Supporting the Searcher: Welcome to micro-lending at large

I discovered Kiva a year ago and since then I have been excited for what it represents. Its business model arguably is the biggest progress in supporting development in the last decades. Have you ever imagined you could lend money to someone in Karachi, Pakistan starting a store? How about lending to open a weaving business in Chichicastenango, Guatemala? Now you can. Welcome to micro-lending at large.


Kiva, in a business model similar to eBay, creates a marketplace where borrowers – in the developing world – and lenders – mostly in developed countries – come together. Through Kiva, I can choose that region, country, business and person I want to lend to.

Peer-to-peer lending can definitely change the world. It has three key aspects that make it different from any other means of supporting development. First, it empowers people by offering the opportunity to start a business and, in broader terms, an independent source of income, breaking its dependence from governmental aid. This can have profound impacts not only on the economic profile of the country but also on political aspects, as it changes the relationships between the state and the population in developing countries.

Second, the approach is expected to be significantly more effective in raising the income of the poor than any other aid mechanism designed by bilateral donors or multilateral organisations. After all, it is the borrower who decides how to increase her income.

Third, it is cost-effective. No intermediaries – other than those that sustain the market – are needed to bring the money directly to the citizen.

The key challenges to increase the scale of this model are two. On the one hand, the market should ensure transparency, which means ensuring the identity of the borrower and confirming that the money goes to the project the lender wants to lend to. This is by no means easy. It requires presence on the field and an important auditing job (unless the lender does not require any specific purpose for the money, debatable if the objective is to promote investment projects).

On the other, it should strengthen the ability to incorporate borrowers to the market. The digital divide keeps most of the population in the developing world without access to the internet, so it is critical to find ways to seek and find the entrepreneurs in these countries. One alternative would be to promote mobile access – which is high even in the poorest countries – and create the necessary organizations and structures on the field to promote and raise awareness of the opportunities provided by peer-to-peer lending.

Finally, the market should seek the incorporation of public funds. The government should scale down its planning and aid agencies and let the people in developing countries to decide how to invest their money.

We are dealing with a new model that challenges the whole structure of NGOs and government agencies in place for decades. The world needs, as William Easterly states, less Planners and more Searchers. The internet and the Kiva model offer the opportunity many people were looking for. Let’s build upon it.