microfinance: a new model for emerging economies
the greatest potential growth
areas in world banking include
microfinance markets such as
India, Indonesia and Mexico
ABN AMRO India, recently acquired by RBS group, has a KIvA.ORG CASE STUDY
microfinance programme providing small loans of $200 or Kiva lets individuals lend money to unique small
less and is aiming to reach a million customers by 2009. businesses in the developing world.
Surprisingly, at 30 September 2007, after lending to 647,931
households across 17 states, no delinquencies had been By choosing a business on Kiva.org, anyone
reported
2
. Indeed, out of the 2007 MIX Global 100 MFIs, all can “sponsor a business” and help the world’s
maintained zero or near-zero delinquency in their portfolios. working poor make great strides towards economic
independence. Throughout the course of the loan
Yunus’ Grameen Bank, the first microfinance bank, (usually 6-12 months), email journal updates from
publishes monthly statements on its website showing the business keep lenders updated on its progress.
its current financial status. It uses a system for providing When the loan is repaid, the funds can be used to
credit that forms groups of five prospective borrowers but finance another business.
initially lends to two of them. Only if the first two borrowers
begin to repay the principal plus interest over a period of Kiva is using the power of the Internet to facilitate
six weeks, do the other members of the group become one-to-one connections that were previously
eligible for a loan. By making both the loan and repayment expensive; child sponsorship, for instance has
visible to the whole group the likelihood of default is always been a high overhead business. Kiva
significantly reduced, demonstrated by a rate of recovery creates a similar interpersonal connection at much
that was stated to be over 98% in February 2008. lower cost due to the instant, inexpensive nature
of internet delivery. The individuals featured on the
THE TECHNOLOGY THAT UNDERPINS website are real people who need a loan and are
MICROFINANCE WILL BE A DRIvER FOR waiting for socially-minded individuals to lend them
FINANCIAL SERvICES IN EMERGING ECONOMIES money.
According to PricewaterhouseCoopers in a recent
report
3
the greatest potential growth areas in world Kiva partners with existing microfinance institutions
banking include major microfinance markets such as that upload their borrower profiles directly to the web
India, Indonesia and Mexico. site so that anyone can lend to them. It provides a
data-rich, transparent lending platform that shows
One driver for the development of banking in these how money flows through the entire lending cycle.
countries will be the use of technology that supports The average user funds four businesses on the Kiva
microfinance, particularly to provide transparency as this web site, putting $25 into each business. About $11
is a key requirement for investors. million has been lent so far with plans to loan $100

million in the next three years.
1 Andrew Zolli, Pop!Tech, October 2007
2 ABN AMRO Sustainability Report, December 2007
3 PricewaterhouseCoopers, Banking in 2050:
How big will the emerging markets get?, May 2007
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