Here’s an inspiring non-profit business model that I heard about on the latest edition of BBC’s Click.

Kiva is an innovative charity that is attracting the attention of budding venture capitalists with its innovative peer-to-peer lending model; allowing small lenders to support low income entrepreneurs in developing countries with ‘microloans’.

Lenders visiting the Kiva website can browse dozens of businesses that are in desperate need of cash flow, and then decide whether they would like to invest in that business, based on key information supplied (e.g. business type, region, bios, investment return risk etc). Lenders have the option to donate as little as $25 via Paypal to any given venture. When the target total is reached, the funds are transferred to a microfinance field partner to distribute the funds to the local business. The intention is that over time, that business repays the loan to the lender, who can choose to reinvest the loan into another business should they wish.

Naturally, the nature of these loans means that there is a high degree of risk associated, but the idea is that by encouraging people to contribute an investment of relatively small amounts, the amount of exposure is small and the worst case scenario is that the investment simply becomes a charitable donation.

The key attraction of this model is that it democratises microfinance, and makes the impact of charitable donations more tangible. Rather than simply sending cash to a charity without knowing exactly how it will be spent, people have the opportunity to find out about a specific individual or business’s circumstances and then provide them with ‘direct’ assistance. Blog updates tracking the success of the loans helps lenders feel that they are acting more like a business partner than a donor – which encourages a higher degree of involvement in the charity (building up a personalised online portfolio of investments) and repeat visits to the website.

It’s obviously proving to be a successful initiative: at time of writing the website was claiming results of 1 loan every 20 seconds, with 3,346 new lenders having signed up in the past week alone – leading to total donations in excess of 1 million US dollars.

As Kiva grows, no doubt its major challenge will be to ensure that it maintains a similar (if not greater) sense of genuine p2p relationship building, whilst ensuring that its field partners are identifying and managing a sufficient number of loan applicants in legitimate need of assistance.