Kiva.org Expands Microloans To College Students
The world's first microlending website, Kiva.org, believes that a quality education for ambitious students in developing countries may be only $25 away.
The organization, which invites Internet users from around the world to provide small, no-interest loans to poor small business owners, announced Monday it will be extending its loan programs to include educational loans for students.
In the countries that Kiva.org serves, "a one year certificate in accounting can increase a person's income 200 to 300 percent," Premal Shah, President of Kiva.org, told HuffPost. "Education has a high return on investment but the biggest barrier is financial hardship."
American students and financial institutions are used to a robust lending system that allows them to borrow and repay loans over a long period of time to satisfy their academic aspirations.
But in the places like the pilot program's countries of Lebanon, Paraguay and Bolivia, lower and middle class students have few options if their families cannot pay for the tuition and incidental costs of higher education, Shah continued.
"This student loan 'product' doesn't really exist in the developing world because there's no real track record of repayment, so banks won't issue loans or create new programs. It's a chicken or egg problem."
Kiva.org aims to break that cycle by definitively proving one way or the other whether higher education students are good loan candidates and local banks and other lending organizations will follow as they did with small business microloans. "If we can show a high repayment rate, we think it will have a huge demonstration effect."
The program will start by lending 40 second-year college students about $1000 each for tuition. Each student will have a profile online that includes the terms of the Kiva loan, their geographic information and a personal biography that distinguishes them from other Kiva.org borrowers.
Noelia Ruiz Diaz Figueredo is a borrower from Paraguay who needs money for basic school materials and supplies. Her profile reads:
"Noelia Ruiz Diaz is from Limpio. She is 20 years old and is in the second year of the Sciences of Education and Mathematics program at the Universidad UTCD de Asunción. She has one sister who is studying in high school. Her mother is a housewife and her father is a construction worker. Noelia currently teaches private classes, earning to have an income and, in this way, help her parents who pay for her studies, and to also practice her future profession. She travels everyday by bus to her school's campus since it is far from her house. Noelia's dream is to finish her degree and work in an educational institution to teach the higher knowledge that she is acquiring."
Shah isn't sure yet if site users will be as enthusiastic about lending to a student like Figueredo, who has big dreams but no clear-cut route to repayment. He also realizes there are no guarantees that she, or any of the other students on the site, will complete their educations and repay their loans.
"One of the big things we want to understand is what the repayment rate is for these students. It's a loan and not a donation and we love the accountability on the loan. That's something we really want to preserve. If we see these loans aren't being paid back, then it's not appropriate for Kiva."
Even more intriguing to Shah is how different types of borrowers will repay what they owe. Do Lebanese students pay their loans back at a higher rate than those in Paraguay? What is it about certain sectors, countries, education degrees that drive up repayment rates?
"We want to place a lot of experiments with no more than 100 students per country," Shah told HuffPost. "It's a really exciting social experiment on the Kiva platform."
To explore the profiles of 40 Kiva student borrowers and offer a loan as low as $25 for higher education, visit Kiva.org.