Your paid back as the entrepreneur pays their loan back. Once it is paid back you are credited back the $25 you loaned. There is risk, as a few, a very few loans aren't repaid. However, my loan was paid back. She actually paid her loan off early. I had the option to cash out my $25, but I chose to keep the circle going and I loaned the money to another entrepreneur. I'm just happy to see it work.
For more on Kiva check out the article I wrote about them:
There are lots of things you could do with $25. You could easily spend it on diner, a movie, a concert, and you could donate it a charity. Did you know you could loan it to an organization to make philanthropic micro financing loans to help fight world poverty? (Link)