A few times in its short four-month history in the District, micro-finance nonprofit Kiva has run out of people to loan money to.
The San Francisco-based nonprofit launched in D.C. this January, aiming to connect local entrepreneurs with lenders worldwide online. Kiva City D.C., a Web site dedicated to borrowers in the D.C., Maryland and Virginia area, has so far featured 20 entrepreneurs. All have received the amounts they requested, suggesting that enthusiasm from lenders has outpaced eligible borrowers in the area.
As a result, it is not uncommon that potential lenders are told, upon reaching Kiva City D.C., that the page is “sold out,” and are directed to consider loans in other geographic locations.
Kiva, known for connecting entrepreneurs and lenders globally — particularly in developing nations in Asia and Africa — lets Internet users lend as little as $25, eventually to be paid back with interest. D.C. is the fourth site of Kiva City, an initiative to connect domestic entrepreneurs with lenders.
Loan applicants in D.C. are vetted by Kiva’s local partner, the Latino Economic Development Center. When applicants run out, the LEDC encourages more local entrepreneurs to apply, according to the organization. The program is also supported by Capital One Bank, which in March set aside $500,000 to match loans on the platform.
So far, several hundred users have loaned money to the entrepreneurs on Kiva City D.C., for a total dollar amount of approximately $153,525. Entrepreneurs often have between one and two hundred lenders, and the average loan request is about $8,000.
Fairfax-resident and lawyer Sequitta Banks was one of the 20 entrepreneurs to take out loans on the site. She had wanted to open her own law firm for low-income clients, but had been turned away from conventional banks.
She needed several thousand dollars for start-up costs, but her credit score — lowered by late payments on bills to deal with her three-year-old daughter’s medical issues — disqualified her from bank loans.
“They weren’t very understanding about a premature baby,” Banks said.
In January, Banks requested $8,000 to cover the cost of advertising for her firm, office rental space, and a secretary. Within 24 hours, 149 lenders from all over the country (and a few internationally, including Australia) had loaned her the money she needed — about $25 each.
Today, Banks is repaying the loan in installments of about $350 a month for 27 months. She isn’t sure of the interest rate — it’s determined by the LEDC— but she finds the payments reasonable, she said. She has already paid back 11 percent of her loan.
Banks’ request was the third fastest loan funded on Kiva City D.C. — the fastest was from a Virginia-based business called One Mango Tree, which helps tailors in Uganda find buyers in the United States (the entrepreneur had requested $10,000 for inventory and was funded within four hours and 24 minutes). In January, the average loan on Kiva City D.C. took two days, two hours, and 35 minutes to fund — so far, the longest any loan has taken has been eight days and four hours.
Within weeks after receiving funding, Banks had rented office space for The Banks Law Firm in Fairfax, and hired a secretary and an intern. The funds she’d directed to advertising bumped her clientele up by 30 percent, she said. The firm offers reduced rates and payment plans for low-income clients.
“Eventually, in the future, I would love to get a loan from a conventional bank,” Banks said, adding that she’ll likely need to hire more staff and expand to a larger space in the next few months, which could cost about $20,000. “But I don’t know how likely I would to get a loan, being a new business. Most of the banks want us to be in business for two to three years.”
For now, she said, she’ll continue to use Kiva. It’s useful for raising money, she said, but it was also “very encouraging that so many people believed in the community and decided to lend their support.”
Despite their support, none of the 149 lenders have reached out personally to ask about her business, she said. “I would welcome that, but it’s not surprising to me, because it was so many different people and they gave small amounts.”
It could be because she’s already started repaying the loan, so they’re already seeing a return on their investment, she said.