A UC Davis student could spend $25 at the movie theater on a ticket, artery-clogging popcorn and a jumbo soda. The same student could also send that $25 as an overseas loan to help kick start a business in Tajikistan. Not only is the money eventually repaid, but there is zero risk of heart attack.
This scenario is just one example of how microfinance works and what the new UC Davis Micro-lending Club is trying to promote. Simply put, micro-lending is the act of sending small loans to the poor, said senior communication major and club vice president, Thea Nilsson.
“You make a small loan to someone in another country,” Nilsson said. “When the loan is repaid you can either keep the money or you can loan it out again.“
Loans are given out on a charitable basis – no interest is received.
The club’s main inspiration and source of support is the microfinance group, Kiva. According to the Kiva webpage, they are the first micro-lending website to directly connect individual loaners to business owners around the world.
Kiva’s website allows lenders to view the profiles of entrepreneurs outside of the United States that are seeking funds for their business. The organization then facilitates the transfer of loans from individual lenders to the businesses or organizations they wish to help, explained Nilsson.
“Kiva is an intermediary between microfinance institutions in the developing world and individuals,” said Executive Director of Campus Kiva, Morgan Lucas. “Because Kiva works with these banks, entrepreneurs do not contact Kiva directly, but rather through Kiva’s partner institutions.“
“We are focused on international loans because the dollar goes so much further overseas,“ Nilsson said. “I have loaned $50 to $75 multiple businesses, mostly retail and mostly women.“
Club president and junior molecular biology and biochemistry major Daniel Ayer, said the UC Davis Micro-lending Club originated when he and other students realized there was no on-campus microfinance group.
The Microlending Club was created as an extension of Campus Kiva, a wide network that connects microfinance clubs at over forty different universities, he said.
While the club will fundraise and take donations to loan money out through Kiva, this is not the group’s only intention.
“Our primary goal is to raise awareness of micro-lending in the community,” Ayer said. “[Our club] wants to spend an hour or so a week to inform people about microfinance.“
Campus Kiva and the UC Davis Micro-lending Club emphasize the prefix “micro.“ According to Ayer, a loan of $25 could make a significant impact for a business owner in a developing country.
“What’s really nice about micro-lending is that you can get together with friends and toss five dollars into a hat to loan out,” Ayer said. “Most of us don’t have a lot of money to loan but even that much can still help other people.“
According to Kiva statistics, the percentage of loans that fail to be repaid is extremely low. The default rate for loans, or percent of loans that go unreturned, is 1.8 percent.
“Kiva has a high repayment rate and is very low risk,” said Ayer, who has lent $25 to Tanzanian grocery store owner, Helena Matemba.
Like Ayer, Nilsson has also loaned to businesses abroad specifically Pakistan, Nicargua, and Tajikistan.
“Lend small and lend to many,” Nilsson said.
While loans do not earn interest, Ayer believes the act of loaning itself will earn other rewards for lenders. “The ultimate benefit [of loaning] is that you are actually going to be doing real good somewhere else,” Ayer said. “Benefiting the third world will benefit us in the first world. As a group we can affect change.“
The UC Davis Microlending Club encourages anyone interested in loaning or simply learning more about microfinance to contact them at firstname.lastname@example.org.
AMANDA HARDWICK can be reached at email@example.com.