One thing I did with my birthday money this month was open an account with Kiva. A brief summary: Kiva is an organization that allows people to give microloans worldwide. Loans are given to small entrepreneurs through third-party lenders local to the entrepreneurs. Most of these entrepreneurs are women starting or enlarging small businesses.
Repayment periods are generally 6 months to 1 year. You don’t earn interest on the loan, but the default rate is quite low (1.43%, though some areas have no defaults) so you’re very likely to get your money back. You can then withdraw it or use it to fund a new loan.
I don’t see Kiva as part of an investment portfolio, but it’s definitely part of a charitable portfolio. The more you put in, the more you have to lend in the future—even $25 put in once can help two entrepreneurs in a year!
Recently, I was struck by a way that people can give even more through Kiva. There’s a practice, at least among my family and acquaintance, of giving to charity instead of giving birthday or Christmas or wedding gifts. It’s not widespread, but it’s becoming more common. I’ve received llamas (friends IRL will know why) as well as a few shares of sheep.
So another path one might follow is giving to Kiva in someone’s name. Giving to Kiva creates even more possibilities for the giftee. I’ve come up with what I believe is the optimal way to give someone a fantastic and flexible birthday (or other) present.
1. Start Early. You’ll need to start at least 6 months before your recipient’s birthday or other special occasion. I think 7 months would be a good idea.
2. Open the Account. You can use your name or that of your intended recipient (the giftee, not the loan recipient), but you’ll probably want to use an e-mail address to which you have access. Signing up is very quick.
3. Fund the Account. Fund the account with however much money you intend to give the recipient. It has to be in multiples of $25. Loan the money to entrepreneurs with 6 month repayment timelines (or more if you’ve started farther ahead of time). For bonus points, pick entrepreneurs whose businesses seem particularly compatible with the recipient (for me, for example, a llama farmer would be perfect).
4. Wait. Done setting up? Here comes the long part—wait 6 months while the money goes to work around the world.
5. Collect. Check in at the end of the loan periods (and periodically in the interim). Given Kiva’s repayment rate, it’s quite likely that your loans will be repaid in their entirety.
6. Hand Over the Account. Birthday time! If you haven’t already, go into the “My Account” section and change the account to reflect the other person’s name, e-mail address, and suitable password. Give all of the above to recipient.
7. Let the Recipient Take Over. The recipient can lend the money to another entrepreneur, give it to cover Kiva’s operations, or withdraw it (via PayPal but without fees).
The beauty of this whole situation is that the person who gets the money gets to choose exactly what they do with it. They can keep lending it over and over, give it to Kiva, withdraw it and give it elsewhere or withdraw and use it. Even if they choose to withdraw it and spend it all on candy, it’s already done good in the world. You can’t do that with most gifts–it’s an either/or. This case is more of a good/better!
So next time you’re looking for a creative way to give, why not try it out?
Note: I talked with a Kiva staffer who confirmed that one could fund a loan and then change the account to someone else’s name and e-mail address in the “My Account” section. It also looks very easy to do. And worst case scenario, you can come up with an alternative gift idea.