If you are donating money to charity, you probably want your dollars to be maximized just like any other investment. One of the reasons that many non-profit organizations fail at correcting the core problems facing the world is that they are often focused on the effects of the problem rather than the cause. Think of the Chinese proverb:  “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”. One outstanding charity that is helping people “learn how to fish” is Kiva, which provides microloans to small business entrepreneurs in third world countries.

Frontline recently highlighted the tremendous good Kiva is doing in Uganda, where many small businesses are thriving thanks to loans from generous individuals who visit the site. They told the story of one woman whose peanut butter business is thriving thanks to a loan that allowed her to buy a peanut grinder and led to tremendous growth in her revenues. They also spoke with a man whose furniture business is in need of a $1,000 loan to help him grow his business and support his family of 20, most who were adopted when his brothers died of AIDs.

How Kiva works is pretty miraculous. People who visit the site can give small amounts, say $50 to an individual asking for a loan. The borrower has a profile on the website with their story and why they need a loan for their business. This provides an intimate connection between the lender and the borrower that differentiates it from other charities. The other difference is that the money is often paid back to you and can be reinvested into other businesses. If you are new to Kiva, you may think that the default rate must be very high. If you are like me, you would be shocked to learn that the default rate is less than 1%! The reason for the high repayment rate is because microloans are enforced by the community. If people default on their loans it can hurt others in the community, so there are strong social forces to get people to make payments on time.

If you are intrigued, head over to Kiva.org and learn more how you can give a gift that keeps on giving.