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The World’s Bank: How Crowdfunding is Disrupting Old Banking

Crowdfunding is no longer a stranger to us. According to Reid Hoffman‘s recent insight, “crowdfunding relies on the wisdom of crowds to identify fund and unleash entrepreneurial innovation far more efficiently than the credit rules of banks can.” And one crowdfunding platform Kiva turns the money-lending difficulties into an easy access world wide.

In Anna Maguire’s book Crowdfund it! , she introduces Kiva’s funding model as follows,

The money lent is generally to repay a Field Partner who has already disbursed the loan. Kiva passes along 100 per cent of what is donated and covers its costs through grants and donations. Field Partners charges interest to the borrower.

And indeed, Kiva is a successful crowdfunding platform enabling small loans that change lives. In the era of innovation, most of the entrepreneurs start their startup ideas by thinking of changing the world, and Kiva has made it happened through crowdfunding. What’s more, Anna Maguire states that even though the Kiva model does not meet the same criteria as general crowdfunding sites, its non profit goal in helping people in need stands out. As Reid Hoffman says, “the motivations for citizen-lenders run the gamut from altruistic to creative to financial. Kickstarter and IndieGogo funders typically get some type of reward in return for their capital. Kiva lenders are paid back by micro-entrepreneurs, albeit with no interest. Services like Lending Club offer lenders a way to earn interest on personal loans.”

Therefore, with its virtuous tagline, Kiva fits into philanthropic criteria, and at the same time, it shows how far can crowdfunding can get, and empowers the democratic access to capital.

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