Kiva.org was founded in 2005 to provide very small crowdfunded loans in eastern Africa.
Since then, it has expanded its loan products to 86 countries. While Kiva initially focused on lending in developing countries, it has recently turned its attention to small business loans in the U.S.
Kiva Zip is an electronic crowdfunding program the company launched in the U.S. in 2011. It uses PayPal to collect microloans of as little as $5 from the borrower’s friends and network. And then PayPal is used to distribute the borrower’s monthly payment among the group of lenders.
As it expands in the U.S., Kiva Zip has started to place volunteers in cities that express interest in its services. Milwaukee was recently selected as a Kiva City.
Kiva officially launched in Milwaukee on Feb. 17. Becoming a Kiva City means Milwaukee’s small businesses will now have access to additional capital, to the tune of about $140,000 in matching funds for their loans. The 1:1 matching funds were contributed by Milwaukee early stage investor George Mosher and the Milwaukee Economic Development Corp. and will be recycled.
“I think the advantage of being a Kiva City is that there’s a network of partners who are working with trustees, working to spread the word and bringing in loan matching capital,” said Jason Riggs, Kiva’s communications director.
In order to become a Kiva City, Milwaukee had to commit to raising $200,000 in grant funds for Kiva, said Martha Brown, deputy commissioner for the Milwaukee Department of City Development. The Wisconsin Women’s Business Initiative Corp. partnered with the city to raise the funds.
The City of Milwaukee chipped in $25,000, while local foundations helped push Milwaukee over the goal line. The Isabel & Alfred Bader Fund was the lead donor. The grant fund is used to train Kiva’s volunteer fellows and for the administrative costs of the local loans.
The two volunteers Kiva has placed in Milwaukee are working to screen local “trustees,” who advocate for the character of small business owners who are applying for loans via Kiva Zip.
Milwaukee has a goal of making 200 Kiva Zip loans over the next three years, Brown said. It has made four so far, and expects the pace to pick up as the list of trustees grows.
According to Kiva, its loans fill a critical lending gap among small businesses. About 7 in 10 small business loan applications are rejected by traditional financial institutions, the organization says.
Kiva’s loans have a 0 percent interest rate, no fees and require no credit check. Borrowers simply need a trustee to attest to their character and a network of friends and acquaintances willing to lend to them.
“On Kiva Zip’s website, you’re able to engage in conversations with lenders,” Brown said. “It’s really about sharing your story and letting the world learn about you, learn about your business, and be able to connect.”
A number of Milwaukee companies have already used Kiva Zip electronically, and a few recent borrowers have had the opportunity to take advantage of the matching loan pool afforded by Milwaukee’s Kiva City status.
Melissa Tashjian received a $5,000 Kiva Zip loan for her Milwaukee-based company, Compost Crusader LLC.
The loan was funded by 15 people in the Kiva community and two different dollar-for-dollar matchers (including the Kiva City loan matching fund) in less than a week. Tashjian used it to purchase a 25-yard garbage truck for her growing compost business, which collects and composts organic waste from area companies and schools.
Compost Crusader will have two years to pay back its interest-free loan.
“Kiva Milwaukee really just gave me an opportunity to be proactive instead of reactive,” Tashjian said. “When you’re a small business owner and you’re just kind of using your own capital to get started, I’m a lot more comfortable knowing I had some money there to utilize when I needed it. It really enabled me to be able to take my business to the next step.”
Angela Moragne, founder and chief operating officer at Milwaukee-based That Salsa Lady, had been turned down for traditional bank loans on several occasions.
In just 18 days, Moragne used Kiva Zip to raise $10,000 for the business, which makes salsa that it sells at farmer’s markets, at area retailers and online. That Salsa Lady is working to create an incubator kitchen for other food manufacturers in the King Drive area, and will use the funding for equipment and marketing for that project.
“Our mission is to basically engage, empower, educate and connect people through food,” Moragne said. “We feel we’re only as successful as people in the food business. We want to make it much easier for those coming up behind us.”
That Salsa Lady’s average loan was about $5, she said. The company attracted four different matches, including the new Milwaukee matching loan fund.
“The great thing was the $5 loan, we know those people really believed in us, because that was local bread, maybe some sandwich meat or eggs, that they went without because they decided to put their money on us,” Moragne said.
Milwaukee is one of 11 Kiva Cities. More information about Kiva Milwaukee is available at Kiva.org/Milwaukee.
