Vittana CEO Kushal Chakrabarti.

Kushal Chakrabarti believes in the power of education to break the cycle of poverty. The former Amazon software engineer is the CEO and co-founder of Vittana, a nonprofit organization dedicated to funding education in developing countries through microloans. Through Vittana's website, donors can select a student, make an interest-free loan (though Vittana's microfinance partners do charge a low interest rate) and, when the student graduates, they pay the loan back in full. The company, which was voted 'Best Nonprofit Startup' at the recent Seattle 2.0 Awards, says it has a 99 percent repayment rate and has helped 1,000 students in eight countries finish their education. I chatted with Chakrabarti about the young startup and how microfinance could fundamentally alter the trajectory of a student's life.

Why did you choose the microfinance model?

"(Microfinance) is a fundamentally more scalable and sustainable model than scholarships, which is what education funding has always been historically. The invention of microfinance (by) Muhammad Yunus won him the Nobel (Peace) Prize about five years ago now for this work. The fundamental point was that, for the first time, he made charity sustainable. People have been giving money to the poor since the beginning, but for the first time ever it was sustainable. So we're building off of his innovation and this is fundamentally about scalable, sustainable ways of providing access to education."

How did you get your start?

"It's been an amazing journey. When Vittana was first founded three years ago, I was literally laughed out of meetings (with people saying) that this will never work. 'What do you know about microfinance?' (they said). 'The students, the young people, they'll never graduate, they'll never repay it, they're not trustworthy.' And I think in three years what we've really done is answered that 'No, young people are trustworthy, young people will graduate. Yes, they will repay it.' And not only will these loans get repaid, but education is the single most powerful way of fighting global poverty... The average income change, after students get the Vittana loans and graduate, they earn on average about three times their previous income. So they go from (earning) about $3 - $4 per day to any where from $8 - $13 a day."

How do students repay their loans and are you always successful?

"We have a 99 percent repayment rate. That's a really interesting contrast against the United States, where loan repayment rates are sub-50 percent and I think it goes back to this point that in the countries we work in -- Peru, Vietnam, Mongolia, the Philippines, India -- there is no other chance. This is your one shot and none of our students are ever going to take that for granted. They know that this is their one shot and if they don't grab it, they're never going to get it back. And it's amazing how much a $350 loan can do.

"Peru was the second country we launched in and one of the first students who got funded on the Vittana website was this woman named Mercy Marilu, a young woman. She wanted to be a teacher originally, but she was forced to drop out because her family didn't have the money, they needed her to go work at the family roadside stand. She basically made the family money selling roast chickens on the eastern outskirts of Lima.

"When Vittana launched in Peru, Mercy was one of the first students that got funded with a $350 loan to finish her teaching degree. She graduated recently and got a job. She has paid all but $4 of her loan, which is amazing since it's only been a year since all of this happened. In the meantime, she actually had a daughter and here's the real deal: More than her getting a loan, more than her graduating, more than her repaying that loan, she opened a college savings account for her daughter. This loan was Mercy's one shot and she wasn't going to let it go no matter what and that's a story I hear over and over again. And each one of our 1,000 students has a story exactly like that and it's kind of amazing...it's been life-changing for me."

How is Vittana organized and funded?

"It's a nonprofit (organization), but we very much see ourselves as entrepreneurs... I'm what you would call a social entrepreneur... We've raised basically the equivalent of seed and angel rounds -- of course these are donations as far as the IRS is concerned -- but for many our supporters they apply the same investor-like mindset to it: 'Well, I want to do good in the world, what maximizes my social return?' And then they donate to organizations that maximize the total impact they can have... If someone cares about fighting global poverty, we believe education is the single most powerful tool to fight that and Vittana is the single most powerful donation. Because for every dollar in donations, we can drive $11 of loans, and for every $11 dollars of loans, that's roughly about $50 dollars worth of new income students can gain because of that."

How many students have you helped since Vittana's inception?

"1,000 students have received Vittana loans. We're shooting for 100,000 by 2013 and we're shooting for a million by 2015 and we've been growing at 10x annual growth year-over-year. We're really excited about it, it's something we can totally do. And now it's about bringing together the right people who can help us do that. We're hiring, we're bringing together an amazing group of donors and deciders and people. My team, we've had an amazing team and they've done amazing things, but we're adding more people to it... I really admire our product, but there are a thousand things I think we can do better and my job is to find them and I'm dying to do it."

How do you select students?

"Any student we think can graduate, can get a job and repay their loan, will get a loan... Really what our core value add is is that, over the last three years, over 8 countries, we've gotten very good at understanding which kind of students are the right students, (the ones) we have the highest impact for, they repay, that will be able to find jobs... The student we work with, we often work with the children of microfinance borrowers, or neighbors...we generally target technical schools and vocational schools and, in some cases, universities. There's obviously a component of the student being able to succeed in their education, are they entering a profession where they will be employable?

"63 percent of our students are women, which especially interesting when you think about the fact that women are often the first to be made to drop out when...a family doesn't have enough money...so it's amazing that so many of our students are women because there's so much research out there that shows that women are the key and the foundation to a family getting ahead. That, if you invest in a woman, you invest in a daughter or a mother, that is what pushes the family ahead because they reinvest in their own family and that's something that we're quite excited about."

Why do you think you were selected as the best Seattle nonprofit?

"I know many of the other nominees very well, they're all amazing organizations. I feel like one of the things I love about Seattle as a community is there is this amazing blend of technology savvy people -- people really understand technology, people are really forward thinking -- but at the same time, there's desire to do good in the world. So all the other nominees are amazing organizations. I obviously happen to think that education in particular is one of the most powerful tools we have to make a difference in this world. I don't know why we were chosen over everyone else, but I think it was because of the power of education, the power to change people's lives."

What are the loan terms?

"Our loans are much smaller and much shorter than anything in the United States. The average loan size is $700. I went to engineering school and I could buy, maybe a semesters worth of engineering books for $700. Compared to the $50,000 or $100,000 it takes to finish education here, the bang for the buck is so much greater (in developing countries). And, because the amounts are so much smaller, the loan terms are much smaller. The average loan is about 2 or 3 years -- that's how long it takes for someone to finish their education and repay their loan. But it's a relatively simple process, and I think what makes it work is its simplicity. Because when you think about the context of these countries, there's no infrastructure, there're no SATS there's no FAFSA, there's no credit bureau, so you need something that works. We work with microfinance lender organizations who manage the day-to-day operations of repayment and following up with students, etc."

What's the greatest challenge ahead of you?

"When we first started, no one thought this would ever work. No one thought that young people would ever graduate, repay and we finally proven them wrong. And we don't get questions about whether or not young people will graduate or repay or have a change in their life (anymore). Now the challenge is to really make a dent….the need is a 100,000, the need is a million. So our challenge is scaling this up in a way to really make a difference for young people around the world...everyone's working furiously to make that happen. We work just as hard, if not harder, than every Seattle, every Silicon Valley startup. We're just not in it for the money, we're in it really make a difference in the world for young people. But the challenge and the opportunity is to take something that we know works and can fundamentally alter the lives of young people around the world and now reach hundreds of thousand and a million young people...it sounds like an absolutely exciting challenge."