[Micro credit:] The Kiva Connection: Exclusive Interview from Cambodia

Here Phal An is pictured in front of her rice wine production area with one of her sons, who helps contribute to the business. (Photo: Jessica Young)

May 14, 2008
by Tamara Schweitzer
Global Business, Kiva

When I set out to blog about the entrepreneurs that Mansueto Ventures sponsored through Kiva.org, I wanted to provide readers with as many details as possible about the day-to-day lives of small business owners in developing countries and how exactly access to microfinance was impacting their operations.

As you can imagine, it is not a simple task to connect directly with entrepreneurs in developing communities, as most do not have access to communication technology. So far, what I have learned about the entrepreneurs we sponsored and what I have reported here on this blog has come from examining the background profiles and photos posted on Kiva's website of each borrower. However, this snapshot is only part of their story, and as a journalist, I felt it my duty to uncover as much of the individual's story as possible.

This is where Kiva comes in. The organization's staff has been amazingly instrumental in getting me access to the information I desired. I have connected with several Kiva fellows, volunteers who are stationed in countries all over the world where Kiva has microfinance partners. These fellows are working on the ground to facilitate the smooth transaction between the local lending institutions and their clients. As such, many of these fellows have the chance to visit with entrepreneurs in their homes and places of business.

Jessica Young, a fellow working with one of Kiva's microfinance partners in Cambodia, was able to arrange a meeting with Phal An, a rice winemaker in Cambodia, and one of the entrepreneurs we loaned to through Kiva. Jessica graciously agreed to bring my interview questions to Phal An and report back with her answers. In order to conduct the interview in Phal An's native language of Khmer, Jessica brought along Phal An's loan officer, Mr. Kiry, to act as translator.

Jessica visited with Phal An at her home in late March, and since then there have been several e-mail exchanges between us detailing the experience. Here is an excerpt from one of Jessica's e-mails (with some words added or changed for clarification purposes) in which she describes her journey to Phal An's home in the village of Damnak Sankae and the nature of their meeting:

We arrived [at the home] about an hour before lunch time, so [Phal An and her family] were already starting to prepare to cook the food. Her husband was at home, as was her son, so during the course of the interview they would take turns adding hay to keep the fire [for the rice wine] going. The overseeing of the rice wine production is an ongoing activity throughout the day. [Phal An] invited us to sit down, answered all of our questions and offered us water and mango. It's common for clients to offer tea or water when greeting you in their homes.

Also present was her daughter who now has a child, so the family was playing with the baby. During the course of the interview her second son came home, as families will typically eat lunch together. Traditionally, it is the woman's responsibility to prepare the meals and look after the house, so she, like most of the female clients, will begin work around 7 A.M. and take two main breaks -- one to cook lunch and one to prepare dinner. In Phal An's case, she can do this while she simultaneously looks after the rice wine. Because she runs the side business of pig raising, she also has to tend to the pigs, feeding them and giving them medicine to prevent them from getting sick.

She was expecting us [for the interview] because another loan officer who is assigned to her district stopped by to see if she was home and give [Mr. Kiry and I] directions. Most homes are off the paved national roads, on side dirt roads, reached by cutting along paths in between people’s houses. As they’re unmarked, they can be difficult to find if you haven’t been there before, unless a local villager is familiar with the name and can point you in the right direction.

After the interview, Jessica provided me with such a wealth of information about Phal An's winemaking business, as well as photos of her winemaking equipment, that I felt it important to share her story with readers beyond just those who follow this blog. Here is the link to the extended Q&A with Phal An, and another to a slideshow that depicts the process of making the rice wine. The interview with Phal An helped to shed light on the significance that one small loan can have to a hopeful entrepreneur.

I am grateful to everyone who has helped me relay Phal An's story, and to tell it accurately. A special thanks to Jessica for stepping into the journalist's role and reporting everything so thoroughly.

