Kiva Zip Aims to Help Small Businesses Gain Access to Capital

Kiva, a nonprofit, peer-to-peer microlender, has rolled out  Kiva Zip to help small business owners in the U.S. gain access to capital via interest-free loans. Kiva Zip works similar to Kickstarter or other social fundraising sites in that it provides small business owners with a social network they can employ in an effort to gain up to $10,000 in interest-free loans. However, in addition to funding from friends and family, Kiva Zip provides business owners with access to any lenders that might wish to help the business, as reported by The Atlantic.

Kiva was launched more than a decade ago to help businesses in developing countries, but after the Great Recession hit the U.S. in 2008, Kiva co-founder Premal Shah launched a pilot program in the U.S., testing it in a number of cities, including Philadelphia, San Francisco, and New York, as reported by Wired.

Shah told Wired that eight in 10 small business owners are turned down for loans, so his goal with Kiva Zip was to fund people who otherwise would not have access to capital, whether due to credit history or because they needed a very small loan. To determine the creditworthiness of potential borrowers, Kiva Zip turns to social networks, the Wired article explained. A business owner looking to borrow on Kiva Zip must recruit around 20 people to contribute $25 each before they qualify for a loan. Once that requirement is met, they can request up to a $10,000 loan that must be repaid in either 24 or 36 months.

Kiva Zip has helped certain groups that traditionally have had trouble securing loans, Shah told The Atlantic, and he noted that 65 percent of the entrepreneurs were ethnic minorities and 55 percent of them were women.

According to its website, Kiva Zip works with a range of organizations to find borrowers and administer loans. They call these organizations “Field Partners” because they work at the local level, within the communities where loans are being used to make a difference. While most of them are microfinance institutions, Kiva Zip also works with schools, NGOs, social enterprises, and more.