From the updated website:
1) It all starts with our Field Partners, which are microfinance institutions operating around the world. Our Field Partners approve and disburse a microloan to an entrepreneur in their community. They take a picture of the entrepreneur and write down the entrepreneur’s story.
2) The Field Partner uploads the entrepreneur’s profile to Kiva’s website. The profile, if it’s not in English, is translated by one of our hundreds of volunteer translators. After translation, the profile appears live on Kiva.org
3) Lenders like you browse the entrepreneurs’ profiles and choose someone to lend to, using PayPal or their credit cards.
4) Kiva provides the funds to our Field Partners by aggregating the loan funds from all contributing lenders. Most Field Partners then use the Kiva lender funds to backfill the loan they’ve already disbursed to the entrepreneur. Disbursals can happen up to 30 days before, or 30 days after a loan request is uploaded to the Kiva website.
5) Over time, the entrepreneur repays her loan. The Field Partner collects those repayments and lets Kiva know if a repayment was not made as scheduled. We give Field Partners the option to cover both currency losses and entrepreneur defaults.
To speed things up and to minimize the number and expense of wire transfers, Kiva works on a net billing system. This means that, for any given month, we subtract the amount of repayments that a Field Partner owes to Kiva lenders from the amount that a Field Partner fundraises for entrepreneurs on Kiva.
If the balance is positive, that means that the Field Partner has raised more than they need to repay, and we use those funds to credit your lender account with the repayments due to you. Tell me more
If the balance is negative, then the Field Partner has 30 days to send us a payment for the balance. As soon as we receive that payment, we use those funds to credit your lender account with the repayments due to you.
Repayment and other updates are posted on Kiva and emailed to lenders who wish to receive them.
6) When lenders get their money back, they can re-lend to another entrepreneur, donate their funds to Kiva (to cover operational expenses), or withdraw their funds to their PayPal accounts.