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TCHO New American Chocolate

Be your own development bank!

We used to talk a lot about disintermediation back at the start of the digital revolution – getting rid of the layers of middlemen and make markets (and life, in general) less hierarchical and more efficient. It’s the reality of disintermediation that excites me about the possibility of each of us, as individuals, to directly change the world for the better instead of subcontracting that out to middlemen who always have their own agendas and rarely accomplish what they claim they’re going to.

My friend and co-conspirator Kevin Kelly (and a TCHO investor) points us in his Cool Tools site to Kiva, a way each of us can directly make a microloan to an individual entrepreneur in the developing world. Here’s how Kevin describes Kiva:

Microfinancing is among the better ways for the haves to help the have-nots. Small loans are made to poor but ambitious workers, who expand their livelihoods with the small loan and then pay it back. Which is then lent out again. . . . [So] why not use the peer-to-peer model to allow individuals with money to loan to specific individuals in need of a small loan? That’s what Kiva does and it works wonderfully.

Kiva enables you to make small $25 or above loans to an individual or small group of individuals in a developing country. They use these small loans (aggregated to about $200-$400) to finance a food stall, repair shop, hair salon, sewing machine, new cash crop, etc. When they pay it back to you in about 11 months, you can then re-lend it to another person of your choice.

The advantages of Kiva over the other worthy agencies are three fold. One, you can direct your loans to the kind of projects or livelihood you deem the most important or the most sympathetic. Maybe you are into food so you gravitate to funding small cafes or local fruit growers. Or maybe you think women’s sewing centers are a key. Secondly you have more direct contact with the borrowers. They have names, faces, stories. Not a few Kiva lenders have met up with folks they have lent to. Thirdly, while most microfiance agencies are thrifty, Kiva is particularly thin in administration thanks to the well-designed software platform that runs this service.

The payback rate for Kiva is about 97%. That’s a better “investment” than stocks this past year! The variety of folks you can lend to is exhilarating. The karma is good. These loans make a difference. Kiva lends $1 million dollars every 10 days. It is easy to do. A few folks are already on their third cycle of re-loaning the same money they first put up three years ago.

It’s a new millennium. Change the world, you can do it – without the middlemen.