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Direct funding from western consumers to small business in the developing world

October 27, 2006

Raising capital to fund third-world development is clearly a big issue and one can argue that the major thing these countries need is a developed infrastructure; clean water, health, education, etc.

In theory, these issues should take priority ahead of business loans. However, micro-finance has considerable benefits and if thousands of small businesses can prosper, the wealth created will help to eliminate some of the bigger problems.

Last month, Muhammad Yunus the pioneer of micro-finance, was awarded the Nobel Prize for his innovative efforts to lend money to those who were being ignored and considered un-creditworthy by banks.

Kiva is a site that allows individuals to loan money to small-businesses in the developing world.

It’s a brilliantly simple site, but one with a ton of logistics beyond it. Kiva has to manage the grassroots organizations on the front line of lending and manage the money transfer and information flow.

Individuals can make loans in increments of $25 and the total size of the loans is pretty small, most are under $1000. The web site allows the user to match their funds to a specific individual, to see the desired amount, the payback period and what the money would be used for. In addition, there is an opportunity to see how the individual progresses in their business goals with reports, etc.

There’s potential here for brands to align with Kiva.

Here are a few suggestions from Influx:

Big US retailers could make loans to small retail businesses in the developing world

Brands like The Body Shop and Aveda could encourage their customers to help fund these developing world businesses

Local taxi operators could support taxi owners in the developing world

Local merchants could “twin” with similar merchants in the developing world- adopting their own business

The idea of individuals being able to give their money straight to the source is a new and one with considerable appeal. Being able to directly see the impact and difference an individual can make with a small amount of cash is pretty rewarding.

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