Peace Through PayPal?

Conti has loaned $25 to three dozen different entrepreneurs from Togo to Tanzania, Afghanistan to Iraq. He calls it his "two-martini loan."

"That's what it costs in D.C. for two martinis and instead someone in Tajikistan has two cows, is able to feed their family … that's an easy decision for me," said Conti.

And the small sums add up. In 20 months the San Francisco-based nonprofit has helped put more than $6 million into the hands of small business owners in 30 countries.

Kiva, which means "agreement" in Swahili, operates based on what's called social lending or person-to-person financing. The power of that method, according to Kiva CEO and co-founder Matt Flannery, lies in the personal connectivity felt on both sides of the transaction.

"I think the secret of Kiva's success is that it's a people-focused experience. People in America get to see where their dollars are going," said Flannery.

Sending a Message

In every country, Kiva has a field partner that deals directly with the entrepreneurs -- reviewing loan applications and delivering the cash. In Iraq, that partner is the Al-Aman Finance Center in Kirkuk, which is funded by a grant from USAID. Al-Aman chairman Waria Salhi says that the Kiva loans send a clear and powerful message to borrowers in Iraq.

"The message is 'Americans are not only the soldiers whom you see on Iraqi streets chasing bad guys. They are also good and hardworking people thousands of miles away and voluntarily willing to help you with their hard earned money,'" Salhi told ABC News in an e-mail.

"Lenders are not lending because they think of how the person is going to pay me back … they're lending because they think this person is the most in need," said Flannery.

The Payback

So far, Kiva has an excellent track record for the repayment of loans.

Only one out of 9,000 borrowers has defaulted on a Kiva loan; all others have paid back or started to pay back their lenders. While the individual lenders on Kiva don't collect interest on their loan, the borrowers do pay interest to Kiva's field partners at a rate of roughly 13 percent to help cover their operating expenses. That's usually far less than the interest charged by banks or other institutions that are available to make loans.

Aside from the default rate, experts find there can be other risks with this operating model for loans. In particular, there is a risk that loan recipients are not honest or realistic about their plans for the money they receive.

"It's very hard to vet projects on the ground … and make sure they're capable of doing what they say they'll do with the money," said Ethan Zuckerman, a research fellow at Harvard's Berkman Center for Internet & Society.

"Kiva's done quite well with this so far, leveraging contacts on the ground. But it gets harder to do the larger you get," he said.

The Next Step

As Kiva looks to raise more money for an expanding group of small businesses around the world, there will likely be changes to its operating model.

To date Kiva's overhead expenses have been covered by donations and grants, but sometime this year the nonprofit will introduce a fee of 2 percent to local partners to sustain and scale up its work.

There are also plans to build out the Web infrastructure on Kiva.org to add rich content including more photos and soon, video of Kiva loan applicants in remote reaches of the world.

But for now, entrepreneurs like Khadeja in Kirkuk, are just happy that they received a loan. She is looking forward to hiring some extra workers and getting new equipment for her beauty shop with her thousand dollars from Kiva.

"I tell my donor thank you," Khadeja told ABC News through a translator. "It will change my life."

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