Kiva is Swahili for “unity” or “agreement” — but more recently, it’s also a web site. Kiva.org will at first seem like the usual “donate for poor starving children” site, which often turn out to be scams or semi-scams, in that you never quite know how much of the money, if any at all, truly ends up at the “starving children” you’ll see pictured. Lots and lots of organizations to that effect have existed for decades. Without doubt, some of them have been tremendously successful at improving the situation in Africa (that is, it would otherwise be even more desperate). But you cannot really know which ones are the best, which ones are the most effective, which ones put the least percentage into their own pockets.

Kiva.org is quite different in two ways. First, it doesn’t involve donations. They call it “loans”, although you won’t receive an interest on them. The “businesses”, which is what they call the persons actually receiving your money, give a period of time. Once expired, they promise to pay you back. The reason they expect to be able to pay you back is that they actually invest the money: for example, by building — through your money — another storage place for stuff they intend to sell.

The other difference is in terms of connectedness. There’s still two layers the money goes through (Kiva itself, and a human aid organization), but the process is a lot more transparent. The “business”, i.e. the recipient of the money, will continuously send progress updates through the organization, including photos.

So, let’s say a business needs $500 to buy some resources they can build a new small house with. All you, and other members, have to do is send sufficient money — at least $25 each — to fill these $500. Once that’s done, they’ll give you a date on when they’ll start working. Usually, it’ll take somewhere between 10 and 18 months; then, the money will come back to your PayPal account, where you can either reinvest it or withdraw.

So, in theory, you don’t actually lose anything; you merely win a lot (because you’ve helped someone out). In practice, there is a chance you won’t be able to get the money back. But:

Microfinance loans worldwide are generating repayment rates of 97% (UNCDF: Basic Facts About Microfinance). To date, Kiva’s repayment rate is 100%.

(The FAQ linked above has lots of other good advice, such as diversification.)

I feel this is one amazing, huge leap in terms of helping people in third-world countries out. Credit to trumptman of AppleInsider Forums for pointing it out.

You can read one of the various press stories about this, such as this piece from BBC News.