Can Microloans Save America's Small Businesses?

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Kiva Microlending hopes to help struggling businesses.

Kiva has long been the leader in microlending to the developing world and has a strong track record of success when it comes to helping revitalize economies and building strong communities. If you aren't familiar with Micolending, don't worry, the concept is still new to most Americans. Basically it provides small loans to people who are trying to start a business or improve their business in order to create new jobs. Using the Internet, individuals can go through a list of all the people who are looking for loans, review their business plan and then they can opt to lend a small amount to the people who they think will be successful. After enough lenders have given someone the money, Kiva issues the loan and then handles the repayment. Typically, these loans are for amounts ranging from $100-$500.

For example, a woman in a small village in Africa might have a cow. She milks the cow each day and sells it at the local market. With a small loan from Kiva, she can afford to buy another cow. Now, her profit has doubled and she can repay the loan. After that, she can use the increase in profits to purchase another cow and possibly hire someone to help her with the milking and care of the livestock. As her business grows, she might ask Kiva for another small loan to buy a wagon or a truck to make delivery easier and improve productivity. Of course, this would mean she would have to hire someone to handle the delivery and sale of the milk, allowing her more time to care for her growing number of cows. This small loan service makes it possible for the woman to get out of the cycle of poverty and provide income for the people she employs, the market that sells the milk and even the people who sell cows. Not to mention, her village has a more reliable milk supply.

It's easy to see how this type of service can really make a difference in the developing world. But what about here in America?

For some struggling small businesses, a small loan can make a huge difference. Considering the current state of our economy, it couldn't happen soon enough.

Recently, Kiva announced that they are expanding their microloan service to help small businesses in hard hit areas of the country. Their new program, called Kiva City launched a pilot program a little over a year ago. In cities like Detroit and New Orleans, they have already been having some success.

For example in New Orleans, an aesthetician received $10,000 to allow her to start a medical skin treatment service that works alongside local doctor's offices. She had been struggling to keep her business afloat because each time she became successful, the offices would close, forcing her to start all over somewhere else. Now that she has some money to work with, she is able to offer a better degree of service and offer a more spa-like atmosphere. This helps her retain clients and also helps the struggling doctors as well.

In Detroit, another community is struggling to rebuild from the ashes. With microlending services like Kiva that are designed to help small businesses and encourage the growth of strong communities, people now will have the ability to make a difference. For many of these people, getting small loans from a bank was next to impossible. The only companies that offer these types of small loans are typically predatory lenders like payday loans and loans against car titles. Typically, these loans aren't designed to uplift people. Instead, they are designed to exploit poor people and keep them trapped in a cycle of poverty by charging obscene interest rates and repossessing people's cars because they owe $500 and can't pay.

I think that anyone who has a little bit of extra money and wants to make a difference should consider visiting the Kiva City site and loaning $25-$100 to help someone build a better life and contribute to their communities.

Have you ever lent money through a site like Kiva? What do you think about Micro-lending? I would love to hear your thoughts in the comments.

By Melissa Kennedy- Melissa is a 9 year blog veteran and a freelance writer for FinancialJobBank and Nexxt. Along with helping others find the job of their dreams, she enjoys computer geekery, raising a teenager, supporting her local library, writing about herself in the third person and working on her next novel.

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