Micro-finance gives developing world a chance to ease poverty

Wednesday, 5th September 2007
Graeme Brown
The Business (UK)

An email has just arrived in my inbox from an organisation called Kiva, telling me that a Cambodian woman I recently lent money to, Pork Saru, has made a repayment of $28 (£13.88, e20.54). Twelve other people from all over the world received the same email. In June, the 13 of us lent Saru a total of $500. She used the loan to buy a motorcycle to transport goods more easily to the grocery store she owns, and to improve her product range.

None of the lenders knew each other, and none of us knew Saru. Until recently, it would have been almost impossible for her to access the funds she needed to improve her business, and almost impossible for 13 people living in the West to help her.

Kiva (which means agreement in Swahili) is a US-based, non-profit organisation. It acts as a kind of retail micro-financier. Micro-finance gives access to capital to poor people in the developing world who otherwise would be unable to borrow; it doesn’t require collateral. According to the World Bank, of the 3bn people of working age in the developing world who could make use of micro-finance, less than 1bn have access to it. Kiva is attempting to make a start at bridging that gap.

Where it differs from traditional micro-finance institutions is that it allows an individual in the West to choose who they will help in the developing world via its website. It personalises aid. Unlike a donation to a large charity, or the tax you pay that is spent on international development, you can see exactly where your money goes. Kiva connects people who need to borrow money with people who want to lend money; it does not interfere with who lends what to whom, it just provides the platform for thousands of transactions to happen.

There are thousands of entrepreneurs like Saru featured on Kiva’s website asking for the loan they need to invest in their businesses, and there are thousands of people willing to lend. Since the website was launched just over two years ago, it has enabled 90,000 people to lend almost $10m to 15,000 entrepreneurs across the developing world. From a brick manufacturer in Kenya, who used his $150 loan to rent a brick press, doubling his production overnight and enabling him to hire five new staff, to a female mechanic in Honduras, who took over her husband’s business after his death and used her $300 loan to buy new equipment and now employs four staff, it is providing help to entrepreneurs and acting as a catalyst for wealth and job creation in countries that are in much need of both.

Reading the stories of people who have borrowed through Kiva is awe-inspiring. Crucially, it seems hugely important to the borrowers that what they are being offered is a loan rather than a handout. Simply giving aid assumes people in the developing world are helpless and robs them of their self-respect. A loan is a business arrangement – borrowers are trusted to pay it back. It helps people to help themselves.

Anyone familiar with the great Peruvian economist Hernando De Soto’s groundbreaking work on the essential role of private property in economic development will recognise the benefits of giving people in the developing world the same rights and responsibilities we enjoy in the West.

Kiva’s borrowers almost always meet their responsibilities. It has a miniscule default rate of 0.17%, comparing very favourably with any bank in the City of London. Remarkably, it appears more successful at assessing risk than almost every financial institution in the West. Kiva uses local micro-finance institutions (it has 59 partners worldwide) who assess whether applicants are suitable for loans. The local partners are incentivised to be cautious because their repayment rates are published on Kiva’s website. If a local partner were to begin showing high rates of default, Kiva’s army of individual lenders would immediately become less likely to lend money to its clients.

The whole enterprise is based on market principles: there is no central direction and no vast bureaucracy. The power of the internet has brought together thousands of entrepreneurs, who want the chance to improve the lives of themselves and their families, and thousands of people who want to help them.

The Western public have rightly become sceptical of aid handed to governments with poor records on corruption and human rights. They are frustrated that huge multi-national non-governmental organisations (NGOs) seem to spend as much on mail shots as they do tackling poverty. At a time when Western politicians – pressurised by a celebrity elite interested above else on assuaging their own consciences – are cancelling debt, Kiva’s 15,000 entrepreneurs are happy to borrow more, and perfectly capable of paying it back.

The biggest change sweeping the developing world is being caused not by government aid, or action by huge NGOs. It is being caused by the market. Mobile phones in Africa are revolutionising communication. Buyers and sellers can exchange information more quickly than ever before, boosting trade and growth.

The Asian Tigers revolutionised their living standards over the last 50 years through trade, not aid; the same entrepreneurial spirit is latent in millions of people in Africa and other parts of the developing world. By lending them money through innovative new personalised and ultra-accountable micro-finance organisations, we can give them the chance to pull themselves out of their heart-breaking poverty and change the world for the better.