07/03/2012 03:08 pm ET Updated Aug 20, 2012

Kiva LA: Site That Lets Public Lend To Small Businesses Expands To Los Angeles (PHOTOS)

A small-loans nonprofit that lifted thousands out of poverty in Tanzania, Bolivia and Uganda has now set its sights on reducing record-high unemployment in what's been called America's Third World City: Los Angeles.

Kiva, a microlender primarily for individuals in developing countries, so far has provided loans to 13 small businesses in LA. For Maria Ramirez, who received a $2,000 loan from Kiva, that meant being able to purchase equipment to rent from her party- supply store, Miscelanea Familiar, in San Fernando.

Loans such as Ramirez's are funded by the public through Kiva's website, where the nonprofit posts pictures of entrepreneurs needing a loan along with details of what the loan would buy. Lenders can then visit the site and choose a small business. According to Kiva's site, borrowers pay the lenders back 98 percent of the time. Even still, the nonprofit recommends that lenders only give $25 per project and spread their money out among various businesses.

With funding from Visa, Kiva, which is headquartered in San Francisco, started its domestic Kiva City program in 2008 in Detroit, then included New Orleans. Why is Los Angeles next?

The nonprofit's founder and former PayPal executive, Premal Shah, told the Huffington Post that Los Angeles was a logical choice because, more than any other U.S. city, its economy rests on the health of its small businesses. LA has the nation's largest small-business community, made up of 325,000 small businesses, about 70 percent of which are minority and women-owned, according to Mayor Antonio Villaraigoisa's office.

The Valley Economic Development Center (VEDC) and Villaraigosa's Office of Small Business are partnering with Kiva Los Angeles and will help find borrowers for the site. VEDC received $700,000 from Kiva to distribute in loans, averaging $7,000 each. The interest rate will be 8 to 12 percent, which is high but still a lot lower than the 35 percent average interest rate on Kiva loans in developing countries, Shah told HuffPost.

He explained that interest rates are high because the costs of making small loans to the underserved is high. In the U.S., those costs include business training, site visits and preparing loan processing documents.

But the rates are lower than what the same borrowers might find elsewhere, Shah said. Kiva borrowers almost always pay the loans back, and they usually make several times more in income than they're paying in interest rates, he added.

Kiva is responding to a demand for small businesses loans, or "microloans," that exists because providing a $50,000 loan costs a bank just as much as providing a $1 million loan (which is more profitable for banks), according to the U.S. Small Business Administration.

Small businesses nationally create two out of every three new jobs, employ more than half of private sector employees and produce over half of the non-farm GDP, according to a 2011 economic report from President Barack Obama. If microloans such as Kiva's funded a new employee for 1 in 3 small businesses nationally, the U.S. would be at full employment, according to the Association for Enterprise Opportunity.

"Crowd-funding allows us all to be a part of the solution," Shah commented. "There's bad news everywhere, including in Los Angeles, and this is a chance for us to be a part of the journey of another business owner. And you don’t have to be very rich to do so."

According to its website, Kiva, which started in 2005, has set up more than 800,000 borrowers with lenders who collectively have funded more than $325 million in loans, primarily in developing countries.

Check out the LA small businesses that have already received Kiva loans:
Photos and captions from VEDC: