Microfinance Potential in Alaska.

• Author: Trainer, Anneliese
• Position: FINANCIAL SERVICES

The term "microfinance" likely elicits images of developing countries and $100 loans, but recent innovations and adaptations to the practice have brought microfinance products and services to the United States, with interesting results in the 49th State in particular. While microfinance in the developing world offers small loans to the poorest of the poor, American microfinance institutions generally provide business loans under $100,000 to those unable to secure financing from commercial banking entities. This may be due to poor/no credit history or the need for a small amount of capital, below typical lending thresholds. Microfinance programs tend to use more lenient criteria when evaluating potential borrowers than traditional financial institutions and usually offer more technical support services than commercial lenders.

Great Potential

Although microfinance efforts are still relatively nascent in the 49th State, the potential is certainly here, and interest in microfinance has been growing among various organizations. A majority of the state's microfinance activity has occurred through a unique platform called Kiva Zip. Kiva Zip is an arm of Kiva, an international microfinance nonprofit. Geared specifically toward borrowers in the United States, it provides an online crowd-funding platform for individuals to make loans directly to borrowers. Kiva Zip representative Adam Kirk explains that "Kiva's unique crowd-funded financing is different from that of traditional financial institutions in that Kiva vets business owners on the basis of their character and not on their business data. Entrepreneurs are required to recruit a number of people from their own network before they're able to raise money on Kiva."

Instead of credit score, net worth, or years in business, community involvement is the main metric Kiva Zip uses to assess borrower credibility and trustworthiness. Kirk states, "In Alaska, Kiva has connected twelve entrepreneurs with $75,400 in funding for their businesses, all without charging a single cent of interest or fees. These twelve business owners include people like Jenny, owner of Sipping Streams Tea Company in Fairbanks, who borrowed $10,000 to expand her wholesale capacity and grow retail revenue."

Zero Interest Loans

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