Giving Students in the Developing World Peer-to-Peer Loans

Of all the online action platforms, none has demonstrated the power of distributed giving as well as Kiva. After five years and $125 million in loans, Kiva's model of peer-to-peer giving is widely emulated. And now, one of the most exciting groups building off of that inspiration -- Vittana, a new platform for education loans -- has just opened up to the public.

One of the only clear paths out of poverty around the world is education. Yet even in the developing world, the cost of higher education is often prohibitively high, and in many places, there just aren't a lot of loans to help reduce the financial burden. Lack of loans for education helps perpetuate inequality of achievement and can exacerbate gaps between rich and poor.

If Kiva believes that micro-entrepreneurs deserve credit as a down payment on their future business success, Vittana is built around the notion that higher educational attainment can enable better jobs and better lives. It is a compelling pitch that appeals to the same person-to-person "you can help this hard worker succeed" emotion that has made Kiva so successful.

Indeed, Vittana's model actually relies on the same sort of intermediary partners as Kivas: local microfinance institutions (MFIs). The difference is that the education loans that Vittana is interested in are often new to the MFI, and Vittana takes an active role in helping their partners build the capacity to successfully facilitate that new type of transaction.

A few things that get me excited about this new launch:

1. They're making something that is extremely difficult seems simple. In their first year, they have helped MFIs who have never issued educational loans before lend out in excess of $100,000 and achieved a 97% repayment rate.

2. I genuinely think there is no better investment than people's education. I don't know what the opportunities for traditional education loans are in Mongolia, Nicaragua, Peru, Paraguay and Vietnam -- the countries where Vittana works. But my guess is that loans are difficult to get and (like here) often hard to repay.

3. Vittana has learned from Kiva's transparency challenges last year. If the appeal of their model is largely driven by the peer-to-peer nature of the loan, their "How It Works" page makes it clear that the student actually receives the loan from the partner MFI before their picture and bio goes up on the website.

4. Vittana is another great example of the growing collaboration between the nonprofit web and for profit startup space. The organization participated in the Facebook-organized fbFund REV program, was started by a former Amazon employee and has several high-profile venture investors as financial backers.

In the just under a year that the site has been in a closed beta test, their community has raised over $100,000 in loans. That's a great start, but it's clear that they're aiming much higher.

I'd love to hear what this community thinks about the new company. Can they do what so many other online giving platforms have tried and failed to do and create a new, compelling giving experience?

Photo Credit: >> Zittona <<