Microfinance, Kiva, and Uri L’Tzedek

Jewish tradition focuses heavily on the importance of gemilut chasadim, or charity. One way today’s globalized world engages in large-scale charity is through microfinancing, a way of offering financial services to the poor or those without access to typical bank lending. The movement is based upon the belief that low-income people can achieve their goals and lift themselves out of poverty if given access to loans. Microfinance Institutions (MFIs) help people in developing countries as well as in developed ones, including the United States. Microfinance includes a number of financial services, such as microcredit, micro-lending, micro-insurance, savings, and money transfer. Today, “>Hebrew Free Loan Societies.

Today, Microfinance has grown into a global movement comprising thousands of institutions, each with its own lending practices. Microfinance currently empowers approximately 160 million people in developing countries.

There are three general microfinancing methods: 1) formal financial institutions, including banks and insurance companies, which have been reluctant to service poor populations due to high transaction costs and other risks; 2) non-governmental organizations (NGOs), such as “>Banker to the Poor,)and head of BRAC in Bangladesh), which currently lend to more than 100 million clients worldwide, and whose safe, secure deposit services make them very popular (though NGOs are not permitted to collect deposits in some countries); and 3) informal organizations, including moneylenders, informal associations, cooperatives, and community-based development institutions, often managed by the poor themselves, which provide flexible, convenient, and fast services, but are highly risky and much harder to study formally.

Do MFIs help people get out of poverty? “>Kadita Tshibakaof Opportunity International counters by noting that MFIs are beginning to offer interest-bearing savings accounts, low-cost insurance plans, and financial education programs for the poor that will help them start businesses, hire people from the local population, and help the community rise out of poverty. In addition, Tshibaka argues that pooling borrowers (who are overwhelmingly women) does not lead to desperate borrowers, but has led to a 95 percent repayment rate in 4-month cycles, contributing to stability. Thus, while there are still problems with some MFIs, the overall effect is beneficial.

“> Kiva has made loans of more than $386 million to more than half a million lenders in 67 countries, with an average loan of about $400, and a 99 percent repayment rate. You can find out more about “>an important article on the importance of microlending and its place in the Jewish tradition for the E-Jewish philanthropy blog.

Uri L’Tzedek has proudly maintained “>Uri L’Tzedek’s Kiva Lending Team to become part of this larger movement. Encourage your community to purchase products associated with microfinance, including goods made in enterprises funded by microfinance or “>Uri L'Tzedek, the Senior Rabbi at Kehilath Israel, and is the author of ““>one of the top 50 rabbis in America!”