Transcripts

Kiva President Premal Shah, Says Farmers & Crops Are Still Coming In

SUSIE GHARIB: The use of farm land to raise crops for fuel has increased pressure on commodity prices around the world. To find out what that means for farmers in developing countries, we turned to Kiva. It's a micro-lending website that directly connects donors in the United States with small entrepreneurs in poor countries. Washington bureau chief Darren Gersh asked Kiva President Premal Shah how rising food prices affect the small businesses his website helps finance.

PREMAL SHAH, PRESIDENT, KIVA: We have talked to a few of the entrepreneurs on our website, for example a farmer in Ecuador who is a rice farmer and while they're able to -- it's harvest season right now and he's excited for the short-term rise in prices for himself, his inputs, the oil- based fertilizers and the transportation to get things to the market, that's also something that eats into his profits.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Is the commodity price that you see at the end in the city when the rice gets sold to somebody, is that going back to the farmer or to the agricultural business that you support?

SHAH: What's happening is is the big driver is the rise in fuel prices right now and with the rise in fuel prices, it basically just costs more to produce that grain of rice. And so it doesn't really go back into the producer's pocket and more so when it goes to the city and that grain of rice ends up in a say small food shop, the consumers who are also poor most of the time, are unable to afford that rice and so essentially it's something that the consumption of rice actually goes down and then the end producer who's enabling that rice to come and get distributed isn't seeing the profit and it's really just an increase in the production -- the cost of production.

GERSH: So you said you've been in contact with more of the people who are getting the loans. What else are they telling you? What kind of problems are they seeing right now because of the rising food prices and commodity prices?

SHAH: There's a woman and she is a dairy farmer and so while the price of basically what she's producing has increased, her feeds, the wheat and the grains that she uses to feed the cow is also increasing. There is a baker also in Latin America who is trying to pass on the rise in cost to his consumers, but he's unable to do this because his consumers can't afford the increase in price. I mean the prices has shot up 50 percent for some of these commodities in just a matter of months. And so I think what we're seeing is a lot of the microfinance institutions that we work with who give out loans on the ground and who post these loans to the Kiva website are actually being asked to give out higher loan sizes so they can cover this shock and a lot of this loan money is not only being used for productive purposes like growing their business, probably subsistence purposes, just having a little extra money around the house to pay for the increase in prices right now.

GERSH: Premal Shah, president of Kiva. Thanks for your time.

SHAH: Thank you.