Intern oreintation microfinance101

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Microfinance 101 and Online Social Lending

for Development

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Outline

• Introduction to Microfinance

• Kiva and Microfinance

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“Give a man a fish and you feed him for a day.

Teach a man to fish and you feed him for a lifetime.

Chinese Proverb

What if he knows how to fish, but just can’t afford the fishing net?”

Matt Flannery, Co-Founder, Kiva

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Microfinance

• "Microfinance is the supply of loans, savings, and other basic financial services to the poor." (CGAP)

• Small loans, often to help start or run a business , paid back with interest

• The poor are typically excluded by financial service providers:– No collateral– No credit history – Illiteracy– Transaction size – Geographic location

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Microfinance Methodologies

• Individual Lending• Group Lending

– Group of Groups (Grameen Bank) – Village Banking (FINCA) – Solidarity Groups (ACCION)

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Group of Groups

• Developed by Muhammad Yunus and Grameen Bank in Bangladesh

• MFIs loan to groups of borrowers, who all are accountable for each other’s loans

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Group of Groups

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Group of Groups

$$

Start Loan Process

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Group of Groups

$ $

Successfully repaying

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Group of Groups

$Successfully repaying

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Village Banking

External Source

of Funds

VB with elected leaders

$

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Solidarity Groups

• Solidarity Groups– Loan disbursed to groups rather than individuals– 3 to 10 members for a group to co-guarantee each other’s

loans– Group liability or joint and several liability – Unlike Group of groups Lending, can all get loans at the

same time– Developed by ACCION International

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Solidarity Groups

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What’s Kiva’s role in Microfinance?

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The Kiva Microfinance Lending Process

Microfinance Institutions

Microfinance Institutions

EntrepreneursEntrepreneurs

LendersLenders

Kiva Fellows play an integral role in the Kiva process as they post loans, write about borrowers, ensure data integrity, and increase transparency.

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