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A student receives a solar-powered LED
A student receives a solar-powered LED (the S1 by d.light) at his school as part of the Lighting Schools Campaign.
Enjoying the benefits of solar energy
Enjoying the benefits of solar energy.
A student receives a solar-powered LED
Enjoying the benefits of solar energy

Microcredit Crowd‑Funding

This microcredit platform collects “loans” in increments of $25 and up, and uses those funds to provide microloans. Since its inception in 2005, the San Francisco-based nonprofit has issued $416 million in microloans to more than 1 million borrowers in 67 countries. With a 98% repayment rate for its loans, Kiva has earned praise from the likes of President Bill Clinton, Oprah Winfrey, and others. The loans fill a variety of needs: a $3,600 loan helps a family in Mongolia purchase building and insulation materials to repair their home; a $7,500 loan helps a Kenyan man buy solar chargers to start a solar charger rental business in his community; and a $125 loan helps a Filipina food vendor purchase a solar lantern to cut fuel costs and extend her working hours.

How it works: Lenders browse different loans and select which ones they’d like to fund. Kiva (a Swahili word meaning “unity”) relies on a network of more than 160 “field partners” to vet prospective borrowers, upload loan details to Kiva’s site, and administer the loans. These partners (microfinance institutions, social businesses, schools, and nonprofit organizations) are approved on a case-by-case basis. The level of vetting depends on the dollar amounts of the loans. “Little to no due diligence is conducted” for credit lines of up to $20,000, whereas higher credit lines require onsite visits and a financial analysis. Once a borrower’s loan request is funded through lender contributions, the field partner collects the loan repayments from the borrower, with interest (on average, 1.66%) to cover their administration costs. Field partners keep the interest and return the principal to Kiva. The funds are credited to the appropriate lenders, who can choose to re-lend the funds to another borrower, donate the funds to Kiva (to cover operational expenses), or withdraw the funds via PayPal.

$$$ Unlike most crowd-funding sites, Kiva does not profit from its loans. The nonprofit depends upon optional donations or “tips” from its lenders—on average, 40% of lenders “tip” about $7 per loan. These tips cover about 50% of Kiva’s operational costs; grants and donations from foundations and corporations account for the rest. In-kind donations of time from more than 400 volunteers around the world keep administrative costs low.

Zidisha’s (Swahili for “grow”) peer-to-peer approach connects lenders to low-income entrepreneurs in developing countries. Since its 2009 launch, the Northern Virginia-based nonprofit has paid out $973,575 in microloans to finance 1,879 businesses in 91 countries. Volunteers and interns travel to countries where Zidisha has lending programs and work with borrowers. They assist borrowers with the application process and teach them how to use the Zidisha website to post loan requests and project updates. In one active proposal, a businessman in Kenya makes his case for a $500 loan that will be used to buy new shaving equipment and a solar module for his barber shop. Zidisha’s website also allows lenders to contact borrowers and ask questions about the business.

How it works: Unique to Zidisha is a bidding process, in which lenders place bids to fund portions of the loan at or below the borrower’s proposed interest rate (between 5% and 15%). If the total amount of bids received exceeds the amount requested by the loan applicant, then only the bids with the lowest offered interest rates are retained. The loan is disbursed directly to the borrower, who repays the loan (with interest) in monthly installments. Lenders may then use the funds to finance new Zidisha loans, or request a withdrawal of all or part of their balance.

$$$ As a nonprofit organization, Zidisha relies on voluntary contributions from its lenders and supporters to cover operating expenses. Zidisha collects the first 5% of the interest; anything above 5% is passed on to the lenders. A one-time borrower registration fee covers the cost of the credit history verification. First-time borrowers can borrow up to $100, and earn higher credit limits when they repay their loans on time. The maximum loan is $10,000, repaid over 12 months.

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