I’ve been in Kenya for a couple of weeks now and have seen such diversity in not only the people, plants, and animals but also in standard of living, quality of life, and income levels. Like anywhere in the world some people live expensive, lavish lifestyles while others work hard with little to show for it at the end of the day. In Kenya, the latter is definitely the most prominent. But last week as a Kiva Fellow at Action Now: Kenya(ANK) in Nairobi, I saw the beauty and success of microfinance that I had hoped for but was skeptical about as I embarked on this adventure (in terms of the realities of economic opportunities in the developing world). In addition, I got to see the effects of Kiva first hand, and as an avid microfinance supporter, and as a Kiva lender myself, I was more than pleasantly surprised.
ANK’s lending model differs from what we traditionally think of when we think about microfinance. ANK uses micro-leasing as a means of uplifting people from poor economic conditions. Through micro-leasing, clients are provided with tangible goods as an in-kind loan, instead of cash, that can be used to start, expand, or enhance their business and improve their income, and ultimately the quality of life for them and their families. The clients are then responsible for paying back the cost of the items in the same manner, with the same terms, as a traditional cash loan. When in desperate situations, a cash loan is sometimes used to satisfy needs completely unrelated to the client’s business. This not only increases the client’s debt burden, it also leaves them without the advantage of additional investment capital to enhance their business – causing a downward-spiraling effect on their economic well-being. Micro-leasing bypasses this issue. You can’t feed a hungry child with a sewing machine. But you can use that sewing machine to earn income to feed that child.
So, last week I accompanied the loan officer/community mobilizer/superwoman who does just about anything that needs to be done, to the bank to meet with Jeremiah, a Kiva client. It was here that I could see Kiva funds actually working the way I, as a Kiva lender myself, envisioned it. The money that was raised for Jeremiah was deposited into ANK’s bank account and there I was, in a land far, far away from where the funds most likely came from, withdrawing it. It was almost as if there was this outstretched arm coming directly from the developed world with cash in hand, connecting with us here in Kenya!
We withdrew half of the exact amount of Jeremiah’s loan and headed for the Gikomba market to purchase the goods he needed for his shop. The other half will be used to make purchases in the near future. ANK’s procedure is for the loan officer to accompany the client to the shop and to get a receipt for the full amount of the purchases as evidence of the disbursement of the loan. The first shop we went to buy Jeremiah’s goods did not have any receipts available. This was not sufficient for the ANK officer due to the lack of accountability and transparency that could transpire, as well as the potential for inadvertently taking part in unethical trading. So we found another shop, one which was willing to provide a receipt, where Jeremiah could purchase his goods using the Kiva funds. In this small gesture, ANK exhibited its integrity and dedication to best practices.
While we were in the shop, the employee who was serving us was curious about this type of loan and where the money came from. She expressed that she had wanted to open a small business of her own but didn’t know where she would be able to get the capital to start-up. We told her about ANK and about Kiva and she was really excited about the idea. In the short time I’ve been here, I’ve learned that the majority of ANK’s clients hear about their micro-leasing program through word-of-mouth. They see a friend doing well in business, ask them how they did it, and come into ANK’s office to apply for a loan. Viral marketing has shown to be an effective tool for creating awareness of ANK’s products/services. To me, any product customers take upon themselves to promote, must be a great product. And in the case of microfinance, it’s not just the product they are promoting, they are promoting being proactive in uplifting oneself from poverty. Now there’s a product I can feel good about!
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