News and Tribune

March 4, 2014

BEAM: You get what you give

Local columnist

— Dressed in a red printed shirt and vest, a 54-year-old woman sits on the ground of her Kyrgyzstan home cradling two sheep. The accompanying story underneath the photo informs us that her name is Gulkhan.

These furry, four-legged friends are much more than pets. For Gulkhan, they are an investment, one that has provided an additional income these past 19 years for her family of five.

Like any good entrepreneur, Gulkhan wants to expand her business by purchasing some additional cows to fatten up and resell. But finding capital in impoverished, rural areas isn’t always easy. Investors don’t find big profits by taking chances on the poor. In addition, banks, in the Western sense, are few and far between in the backwoods of countries like Kyrgyzstan. People that do lend money tend to charge exorbitant interest rates.

So, last week, I loaned Gulkhan 25 bucks.

OK. OK. It wasn’t just me. Seventy-five folks from across the globe pitched in varying amounts of funds so this woman could reach her $2,000 goal. It’s called microcredit, a relatively new weapon in the war against poverty. The micro refers to the small size of the loan, another hurdle that oftentimes keeps those with low incomes from obtaining funds.

Since 2005, a nonprofit organization called Kiva has provided a platform where would-be lenders could learn about prospective borrowers, many of who have few financial resources. It’s where I met Gulkhan. In this new take on philanthropy, donors help lenders help themselves by encouraging new opportunities through self-sufficiency.

The process works like this. Would-be lenders go to and browse the different profiles of those requesting a loan. Individuals from more than 70 countries, including the United States,  post their stories and aspirations on the site.

As little as $25 may be applied to the selected loan. More money can be given, but the Kiva website recommends diversifying your “portfolio,” much like a Wall Street investor does with stocks. While 98.97 percent of all loans are repaid, there’s still an ever-so-slight chance that your borrower may default.

Kiva itself doesn’t appropriate the funds to the borrower directly. Rather, field partners across the globe receive the money and disperse it to individuals and groups that have applied and met preselected criteria. At times, the loan already has been given, and the allocation from Kiva merely refunds the initial amount to the partner.

Over a set period, the individual or group repays the loan. For Gulkhan, that’s 14 months. Normally each month, the lender, as long as the borrower makes a payment, will receive a portion of their initial investment returned. Once the loan has been paid back, the investor can either withdraw their funds from Kiva using a Paypal account, choose another project to invest in or donate the money back to aid Kiva with their operational expenses.

Make no mistake. While Kiva charges no interest, many of the field partners do to cover their own costs and defaults, some at percentages that sound steep to Americans. That’s one of several reasons why microfinancing doesn’t work for everybody.

Some in low-income situations either aren’t able to afford the loan or aren’t in a position, albeit through health or location issues, that allows them to succeed. Even Kiva acknowledges that these loans are “not always the appropriate method, and that it should never be seen as the only tool for ending poverty.”

Still, studies have shown the impact microcredit can have on low-income homes, especially for females. In the book “Half the Sky,” authors Nicholas D. Kristof and Sheryl WuDunn detail this influence by looking at the lives of women who have succeeded using these types of loans. For example, look at the results from a program run by the organization Kashf in Pakistan.

“An in-house evaluation concluded that by the time the borrowers have taken their third loan, 34 percent have moved above the poverty line in Pakistan. A poll found that 54 percent said their husbands respected them more, and 40 percent of said they had fewer fights with their husbands over money,” said Kristof in the chapter entitled “Microcredit: The Financial Revolution.”

Are those percentages insignificant in a global setting? Some might argue that, but they’re still promising. Change is change, even at a microscopic level. And while my $25 loan won’t save millions from living a life of abject poverty, it could make a difference for a family in Kyrgyzstan.

There’s nothing small about that.

— Amanda Beam is a Floyd County resident and Jeffersonville native. Contact her by email at