Page last updated at 02:35 GMT, Wednesday, 10 June 2009 03:35 UK

Internet loans swing towards US

By Martin Plaut
BBC News

South Africa crafts workshop
Many small businesses in the developing world have benefitted

For the last four years an internet-based bank has been lending money from individual donors in the West to small businesses in the developing world.

But now Kiva will enable loans to be made to the United States as well.

Premal Shah, president of Kiva, says 10 million small businesses in the US are unable to get bank loans because of the credit crisis.

So Kiva has seen 500,000 lenders provide around $80m to businesses in the developing world.

Kiva is founded on a simple principle: individuals can make loans across the internet.

They don't get interest, but rather the satisfaction of seeing the money returned as the business repay the loans.

So a pig farmer in Vietnam or a dressmaker in Uganda might receive $1,000 or more from a range of lenders who might live anywhere from Sydney to Los Angeles.

But now Kiva is - in a sense - reversing the flow.

The poor in the United States will also be able to get funding for the small business they are trying to get under way.

Kiva's president, Premal Shah, explained why - of all developed countries - his organisation chose the US.

"We realise that poverty is everywhere on Earth and now more than ever access to capital is so difficult for small businesses.

"So we decided to start with the United States where 85% of businesses are small businesses and something like 10 million small businesses cannot get a loan from a bank right now because of the credit crisis," said Mr Shah.

So from now on it will be possible for someone in Nairobi to fund a decorator in New York, joining the more than half a million Kiva lenders who have so far lent nearly $80m to small businesses in the developing world.

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