Microloans Are Not Charity

Today’s guest post is from Seeds, a tech startup with a female founder working to build social good through microlending into every app that exists.

Most of us know what microloans are, right? They’re small loans — say $5 or $25 — given to people in need. These people can use the loans to buy livestock or supplies for their small businesses, and then pay back the loans with their proceeds.

What usually comes to everyone’s mind when they think about microloans is Kiva, the highly successful microlending nonprofit. (Fun fact: Bill Draper, one of Kiva’s investors, and Sam Birney, Kiva’s former Director of Engineering are investors in Seeds!) Kiva is awesome, but there’s actually a lot more to the world of microfinance than just what they do. We wanted to shed some light on this broader landscape today.

1. Microloans are not a type of nonprofit.

Because Kiva is a nonprofit, what seems to be a big misconception has propagated: that microlending is a category of nonprofit. In fact, it’s a type of lending and finance that happens to do a lot of social good. We think the “social good” part is what confuses people. People often don’t realize that social good doesn’t just come from nonprofits — it can also come from financial institutions, businesses and startups (like Seeds!)

2. Microfinance is not charity.

Microloans are what they sound like: loans that are meant to be paid back. They’re a separate and enormous category, and a powerful way to create sustainable social good. Because the money is repaid, it can be re-lent into perpetuity, and that means microloan institutions can help millions of people for the foreseeable future.

3. There are over 10,000 microlending institutions in the world.

One common misconception is that microlending consists of one single nonprofit — Kiva. In fact, there are literally thousands of different types of microloans that perform social good. There are organizations like Seeds’ partners 4G Capital in Kenya, Wells Mountain in South Sudan, and La Ceibain Honduras. Some 10,000 microfinance institutions serve over 150 million people in the world. These include savings and credit cooperatives, NGOs, microfinance banks and commercial banks — and yes, some nonprofits.

4. Microloans come in multiple flavors.

Microloans aren’t just a general category — they can be highly focused. There are microloans and microfinance institutions for poverty elimination (Grameen Bank), education (Guatemalan Project), small business (Friendship Bridge), rural areas (Hattha Kaksekar), agriculture (Kickstart) and even mobile tech micro-startups in places like Nairobi, Kenya.

The Next Step In Microloans: Seeds

The world of doing good has evolved dramatically, going from charities and nonprofits to major companies building out their own corporate social responsibility (CSR) arms. We believe Seeds is the natural next step. Rather than provide aid (nonprofits), we’re invested in sustainable empowerment (microloans). Rather than drawing distinctions between doing good and making money (creating CSR arms separate from corporate business groups), we’re working at what we believe is the frontier of social good: building good into products themselves. When you go to pay for a purchase at one of Seeds’ participating apps, your payment will be turned into a microloan to an entrepreneur in need.

Microloans funded by users of Seeds have gone on to help people like Mary in Kenya, who was able to expand her bakery business using loans financed by our users. The proceeds of her business go to feed, clothe and educate her three children. (Fun fact: 81% of our loan recipients are women!)

If you’d like to give Seeds a try, check out Aura, a top meditation app named #1 by Apple in New Apps We Love, Habitica, a free habit-building and productivity app that has 2 million users and Mini Golf Stars 2, a popular and addictive family-friendly golf game. When you make a Seeds purchase in one of these apps,, your money will be channeled through our system to provide a microloan to a person in need. We believe that building microlending into products is the next-generation use of microfinance, and we’re excited for a future that blends the best of all worlds.

Photo: Jennifer James

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