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The Course And Success Of The Economy Belongs In All Of Our Hands

It is difficult to know how any one of us can make a difference in any of our nation's most troubling problems. But, what if the money stored in our wallets had a new purpose, even just for a short amount of time?
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The last five years of slow economic recovery has proven that the course of the economy affects each of us in profound ways. It has the power to create or eliminate opportunities for jobs, homes, retirement, education and even personal pride. Every person reading this has experienced the fear or reality of losing what it took years to create.

It is difficult to know how any one of us can make a difference in any of our nation's most troubling problems. But, what if the money stored in our wallets had a new purpose, even just for a short amount of time?

If each of us lent as little as $25 to be a part of "crowdfunding" a loan to a small business owner, the funding gap that stunts job growth and economic recovery would begin to be filled. If just one in three of our country's smallest of small businesses could hire a single new employee, the Untied States would be at full employment, according to the Association for Enterprise Opportunity.

Last year, Kiva and Visa Inc. teamed up to launch the Kiva City initiative to help crowdfund microloans to small businesses and spur job creation. Thanks to Visa's strong interest in supporting small businesses, Kiva has now launched Kiva City in Detroit, New Orleans and Los Angeles. Each Kiva City is a coalition of local leaders, community organizations and financial partners working together to strengthen local economies, support small businesses and expand financial access to underserved populations.

When visiting, you can browse through the profiles and stories of individual small business owners in these cities and select one to support. Kiva is a nonprofit providing this microlending platform for free, making no money from the loans it facilitates. Lenders using Kiva have funded $331 million in loans to 818,000 individuals in more than 60 countries. With a 98 percent repayment rate, the money you lend is likely to come back to you. Through Kiva City, each of us has a chance to lend our support to small business owners in the United States. When small businesses do well local jobs are created and communities are strengthened.

Small businesses are the cornerstone of the nation's economy and a stepping stone to the American Dream. They represent more than 99 percent of all businesses in the country, create two out of every three new jobs, employ over half of private sector employees, and produce over half of the nonfarm GDP.

Despite the economic power of small businesses, the credit freeze of 2008 has not thawed for the smallest of small businesses. Karen Mills, Chief of the U.S. Small Business Administration (SBA), is alerting audiences across the country to the fact that, "Small-dollar loans and loans in underserved communities are still not back at the levels we need them."

The lack of small dollar loans is not based on the merit of the small business owner's idea or projected success. According to the SBA, small dollar loans, or "microloans," are difficult to find because traditional lenders do not make money lending in small amounts. The cost to banks for processing loans of $50 thousand is nearly the same as processing a $1 million loan.

Microloans are a critical first step for business owners to realize long-term financial success. Microloans can serve as a bridge for many small business owners, providing commercial credit history and working capital to start up, expand operations, and hire or retain employees.

In less than one year, the Kiva City New Orleans initiative has facilitated more than $300,000 in loans funded by thousands of lenders inside and outside of the U.S. These microloans have created real change in the lives and communities of the small business owners who have received them.

Through Kiva City New Orleans, 100 percent of the loans went to minority business owners, 68 percent are women-owned businesses, 56 percent are start-ups and 29 jobs were created and 71 were retained. Every one of these small business owners were turned down by traditional financial institutions. The success of the Kiva City New Orleans initiative provides just a glimmer of what is possible when crowdfunding microloans to small business owners truly goes to scale.

Lending to small businesses has a ripple effect on local economies and communities. Every dollar you lend helps to create local jobs, which in turn supports another local business and then another. As small businesses grow, local economies improve helping to support schools, city services and sustainable communities. The dollars you lend to spark that cycle come back to you, but the cycle you help to spark continues long after your loan is repaid.

Our country needs an economic recovery crowdfunded by the American people and sustained by small businesses. The power to shape economic opportunity belongs in each of our hands.

Premal Shah is the President of Kiva.