what some organizations are doing to support entrepreneurs through microfinance partnerships.

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