P2P Loans and Kiva.org

If you use LinkedIn, you're probably familiar with Kiva.org. Kiva has done an outstanding job using the Group functionality in LinkedIn to grow awareness of the work they are doing in the area of providing syndicated loans to third-world entrepreneurs.


Kiva's microfinance model seems to be working - at least for me. This morning, my first loan - to a female grocer in rural Mexico - was repaid on time, and in full.

Rather than withdraw the money, I have now joined a syndicate that will provide $1025 (all Kiva loans are around this size) to Baqi, a wood salesman living in District 10 in Kabul, Afghanistan. Baqi's use of funds is to purchase stock, so he can expend the business. Kiva provides a useful hub for enabling financing of this kind of basis funding requirements, and their syndication technique enables the risk to be spread across a multitude of lenders.

Incidentally, there are a ton of emerging fist-world "Kiva.orgs", such as Prosper.com, that are well-known and well-trafficked. If you're a subscriber to Jim Breune's excellent Online Banking Report, you're probably aware that he is predicting that 2008 will be the year that peer-to-peer loans move from the back of the wave to the front.

Check out the above graph (based on Celent data) that was published here in USA Today. It certainly seems to back up what Jim has been saying in OBR.

Prosper.com reminds me of PayPal circa 2002 - some teething problems, some fraud issues that occasionally get in the news, but I personally find the service fascinating, and I think it provides a useful secondary source of funds for people that have had their identities or credit access compromised.

By the way, if you're interested in Kiva, head over to Kiva.org and sign up. For the low (starter) price of $25, you'll help create wealth, and learn a lot about the emerging P2P marketplace.