Spotlight Exclusives

Rebuilding America’s Economy by Giving Budding Entrepreneurs a Chance

By Premal Shah and Jordan Choy, Kiva By Premal Shah and Jordan Choy, Kiva, posted on

The region of Appalachia stretches from New York to Mississippi. With great cities and beautiful forests, this picturesque stretch of America has much to offer the country. Yet, despite its natural beauty, the region faces difficult and even severe economic challenges. Rampant unemployment and poverty has been as persistent as the forests and vistas that characterize it.

De-industrialization, loss of demand for coal, and increased automation has devastated local economies and caused job losses. This overall lack of job creation is not unique to this region; between 2010 and 2014, the period of economic growth and recovery was heavily concentrated in major cities, with only 20 counties in the entire nation producing half of all new business establishments.

As the region has often lagged behind the rest of the country in economic growth and development, the citizens of Appalachia have been hit with hard times and harsher conditions. Solutions are difficult to come by, as slow job growth, limited opportunities for education and job training, and poor health care are issues that cannot be overcome with simple, one-size-fits-all solutions.

The Appalachian Regional Commission (ARC) recommends that investments be made in numerous areas like infrastructure and education. One of the key areas where ARC’s recommendations align closely with’s mission is through investment in economic opportunities such as entrepreneurship and small business creation.’s mission is to connect lenders with borrowers in the United States and around the world. The U.S. program is defined by direct peer-to-peer lending at zero percent interest, aimed at helping American entrepreneurs and small business owners that are financially excluded. Kiva operates in every U.S. state and more than 80 countries. Visitors to choose who they want to lend $25 or more to and individual loans of $25 or more are collected until the borrower’s full loan request is “crowdfunded.” As the borrower repays, lenders can re-lend their money to another borrower or withdraw their money and put it back in their pocket.

Supporting the establishment and growth of small businesses is critical. Scholarship tells us that across all demographics, small business entrepreneurship is associated with driving innovation, job growth, and personal satisfaction, and that small and local businesses are responsible for employment growth, rural economic development, per capita income growth, and even a lower poverty rate at the community level. In fact, in a study of U.S. counties from 2000-2008, an abundance of local businesses with two to nine employees is associated with a decline in poverty at the county level.

As an example, Ryan grew up in Kansas City, Missouri, but has established his business in Cumberland Gap, Tennessee. He runs Mitty’s Metal Art, working as a talented blacksmith and producing metal art. He used a $10,000 crowdfunded loan from to establish a co-working space for the community and teaching the art of blacksmithing to others. His loan was crowdfunded by 177 lenders, each lending just $25 at a time.

Kiva loans fill in the gap where traditional lenders do not. Kiva’s small business loans are available regardless of credit score, collateral, cash flows or number of years of operation. This contrasts with the traditional lending landscape, where eight out of ten small business loan applications are denied. Lending in Appalachia was 18 percent lower than the national average following the economic recession and it was 56 percent lower in the region’s economically distressed counties.

This June, Kiva reached an important milestone of distributing $1 billion in crowdfunded loans worldwide –to-date Kiva has provided loans to more than 3,700 small business owners in the U.S.

West Virginia in particular has been the victim of economic and population decline, having lost about 8,000 jobs in the last few years, and projected to suffer a population loss of 23,000 in the next 20 years. This is part of a disturbing trend in Appalachia, which never fully recovered from the economic collapse in 2009. Kim was one of the 22.5 percent of people in Appalachia who have bachelor’s degrees, with only 48 percent of the region having any form of post-secondary education at all.

April grew up learning the value of good food and family. She was born in Ashland, Kentucky, and grew up moving to rural Ohio and then back to her home state. Her mother was an excellent cook and taught her the value of cooking with love, a lesson April took with her when she settled down in Huntington, West Virginia. She set up Farm to Table Cafe, working together with her son, who has Asperger’s Syndrome, to serve great food. Her loan of $5,000 was funded by 84 lenders.

One of the most important keys to economic recovery in Appalachia comes from investment in small business ownership and entrepreneurship. Small businesses are the backbone of a robust economy, as more than 92 percent of all U.S. businesses consist of less than five employees. In regard to addressing staggering inequalities, micro-businesses are far more inclusive, with lower start-up capital and educational requirements. Improving job creation and local economies in Appalachia will have to start with strong support for small business ownership and entrepreneurship.

With average loans of just $25, the dreams of people like Ryan and April have been funded. Boasting 97 percent repayment rates, a single loan can be reused and lent to yet more aspiring entrepreneurs. The path towards positive change and economic growth begins with small steps at the grassroots level. Kiva is a unique organization working hard on the fight to rebuild the Appalachian economy and show that, regardless of the area, everyone deserves an equal opportunity.

Premal Shah is the co-founder and president of Kiva. Jordan Choy is a research fellow at Kiva.

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