Technology Platform Helps Microlender Reach Low-Income Entrepreneurs

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    Back in 2007, I took advantage of an incredibly cool technology platform that enabled me to loan $25 to a woman in Afghanistan named Rohena Faiz Mohammad, who needed $300 to buy beans and peas to sell on the street. It’s difficult for women in Afghan society to engage in a business like that, so having a vehicle to help her meant a lot to her and being able to contribute to a worthy business meant a lot to me.

    The vehicle that made this transaction possible was Kiva, a non-profit organization in San Francisco that fights poverty all over the world by providing the technology for people like you and me to make microloans to aspiring entrepreneurs. I recently learned that it’s getting easier to help the people who need it most right here at home, too. Kiva has launched microlending initiatives in a number of major cities in the United States.

    The most recent such initiative was launched earlier this month in Newark, when Kiva formed a partnership with the Intersect Fund, a non-profit microfinance organization in New Brunswick, N.J. The organization was founded in 2008 by two Rutgers University students, Rohan Mathew and Joe Shure, to help low-income entrepreneurs in the local community. Mathew is now the organization’s president and CEO, and I spoke with him last week to learn more about the Kiva partnership.

    I asked Mathew how the partnership came about, and he said Kiva had invited him to go out to its headquarters in San Francisco last year to give a talk about the Intersect Fund. The synergy was obvious:

    Kiva is a technology company that works with microfinance institutions like us to help us connect our borrowers with lenders all around the world. They have this Kiva City initiative that they started, I think back in 2009—they’ve launched Kiva Cities in Detroit, Washington, D.C., Los Angeles and New Orleans, to allow borrowers there to raise money on the Kiva platform. I told them that the Intersect Fund was planning on expanding [from central New Jersey] to Newark in 2013, and it just kind of all came together. The launch was on July 15, and Kiva City Newark was the largest Kiva City launch ever—we had 24 loans posted. So the Intersect Fund is able to raise more capital, which is something we’re very much in need of. And it allows us to provide a different kind of experience for our supporters to connect directly with the borrowers. Before we launched this partnership with Kiva, you could go onto our website and make a donation. But with Kiva there’s a person-to-person connection—you can see the profile and read the story of individual borrowers, pick which one you like the best, and lend directly to them. There’s something powerful about that, and we didn’t have the technology to do it.

    Mathew went on to explain that the biggest barrier to the organization’s growth is simply getting the word out:

    What we offer is an extremely attractive product for businesses that can’t raise capital. Most of them are turning to things like loan sharks, which charge upwards of 300 percent annual interest, in order to fund their businesses. … Most of our borrowers don’t have access even to a credit card—even if they could get one, they’d probably be paying 30 percent interest. Our loans are typically small loans—$2,500 is the average size, and short-term. Our interest rates typically range from 10 percent to 15 percent. So for a $2,500 loan over 12 months, you pay about $180 in interest over the course of the loan.

    I asked Mathew to encapsulate what the criteria are for a small business to become a borrower through this program. He said the organization funds both startups and existing businesses, and he listed the requirements:

    The entrepreneur just needs to be over the age of 18 and have at least $1,000 in monthly household income. We look for people who don’t have any past-due taxes, legal judgments, or child support. So if you meet those requirements, you’ll probably be pre-approved for an Intersect Fund loan on Kiva. … I can tell you that 99 percent of our loans have gone to either low-income or minority-owned businesses. That has happened just by virtue of the type of outreach that we do—we focus on the areas of the city that have the greatest need. People who have higher incomes and better credit scores have more opportunities to secure capital, and we’d rather they do that. We want to use our capital for the people who really need it most, rather than make it available to someone who could get a loan elsewhere. I can tell you that almost every single dollar goes to the people who need it most.

    Finally, Mathew explained that the Intersect Fund strives to help these entrepreneurs not just by providing capital, but by connecting them with technology:

    The people who come to us don’t have a very high degree of digital literacy. One of the things we do is we help them become more digitally literate, to come into the 21st century. So things as simple as registering with Google Places so they’ll show up on the map in a Google search, or dealing with a negative review on Yelp, or creating a Facebook page. One of the things I’m proudest of that the Intersect Fund does is taking a population that’s really not connected to technology, and helping them learn about how it can help their business.

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