http://news.bbc.co.uk/1/hi/technology/4759122.stm
Online loans help world's poor
By Clark Boyd
Technology correspondent
The internet is revolutionising how donors and lenders in the US are
connecting with small entrepreneurs in developing countries, be they a
farmer in Kenya who wants to invest in new cows or a seamstress in India who
wants to open her own shop.
For 14 years, Dennis Whittle worked at the World Bank, overseeing big
development projects that gave out huge loans.
But in 1997, Mr Whittle's boss gave him a new challenge - to fund small
projects. After several failed attempts to push these small projects through
the World Bank bureaucracy, he decided to call a brainstorming session.
"My colleagues and I went into a room at the World Bank one day, and said,
what if we just allowed anybody to come in and just pitch their idea. And
what if we made decisions on the same day," said Mr Whittle.
They decided to put the plan into action, and it proved successful. More
than 1,000 groups from some 85 countries submitted ideas for small
businesses and non-profit projects.
More than 500 finalists were chosen, and came to Washington, DC, to make
their cases for funding. On the final day, the World Bank awarded $5m to
dozens of small start-ups.
But what Mr Whittle remembers most is a conversation with one South African
woman who did not win that day.
She was not upset. In fact, she was convinced that there were many people
around the world who would fund her project if they knew about it.
Going online
Dennis Whittle saw an opportunity to tap into what he calls the "secondary
market" for donations. He quit the World Bank, and six years ago, he and a
colleague started a private, web-based microfinance program called Global
Giving.
Take a goat herder in Uganda. If you give him $25, that's two smaller
goats. That's a great start. With $100, you can imagine more goats, perhaps
a small shelter, stock up on goat feed
Jessica Flannery, Kiba
"Global Giving just enables small-scale grassroots projects to match up with
relatively small donors all around the world, who want to help them make a
difference," said Mr Whittle.
"The website is kind of like a combination of eBay and Amazon. And the idea
is that qualified grassroots projects from around the world can be listed,
as long as they meet certain qualifications.
"If you're a donor, and you're interested in HIV/Aids, you can find projects
to fund. If you're interested in projects in Kenya, you can find those. It's
a clearing house."
A potential donor searches through a list of small-scale projects on the
Global Giving website. You can even e-mail project leaders for more
information.
Then, the donor can choose to give as little as $10 to a project. Some,
though, have given as much as $150,000.
Needy projects
Global Giving is not the only website tapping into internet's power to
directly connect would-be funders with would-be entrepreneurs.
Another site is called Kiva, the brainchild of a husband and wife team from
California.
Kiva's story starts a little more than two years ago, when Jessica Flannery
went to East Africa. She was working for a group that gives $100 grants to
needy projects.
"Every single day, I would meet an entrepreneur, and hear about how $100 had
changed not just his or her life, but also the lives of their families,
friends and other community members," said Ms Flannery.
"Take a goat herder in Uganda. If you give him $25, that's two smaller
goats. That's a great start. With $100, you can imagine more goats, perhaps
a small shelter, stock up on goat feed. So, that little bit of money can
really help set someone up."
Jessica's husband Matt Flannery, a computer programmer, came to visit her in
East Africa for a few weeks.
He too was moved by the entrepreneurial spirit he saw there. So, he set out
to design a website that could connect small lenders with small donors.
"I wanted to start a little program where someone in America or Europe or
Australia or anywhere with the internet could lend money online to a small
businessperson in Africa," said Mr Flannery.
'Peer-to-peer' giving
The result is the Kiva website. Kiva is a Swahili word for unity or
agreement. The site went live last year.
The challenge that these microcharity enterprises have is identifying
great projects, vetting them, ensuring that they are on the level, and
ensuring that they are using the money wisely
Ethan Zuckerman, Harvard Law School
Kiva users are not donors, they are lenders. Matt Flannery calls it a kind
of "peer-to-peer microfinance." Using the internet, Kiva lenders can loan
out as little as 5 dollars to a project.
"The way it works is you pay using PayPal," said Mr Flannery. "Then, you
receive updates that are like blogs over e-mail and on the internet, and
eventually you get paid back according to the performance of the
entrepreneur."
Lenders do not receive interest on loans, but the borrower does pay some
interest, which helps pay some of Kiva's costs.
But the internet can bring both great promise and great peril for
microfinance, according to Ethan Zuckerman, a fellow at Harvard Law School's
Berkman Center for Internet and Society.
Mr Zuckerman, who also sits on the advisory board of Global Giving, points
out that the net makes it easy to give money to worthy projects, but it also
makes it easy for scammers to dupe potential donors.
He says that guarding against these kinds of scams is an important service
Global Giving and Kiva can provide.
"The challenge that these microcharity enterprises have is identifying great
projects, vetting them, ensuring that they are on the level, and ensuring
that they are using the money wisely," he said.
Globalgiving and Kiva say they work with local groups to vet would-be
entrepreneurs. Both organisations contend that is the best and most
cost-effective way to make sure money collected via the internet is
distributed efficiently, and properly.
Both websites seem to have successfully tapped into what one could call a
"distributed network" of small donors and lenders worldwide.
Global Giving has raised millions of dollars in donations for small projects
in the developing world. And while the Kiva's co-founders will not put a
dollar figure on the amount they have loaned so far, they do say that every
time a new business is listed on the website, the needed funds are raised in
just days, or even hours.
Clark Boyd is technology correspondent for The World, a BBC World Service
and WGBH-Boston co-production
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