Microlending Pioneers Kiva and Prosper
February 9th, 2007
Kiva.org which loosely translates into “agreement” in Swahili and Proper.com are two startups with different aims targeting the microlending industry.
Prosper.com raised $7.5m from Benchmark and Accel. “There’s no question we were going to get funded because of our track record” says Larsen, 45 who was founder and chairman of E-Loan. Then last February, Fidelity and Omidyar Network invested $12.5m in Prosper. “We didn’t need the money but we wanted the brainpower”.
Flannery and his wife Jessica of Kiva worked with a pastor in Uganda to gather loan requests of $3100. They went through their wedding list and contacted all the people invited and raised the money within 3 days. All the money was distributed to the Uganda entrepreneurs and repaid within the year, interest free.
Unlike Prosper, Kiva works only with Entrepreneurs.
COO Olana Hirsch Khan came to Kiva in May after 6 years in Sales at Google. Permal Shah, who made his fortune as one of Ebays first employees became Kiva’s president last year. Shah and Flannery now earn about $3,300 a month and Jessica volunteers while she finishes her Masters Degree.
The field of microlending was born in the 70’s and is gaining wide acceptance and prominence from the internet. Muhammad Yunus founded microlender Grameen Bank in 1976 and won the 2006 Nobel Peace prize for developing the idea of making small loans to entrepreneurs.
Prosper receives 1% of the loan amount and lenders pay an annual service fee of 0.5% of the amount they lend.
In it’s first 7 months, Prosper’s 100,000 users have made $22m in loans, averaging about $5,000 usd. Kiva’s 15,000 lenders have made $1.2m usd in loans with an average loan size of $500.
Kiva’s Shah says… “Right now there are so few people doing this and it’s so experimental, we need to help each other. If either model has a significant flaw, it could destroy the credibility for everyone”.
www.kiva.org
www.prosper.com
www.fundable.org
source: Business Week Small Biz Winter 2006
