These Entrepreneurs Involve Entire Communities in Small Business Financing

SMEs funded by Kiva needs to involve investors and above in its mission. Since each loan from a “microlending” nonprofit is crowdfunded, entrepreneurs must tell a compelling story to attract support from the community their business will benefit from.

“Every community has a unique history and context that needs to be understood in order to ensure equitable access to funds. That is why we work with local organizations to achieve our mission.” said Brit Heiring, Director of Communications at Kiva.

One of the ways Kiva helps solve local challenges and meet community needs is through hub partnership. This includes partnering with CDFIs, local governments, foundations and other organizations to make capital more accessible.

“CDFI is an ideal partner because it shares our mission to provide fair and responsible funding to communities that have been historically disenfranchised and have the local context and history to make it happen. because we are doing it,” says Heiring.

Borrowers go through an underwriting and approval process by Kiva to apply for a loan, and CDFI and other hub partners guarantee the borrower’s ability to repay. Loans are then advanced through “social underwriting”. This allows borrowers to solidify their trust by inviting friends and family to help fund part of the loan, he said.

In the next phase the loan is posted. Kiva’s crowdfunding site. Anyone can lend $25 or more to crowdfund a loan. Lenders can choose which entrepreneurs to fund based on their purpose of interest, including agriculture, arts, food, and health.

Once the loan is fully funded, the funds are distributed among the borrowers. The loan is interest free and from 1 year he will be repaid over 3 years. The Kiva community has funded more than $1.8 billion in loans for him, and borrowers on the platform have achieved his 96% repayment rate, according to the organization.

A CDFI can designate a capital access manager. This manager is a member of staff he was trained by Kiva on how to share loan opportunities with entrepreneurs. Managers also provide loan applicants with information about best practices and help revitalize local lending communities to increase their chances of getting their loans funded.

One CDFI affiliated with Kiva is Wisconsin Women’s Business Initiative Corporation (WWBIC). The organization has raised her $270,000 through a partnership with Kiva for small businesses such as florists, cafes, vintage clothing companies and composting companies.

Many SMEs and entrepreneurs, especially those from underserved groups, are often excluded from traditional funding and Kiva’s partnership with CDFIs aims to bridge that gap. I’m here.

“By offering interest-free business loans, we are able to address the funding gap in a flexible and equitable way that meets the needs of different communities and business owners,” said Heiring, referring to Kiva’s Capital is “risk tolerant.”

But investing in historically disadvantaged groups isn’t necessarily riskier than investing in other groups, she adds, and that’s a common misconception. For example, financial services organizations have viewed refugee groups as a high-risk population, she says, but Kiva’s data shows that these individuals are repaying loans at the same rate as other groups. is showing.

“By focusing on our mission and working with communities that have been denied access to these critical services through traditional means, we will break down stereotypes and move forward towards a more inclusive financial future. We can take action,” she said.

By partnering with CDFIs, we will also fund entrepreneurs historically excluded from the financial system, expanding Kiva’s ability to “create a world where everyone has the power to improve their lives.” increase.

This story is part of CDFI Futures, a series exploring the community development finance industry through the lens of equity, public policy and inclusive community development. This series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org.