Co-founder of Kiva enables the poor with small loans
Five-year-old Premal Shah was sitting in a cab during a family visit to India when he got his first inkling about how unequal the world could be.
“You see a kid your age knocking on the window, hungry, and they are on the outside and you are in the inside,” Shah, now 42, said. “I didn’t have the language for it, but I remember thinking, ‘Wow, this isn’t the suburbs in Minnesota.’ ”
Subsequent trips would confirm it for the native Minnesotan: Yes, the world is unfair — but there are small ways to make it less so. As a 5-year-old, Shah would give the young beggar a few cents. Today, he runs a nonprofit that helps people who would normally be rejected by banks to obtain small loans.
Shah left his well-paying job at PayPal in 2005 to help create Kiva, a platform where people can lend money in $25 increments to impoverished entrepreneurs at a zero percent interest rate.
Kiva lenders browse through profiles from around the world to choose borrowers they’d like to help. Current examples include an undocumented woman in Oakland looking for $775 to grow her pocket bag business to a group of women in Burkina Faso seeking $1,225 to buy rice, oil and seasonings for a restaurant business.
The idea seemed simple and noble, Shah said, enabling even the poorest of the poor to participate in the world economy. The problem?
“We had tough traction early on,” he said. “Trust was the big issue. People never believed they were going to get repaid.”
But a year later, the momentum began. Muhammad Yunus, a Bangladeshi entrepreneur, won the Nobel Peace Prize in 2006 for his work in microfinance — the idea of giving small loans to people in need. After Yunus’ award put a spotlight on microfinance, Kiva’s website got so much traffic that it crashed.
Oakland Mayor Libby Schaaf, who is on Kiva’s leadership council, called Kiva “deliciously disruptive,” noting that the nonprofit funded more than 200 loans in Oakland in 2017.
“These are the entrepreneurs that have been shut out of traditional lending, and shut out of the entrepreneurial dream of making their own business ... and we are turning that on its head,” Schaff said. “These loans are not about credit scores. They are about character.”
Shah likes to say that microcredit is just a way to reframe the traditional view of poverty. Instead of seeing the poor as people who were unlucky or who did something wrong, microcredit allows them to be viewed as entrepreneurs.
“There’s immense creativity and resourcefulness out there,” he said.
And the more that work ethic is enabled, Shah said, the less unfair the world may become.
» “These are the entrepreneurs that have been shut out of traditional lending, and shut out of the entrepreneurial dream of making their own business ... and we are turning that on its head.” Oakland Mayor Libby Schaaf