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Kiva Introduces U.S. Microloans

Internet microlender Kiva is extending its services to U.S.-based entrepreneurs for the first time.

For almost four years, the online lending service has been helping small business owners raise funds. The focus was initially on African nations, and over time it expanded to include other developing nations. Poverty being no stranger to the developed world, and the global credit crisis stubbornly in place, Kiva has decided to open up micro financing even more widely.

"Since over 70% of our lenders are currently from North America, the United States was a natural first choice," a Kiva blog post stated Wednesday.

Here's how Kiva works:

1. Lenders browse profiles of entrepreneurs. Choose someone to loan to. Kiva's home page recently featured Enrique, "the proud owner of a shoe repair business in Manhattan. Shoes are his passion." He is seeking a $5,000 for "leather, rubber soles and general working capital." See all U.S. loan-seekers here.
2. Kiva's microfinance partners distribute the loan and may provide guidance to the entrepreneur.
3. The entrepreneur repays the loan. It's important to note that these are loans, and not gifts.

Microfinance is not without risks. Business and health setbacks, bankruptcy, fraud, and poor operations are the bugaboos of capitalism both high (GM, Madoff Investment Securities) and low. But Kiva helps lenders assess the risks, urges diversification, and provides field partners to administer the loans. The current default rate on $34,000,000 in ended loans is 1.6%, Kiva says.

By opening up its lending to U.S. loan-seekers, Kiva joins Prosper and Lending Club in cutting banks out of the equation. One key difference: While borrowers on Kiva are focused on sustaining or building their businesses, borrowers on other sites may want to buy a new motorcycle or fix a child's overbite.

But it all boils down to a greener way to borrow and lend.

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