Tuesday, November 08, 2005

Sponsoring an African business

You are probably well-acquainted with the commercials that offer a chance to sponsor an African child. There is a new site called Kiva.org, that offers the opportunity to sponsor an African business through a small loan (as little as $25).

By choosing a business on our website and then lending money online to that enterprise, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan usually 6-12 months), you can receive monthly email updates that let you know about the progress being made by the small business you've sponsored. These updates include reports on loan repayment progress, photos of new capital equipment, narratives on business growth and standard of living improvements, and more. As loans are repaid, you will get your original loan money back.
It is currently being offered just in Uganda and because of the publicity they have been receiving, they are currently out of businesses to sponsor. Apparently if the company defaults on the loan, your loan becomes a donation, but none of the companies have defaulted yet.

You can see the businesses that are being sponsored here.

What do you guys think of this strategy for helping people in developing nations? What are the advantages of this over traditional aid that are pure donations?

(Source: Private Sector Development Blog)


Gregory Bylos said...

I think this is a brilliant strategy to getting people to give money to help third-world countries. The advantages to this are 1)the money is used not simply to give people resources, but to help promote industry and business so that they can develop, and 2)that people are more willing to give money that they will most likely get back anyway. People will feel like they are making a difference without technically having to give anything except lending their money for a couple months. Also, like the other post points out, because it's online, it's very very easy to donate your money.

Daniel Hanison said...

I agree, I think that another advantage is that the people giving money know that the money isn't going straight into the hands of a corrupt politician. Some aid given to third-world countries is pocketed by a corrupt politician in that country. Its a simple way of donating that makes people feel like they are making a difference.

Anonymous said...

I like this idea, and I think it's a great way to help third-world countries turn things around. In order to be a successful country, you have to have a successful economy, and this idea will definitely help their economy. This way, you're not only helping one particular business, but you're also helping the entire country. I also agree with Gregory's #2.
-Emily Freebairn

Anonymous said...

Also when you help business and those businesses grow, it provides opportunity for them to hire and produce locally provided goods and services. People who are working and making a honest living are less likely to cause trouble.