CSTN has always been about helping individuals fulfill their solo travel dreams. After twenty years of connecting internationally with the global tourism industry and with other solo travelers, I, as CSTN founder, began thinking of such singular journeys in a less self-centered way.
Doubtless, there are few travelers – solo or otherwise – who have not been dismayed to see sights of extreme poverty and need in many places we visit. Thankful for our blessings, we've wished to do something to help ease such abject circumstances. But what? There are, of course, dozens if not hundreds of charitable organizations whose aim is to do good in developing countries. CSTN has investigated some of these charities and, in the past, raised funds for a few, but only in a sporadic way.
In 2008, I began searching for an organization that would provide a compatible and ongoing way of adding philanthropy to the CSTN mandate. Finding Kiva was my first introduction to the concept of micro-financing.
Kiva is about inspiring and empowering individual dreamers one by one. Through a system of small, person-to-person loans, people who otherwise have no hope of getting credit, have an opportunity to lift themselves out of poverty and fulfill their personal dreams. Individuals helping individuals help themselves – a perfect fit for CSTN.
Since April 2008 CSTN has been lending 50 per cent of every registration fee to individual entrepreneurs via Kiva. A report on funding is regularly updated as follows:
>> Hovik lives in Kapan town Armenia with his parents and 14-year-old sister. One year ago, Hovik rented a vending machine and started providing coffee service in town. Realizing that there is a growing demand for that type of machine and service, Hovik now would like to expand his business. He asks for this loan to purchase a new vending machine, which will be his own. He has been approved for a loan within the framework of the joint initiative between Kiva and SEF International. The start-up loan program provides funding to informal businesses that do not have access to other credit.
CSTN portion: $100.
is a widow. She lives in her own house with her children. She runs a general store, selling household supplies and other products. She started the business with her own capital in 2009, with the goal of having a business which would generate income to help her family move forward. She works from six in the morning until seven at night. With this loan she will purchase inventory to open a new retail outlet at her father's house. She won't have to pay rent so she can easily generate new income and continue improving her family's lifestyle while decreasing her debts. Her main goal is to earn sufficient funds to finish the construction of her home.
CSTN portion: $100.
>> Victorino operates a small coffee farm in a rural community in northern Nicaragua. In the last 3 years, his coffee production has increased by 30%, and with it, his income. He has used it to improve his family's living conditions and make small investments in his farm.
To continue with these investments, this year Victorino is asking for a loan to renew two hectares of coffee. This will allow him to increase production in the next few years, as well as his income.
CSTN portion: $100.
>> Constancio is 59 years old. He is married with four children. His wife keeps house and looks after the children while Constancio supports the family with income earned as a driver. Unfortunately, his car is getting old, so he needs a loan to replace it with a newer one.
Constancio hopes you can help him, because he is the sole breadwinner for the family.
CSTN portion: $100.
Excerpts from field report by Kiva Fellow, Meg Gray, working in Nicaragua with Kiva field partner CEPRODEL
In Nicaragua every road has character, and usually this "character" makes it hard to get to CEPRODEL's clients. Now, besides being an inconvenience, why does this matter? It matters because bad roads are one of the factors that contribute to high operating costs for a micro-finance institution (MFI). Here are several more reasons [why CEPRODEL charges 36% interest].
Populations are often very spread out. Even with centrally located offices, many clients have no way of visiting the branch and thus [loan officers must travel to individual clients].
The administrative cost [time, manpower, and paperwork] of a loan is fixed no matter how small it is.
Frequent repayments (often daily or weekly) are more labor intensive. Many CEPRODEL loan officers spend every afternoon walking or driving from business to business collecting repayments.
Now, how are MFIs supposed to pay for all of this? Yes, they could keep seeking out grant money year after year, but I, for one, would like them to be sustainable. The only way to do that is to charge enough interest to cover operating costs.
While rates may seem ridiculously high, as long as we have loan officers needing to drive 30 kilometers through the mud on a motorcycle to spend an hour (or more), all for a loan of $250, then yes interest rates are going to seem high. But financial services will also be reaching people who have never had these opportunities before.
Diane: At first, I was rather alarmed to find that interest charged to recipients seemed excessively high, but the above explanation puts things in perspective. Interest and fees do vary considerably between field partners, and Kiva lets lenders (like us) check the fundamentals of all field partners. Those checks include interest and fee comparison charts, as well as profit margin declarations. Incidentally, just to be clear, we lenders invest the capital but do not receive interest on return. And Kiva operates solely on voluntary donations.