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Because many candidates can’t supply collateral, microlenders often pool debtors collectively as a buffer. Like conventional lenders, microfinanciers must cost interest on loans and institute specific repayment plans with funds due at regular intervals. Thus, many poverty-stricken individuals usually look to household, friends, and even loan sharks—who typically cost exorbitant interest rates—for help. Kiva U.S. is part of Kiva, a nonprofit providing peer-to-peer microloans. This suggests that formal lending applications can help SME development across a broad range of contexts, not simply in specific environments or for narrowly targeted companies.
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