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Kiva is a US based peer-to-peer lending system that allows people to temporarily loan money to entrepreneurs in the developing world. Kiva acts as the agent hosting profiles of entrepreneurs for lenders to access, collecting the funds to be distributed through agencies on-the-ground, and, once a loan has been repaid, giving the funds back to lenders who can then chose to re-lend, keep, or donate to Kiva. I’ve been lending in a small way with Kiva for a little while and my experience follows that of others I talk to who boast of an exceptionally low default rate on their lending.
Kiva in the US has just announced that it will begin to allow for US based enterprises to access Kiva funds, recognising the fact that it’s not only Guatemalan agriculturalists who find access to credit difficult, so to does a Kentucky based plumber.
Here in New Zealand I was interested to read the other day that the rate that lenders charge small business for loans has hardly moved despite a massive cut in wholesale interest rates – it seems that traditional banks have little appetite for funding seemingly risky SME loans.
Even worse than the rate SMEs have to pay for loans is the bottom-line accessibility of funds. The reality is that without good collateral (generally a house) on the part of business owners, banks won’t look at SMEs as potential candidates for finance – this despite the fact that both property prices and potential to sell houses has taken a dive for the worse. And this also despite the fact that a number of applicant businesses are cash positive, have real potential, and have been trading successfully for many years.
Business owners I talk to tell of the difficulties they face securing even modest working capital – this despite the fact that, in many cases, cashflow is high and has been for some time.
The issue was raised at the job summit a few months ago, but it seems that traditional lenders have no real desire to change the systems to free the flow of capital for small businesses – it’s an issue that is close to the hearts of all the stakeholders in bizchat – after all having a place to find advice is all very useful, but without the metaphorical blood to feed the muscles of enterprise, it’s only half (or less than half) of the solution.
It’s something we’re looking at and are keen to hear from others with some time and energy to give to the cause.