HourChallenge

I am pretty amped up right now. I just extended my first small business loan of $25 to Ruhid Aliyev of Saatli town, Azerbaijan. Aliyev rents a sandwich bar in the local bazaar of Saatli town selling sandwiches to local customers and vendors. The business is going well but he needs some investment capitol to increase revenue.

This loan is one of possibly millions that will be made today by socially conscience banks and individuals. Microcredit is not a new phenomenon, but it is one that is catching steam these days. This is partly due to the work of Muhammad Yunnus. Yunnus began Grameen Bank, which shares the Nobel Peace Prize (2006) and now has 2,211 branches covering 70,370 villages and 6.5 million people. Most of the loans are made to poor women. Repayment rates are unbelievably high. I just finished his book Banker to the Poor which I highly recommend.

So what is Microcredit?

Microcredit is the extension of very small loans (microloans) to the unemployed, to poor entrepreneurs and to others living in poverty who are not considered bankable. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of financial services to the very poor; apart from loans, it includes savings, microinsurance and other financial innovations. Read more.

I funded my loan at Kiva.com. Kiva is a non-profit business / website that let’s you make small business loans to entrepreneurs around the world. 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 email journal updates from the business you’ve sponsored. As loans are repaid, you get your loan money back.