Strategies: Shriver's big on small loans, for good reason

— -- It was an ordinary day at the San Francisco offices of Kiva — the online community that enables people to loan very small amounts of money to aspiring entrepreneurs and small businesses in developing countries.

The young president, Premal Shah, and CEO, Matt Flannery, were in the midst of one of their daily arguments. All of a sudden, with no warning, in walked the first lady of California, Maria Shriver.

Shriver had a simple question: Why not enable microloans right here in America?

That surprise visit over a year ago resulted in a new microlending program in the U.S., launched June 10. Small-business owners can now receive loans for small, but critical amounts, through Kiva.org. This is especially important when credit, and times, are so tough.

As importantly, those of you who want to help others right here in America start and grow their businesses — often pulling themselves out of poverty or unemployment — can make loans in amounts as low as $25. Remember, these are loans — not charity. And they make a huge difference. As the tagline for Kiva goes, "loans that change lives."

Shriver first became interested in microlending as a result of the Women's Conference she runs as first lady (her husband is California Gov. Arnold Schwarzenegger) and a program — WE invest — that grew out of the conference. "We'd wanted to do microlending in California for some time." Knowing of Nobel Peace Prize winner, Muhammad Yunus, whose Grameen Bank makes microloans throughout the world, Shriver thought, "Why can't we do that here?"

But everyone told her microlending in the U.S. was too complicated. There were legal problems. It couldn't be done. And then she heard of Kiva, a company doing global microlending, based in her own state of California.

"I was in San Francisco and had down time for two hours," Shriver told me. "I went over to Kiva. I just wanted to walk around their offices. We sat down, and I asked, 'Why can't we work together?' I started scared, and then I met the Kiva people, and they were not scared. And I thought, 'these are good people for me.'" Isn't it nice to know that Maria Shriver — a Kennedy and first lady of California — gets scared, too?

"Every month, a million people visit the Kiva website," said Premal Shah, Kiva's president. "We get more traffic than the Red Cross. Over half a million people have made a loan. It's a site that's really captured the imagination. After all, $25 goes such a long way in Uganda or Cambodia. If you need $300 to buy a cow or start a yogurt business, $25 makes a life-changing impact."

But $300 doesn't go so far in the U.S. Shah predicts that American loan sizes will be in the $5,000-$10,000 range. "But $10,000 is only 400 $25 lenders backing a person," Shah explained.

Kiva's concept is simple — so simple it seems unlikely. Small-business entrepreneurs who need money are listed on Kiva's site. Individuals who want to lend money choose who'd they like to help. And over time, the lenders get paid back and can lend their money again. Kiva has a 98% repayment rate, according to Shah.

"It's a great social experiment. It's all about creating a marketplace of trust for small businesses," Shah said. "People are so willing to bank on other people." To screen applicants, Kiva works with field partners, local microlending organizations. In the US, Kiva's field partners are currently Accion USA and Opportunity Fund. They're now only accepting applications from California and New York but expect to expand to other states soon.

Last holiday season, I gave each of my nieces and nephews a gift certificate to Kiva, wanting them to experience helping someone achieve self-sufficiency through entrepreneurship. My nieces, Kayley and Adeena, invested right away; Adeena's following Chanthorn Ngun, a fruit seller in Cambodia. When I told my nephew Aaron he could now invest in someone right here in the U.S., he got really excited. I suspect many Americans will be like Aaron — eager to help others right here at home grow their way out of poverty.

If you want more information about how you can make — or get — a microloan, go to www.Kiva.org. Make a loan; change a life.

Rhonda Abrams is president of The Planning Shop, publisher of books for entrepreneurs. Her newest book is Successful Marketing: Secrets & Strategies. Register for Rhonda's free business tips at www.PlanningShop.com. For an index of her columns, click here. Copyright Rhonda Abrams 2009.