For those unfamiliar with the concept of micro-loans, allow me to give you the quick rundown. Micro-loans is the act of giving small loans to entrepreneurs in the third world. The loans can be small, hence the name micro, as little as $50, and are used by entrepreneurs in places like Nigeria, Mexico, Peru, Indonesia, and East St. Louis (zing!) to start and expand businesses. We’ve made loans to shop owners, building contractors, seamstresses, natural medicines stores, and restaurants. Each fund at Kiva.org is in the $700 - $1,300 range and our average contribution per entrepreneur is $50-75. Each loan is built using funds from multiple lenders and are paid back, interest free, in 6-9 months. We have 24 Entrepreneurs in our Portfolio and we make new loans every week or two, all paid back loans go right back to new entrepreneurs.

Micro-finance has been shown to be an amazingly effective boost to people, families, and communities. It seeds a better quality of living and is truly giving people a helping hand up rather than a stream of ‘aid’ to become dependent on. The whole teach a man to fish thing. Kiva.org has a ridiculously low default rate of .02% on $886,385 in loans, so it’s a rock solidly safe investment.

I’m as die-hard an entrepreneur as you can get, so one of the first things I thought about when the idea of redesigning and retooling Planetsave was to bring micro-loans into the picture. Jan has been saving rain forest with the site since 1999 and he was glad to have the additional resources that are available to grow out the concept to include micro-loans and buying wind credits from Renewable Choice Energy (disclosure: I was a founder of RCE).

You can visit our Lender page on Kiva to see all the amazing people we’ve invested some of our profits into. You can read more and sign up yourself at Kiva.

That’s why Planetsave is better than your website. We just fucking care more.

While purchasing items on several months’ credit is commonplace in business making an artisan or farmer to wait several months before receiving his/her only income causes undue hardship on producers and their families. Beyond payment for goods, Fair Trade relationships are based on a long-term goal of mutual success. Fair Trade importers are therefore invested in the growth and success of their counterparts, and will frequently give small micro-loans to help with product expansion, capacity building, quality control and funding for certification.

These micro-loans can be integral to the success of small businesses, yet are hard to come by through conventional means. Typical banks shy away from loaning money to assest-less poor, and many charitable organizations are focused only on massive undertakings and will not involve themselves in small loans. Loans and financing are a business necessity that Western operations take for granted when starting up or expanding. Micro-financing has been proven to be a successful development tool. One of the pioneers of micro-financing, the Grameen Bank, was awarded the Nobel Peace Prize and the resulting publicity has brought such micro loans and their high return rate into public awareness.

Kiva was created to help bridge the gap between people with a small amount to loan and those which need it. Kiva is a Swahili word meaning “agreement” or “unity” and their website allows you to enter into this agreement quite easily. What sets Kiva apart is that it allows average-income individuals to lend small amounts (as little as $25). Kiva is a non-profit and supported solely through additional donations, so you’re assured 100% of your loan is in the hands of the person requesting and thus far Kiva has experienced a 100% repayment rate on all business loans. The individual stories and progressive journal entries allow you to personally connect with those you wish to help.

It is through financial assistance rather than blanket charity that small businesses and this poor communities will be able to grow and thrive.

This is the fourth in a series of posts discussing the Fair Trade criteria. Also check out Fair Trade: Transparency, Fair Trade: Fair Wages and Fair Trade: Environment.