Money makes the world go round!

If you have it, a lot of things work. If you don’t, a lot of things don’t.

Kiva, meaning “unity” in Swahili, was founded as an micro-loan experiment in East Africa to help small, minority, and women-owned businesses get off the ground.

The first loans were less than $500, as many are today in underdeveloped countries. Kiva is now in 77 countries, has generated $1.7 billion in loans from 1.6 million lenders with a repayment rate of 96%.

Though it operates differently in the US, Kiva is an internet crowd-funding platform where borrowers ask lenders to make loans in amounts as low as $25. Kiva US focuses on small businesses that banks ignore because the borrowers have low credit scores and no collateral. When these businesses can find loans, interest rates and fees are often exorbitant.

Kiva solved all of that. No interest. No fees. Low credit scores and no collateral are OK.

I met Kiva in 2020. It uses a three-pronged model with hubs, funders and trustees. The hub is the focal point with a manager charged with marketing Kiva and helping borrowers navigate Kiva.org to get their loans online.

Funders support hubs, if needed, to cover Kiva’s annual $25,000 cost and to pay the manager. Funders also create matching funds making it easier for the borrowers to reach their goals.

Because Kiva doesn’t know its borrowers, it relies upon trustees to “endorse” borrowers and to be mentors. Endorsed loans get their loans much more often than non-endorsed borrowers.

Self-Help Credit Union, a local minority-focused bank, agreed to be the hub. Salisbury gave Self-Help $20,000 to cover the hub’s fee to Kiva. Salisbury also set aside $60,000 for a matching fund. Kiva charges 10% per year to administer matching funds, so over a three-year contract, that would reduce Salisbury dollars available to borrowers by $18,000.

Unfortunately, there were some glitches during the first year, so city council “paused” the program. Suddenly, the public cared and criticized city council for taking money away from small businesses. In fairness, “pause” in government-speak can mean termination.

Not this time. City council thought the taxpayer received no return on its $20,000 investment and needed time to revisit the program with Kiva and Self-Help. Even though three local borrowers had failed to reach their loan amounts, the city was never informed of any borrower activity. Consequently, we never remitted our matching funds to Kiva. (The city does not match loans. Funders send money to Kiva which does the matching.)

Last month, two borrowers were successful, one raising $6,000 and the other raising $15,000. Both attracted almost 300 lenders around the country. That’s the power of Kiva. One complained publicly about not having access to Salisbury’s matching fund. Both loans received matching funds from other funders, from a women-focused fund and from Bank of America. So, neither lost a single dollar because of the city’s delay.

Kiva will continue in Salisbury, but will not use the hub model. Kiva US was originally a trustee-based model. Trustees do the community outreach and help borrowers navigate the application process. (The hub model grew out of larger cities organizing trustees.) Because Kiva charges no fee for a trustee model, the city can re-direct those dollars into its matching fund.

Pete Teague has been my partner throughout this process. We are creating a non-governmental trustee organization. Though we have a list of potential trustees, we invite anyone to join. To keep every trustee from having to learn how to navigate Kiva.org, we are also creating a way to assist borrowers referred by trustees.

To be clear, any borrower anywhere can go to Kiva.org and apply for a loan. Borrowers are not required to use a hub or a trustee.

Finally, Kiva also has over 4,000 “teams,” groups that make loans. They range from 175,000 to one member and with loans ranging from $66 million to $25. When a team member makes a loan, the team gets credit. Hopefully, Salisbury can organize some teams, say, the Chamber’s Minority Business Council, colleges, churches and civic clubs.

Here’s the bottom line: if Salisbury wants to help grow small, minority, and women-owned businesses, the pieces are in place to make the world go round.

David Post is a Salisbury city council member.