LATIN AMERICA: Micro-loans widen students' options

Students in Latin America and the Middle East discovered a new way to help pay tuition fees last month, as an innovative micro-loan organisation launched a one-year pilot programme in Bolivia, Lebanon, and Paraguay to make it easier for them to pursue a university education.

Within 12 hours of the students' profiles appearing on its website, all 47 loans were filled, says Premal Shah, president of Kiva, which means 'agreement' in Swahili.

"We're really excited to extend our loan options to students because we believe this is something revolutionary for the microfinance industry," Shah says. "We believe that education and entrepreneurialism are two sides of the same coin - providing loans that help change lives and alleviate poverty."

With student loans virtually non-existent in developing countries, Kiva has tailored its model entrepreneur loan programme to the college set. Shah says: "We plan to open to a few other countries based on how the initial pilot is going, and which of our field partners express interest in participating."

While this pilot programme counts two Latin American countries, there has been much interest from others, with students already participating from Peru and Mexico.

Founded in 2005, Kiva has made a whopping $164 million in micro-loans to more than 400,000 entrepreneurs worldwide. The non-profit organisation works with micro-finance institutions around the world to provide loans to entrepreneurs lacking access to traditional banking systems. Kiva provides the funds to the lending institution, which in turn administers loans locally.

Working with students is similar. When lending institutions approach Kiva with recommendations for individuals for loans, Kiva looks into making them a 'field partner'.

The partner provides the loan, working together to lend to students.

For instance, a student from Paraguay immediately received from 17 lenders the $500 she needed to continue her second year of nursing school. Another loan applicant received $175 to cover tuition fees for one of his sons from seven lenders.

Lenders who join Kiva can provide as little as $25 loans to a range of entrepreneurs, and now students, whose profiles and needs are profiled on the website. Kiva acts as the middleman when loans are repaid - and they almost always are, with a 98% repayment record. Lending institutions receive interest rates they set, but Kiva does not pay interest to its lenders.

Why would people lend? "Over the years I have found that helping others not only improves their lives but enhances my own. It is simply the right thing to do," 100-year-old Liane from New York wrote to Kiva. She says she appreciates that through the internet she can see how the money is being used in various countries in desperate need of development.

Other lenders had recovered from a patch of bad luck and wanted to pay their good luck forward, while there are others who simply want to share their fortune with those who need a hand.

Shah says moving into the student micro-loan arena was a natural extension of its goals. "Kiva believes the global need for sourcing capital is immense - whether it's funds so that a tortilla maker can buy cornmeal or an eager student can further his or her education," he said.

"Loans to students aren't a big industry in the developing world, unlike in the United States. We hope to demonstrate that student loans can have high repayment rates, and help grow the industry. As that happens, we hope to see the number of student loans on Kiva grow."