Kiva Chooses Detroit as First City for Crowdfunded Microfinance Program

8/2/11Follow @XconomyDET

When Delphia Simmons’ boss at COTS Detroit, an organization founded in 1982 to address the city’s growing homeless crisis, came back from a trip to Philadelphia with an armload of newspapers produced and sold by homeless people there as a means of self-support, an idea started bubbling in the back of Simmons’ mind.

“I had never run across one of those newspapers,” Simmons said. “I was not previously familiar with the concept and I was really excited about trying it in Detroit.”

The idea stayed in the back of her mind for close to a year because she wasn’t sure how she would raise the approximately $2,500 needed to start a similar newspaper in Detroit.

Enter Simmons’ friend Margarita Barry—entrepreneur, champion of all things Detroit, and founder of the website I Am Young Detroit. Barry had been tapped by Michigan Corps, a network of local and global Michiganders committed to positive change in their home state, to be part of its Kiva Detroit Working Group, which trained a cross-section of community leaders to go out to recruit small-business owners in need of microfinancing.

Barry sent Simmons to micro-lender Accion USA’s website to fill out a loan application, and the Thrive Detroit street newspaper was officially born, one of four small-business enterprises already funded by Kiva Detroit.

What sounds like a complicated if serendipitous chain of events is precisely the mission of the Kiva City program. Launched with Accion USA, the John S. and James L. Knight Foundation, and Kiva.org, Kiva Detroit represents Kiva’s first locally-organized initiative in the United States and, hopefully, the beginning of a nationwide city micofinancing program. Kiva Detroit allows Detroiters and supporters of Detroit to lend as little $25 to local, small businesses with loan impact doubled through a 1:1 match supported by $250,000 in funds from the Knight Foundation.

Though Kiva is traditionally thought of as an organization that serves people in remote corners of the globe, its mission to give people the power to create opportunity for themselves and others fits nicely in a city like Detroit with plenty of need.

Michigan Corps, whose founding members include Google’s Eric Schmidt, CNN’s Dr. Sanjay Gupta, sportscaster Dick Enberg, and Pulitzer Prize-winning author Jeffery Eugenides, stepped in to organize and educate community members on the ground so they could spread the word about Kiva Detroit’s goal of connecting the underbanked with microloans.

The field of microfinancing was pioneered in the economically ravaged country of Bangledesh, but it has slowly taken root in the United States—especially given the recent economic downturn. But Kiva’s president Premal Shah says domestic microlending still has a long way to go.

“We try to pick up where banks leave off,” Shah said. “It’s estimated that 20 million small businesses in the U.S. are unbanked or underbanked. We chose Detroit as our first Kiva City because it’s been particularly hard hit by the economy in the last 5 to 10 years. We’re trying to enable the entrepreneurial ecosystem. Even Kiva wouldn’t be around if we hadn’t gotten investment capital.”

Kiva uses the “crowdfunding” model, where people across the Internet click on Kiva’s website and scroll though loan opportunites. They pick one, donate $25 or more, and 100 percent of the loan is sent to one of Kiva’s partner lending organizations, such as Accion USA, which holds the loan. Citizen lenders eventually receive repayment through their Kiva account. They can then withdraw the money or use it to finance another microloan.

“The Internet community has certainly been willing to bank on projects in Detroit,” Shah said. “In fact, I was looking at the list of Detroit lenders the other day and saw Craig Newmark’s name on the list.” Yes, that Craig Newmark—better known as the founder of Craigslist.

Shah said he became involved with Kiva after working for PayPal. He was intrigued that complete strangers were connecting on the Internet to buy and sell wares to one another, usually quite successfully.

“I thought, if commerce can be done like this, why not lending?” Shah said. “Microlending is a business approach to poverty alleviation and opportunity creation.”

Poverty alleviation is exactly what Delphia Simmons has in mind with her Thrive Detroit newspaper project. After training her sales crew on her expected vendor code of conduct, she plans to sell each paper for $1, with 75 cents going to the individual vendor. At first, the plan is to concentrate on the downtown, Midtown and New Center areas of Detroit. Simmons wants to give all homeless people the opportunity to participate, which is why she’s wiling to give anyone who asks 10 free papers—with the understanding that she’ll never see some of the recipients again.

“But some,” Simmons said, “will really take hold of this idea of micro enterprise.”

Simmons had planned to launch Thrive Detroit this month, but there has been a slight delay due to the challenge of finding volunteers to provide content for the newspaper. (Email her at info@thrivedetroit.org if you have a story idea you want to write about.) However, she’s not too hung up on the launch date—she has a bigger-picture goal of making Thrive Detroit the first of several microenterprises that will provide opportunities for the homeless population in Detroit.

“I had such a positive experience working with Kiva and Accion,” Simmons said. “The loan application wasn’t intimidating, the business template was easy to fill out … I plan to send some of our more successful vendors to Kiva for help with their own side businesses.”

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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