Microlending helps small entrepreneurs start businesses - Essay Example

Microlending Helps Small Entrepreneurs Start Businesses Kiva has become a successful organization owing to its strategy of lending people cash without requiring collateral or making formal demands like other lending organizations do. Further more, the organization is successful in that it charges a lower interest rate that those charged by other lenders in the micro-finance industry. The organization is also successful because it makes it possible for lenders to borrow as little as $25 dollars while lenders.

Many lenders tend to focus of people who require relatively huge sums of money. The organization of Kiva is different from those of its traditional counterparts in the sense that it allows individuals and organizations to borrow and lend money online. What this means is that people do not have to go to a physical location to borrow money from Kiva or lenders. While many micro-lending institutions depend on money deposited by their members or bank loans to serve their customers, Kiva depends on lenders spread across the world for funds and has partnered with various local micro-finance organizations to disburse funds to loanees.

While many micro-lending organizations are profit oriented, Kiva is a non-profit organization. The business model adopted by Kiva may not work with larger loans owing to the risks involved. In the event that the organization gave a large loan to a person or organization that is not formally established and without committing an asset as collateral, the organization (Kiva) may experience a huge loss in the event that the loanee defaults in payment of the loan. This means that lenders would not be able to recover their funds leading to loss of confidence in the organization.

Without confidence or good will, the organization would ultimately fail or collapse.