Applying ‘Web 2.0’ principles to Microfinance Online Giving Marketplace Conference Premal Shah President Kiva www.kiva.org "Revolutionising how donors and lenders in the US are connecting with small entrepreneurs in developing countries”
Kiva 101 Internet Lender Online marketplace Local Partner (MFI) Entrepreneur Money Information
+340,000 social investors have lent + $45 million in first 3 years.
Other Key Stats
Growth: $1M loans every 10 days.
Risk: 3.5% delinquency rate / < 0.5% default rate
MFI Portfolio: 97 MFIs in 42 countries. Growing 3 a month.
Traffic: 100,000 site visitors a week.
Organization: 30 employees / +400 volunteers
Leverage: Platform raises $10 in loans for every $1 donated.
5 yr goal = $1 Billion
Kiva utilizes 5 “Web 2.0” principles
Create an “ Addictive ” User Experience
Be “ Radically Transparent ”
“ Crowdsource ” against constraints
Build in “ increasing returns on data ”
Reach “ The Long Tail ”
Create an “Addictive” User Experience
“ Addictive” = Easy + Fun
How Kiva tries to make it “Easy” Designed for everyday people, not affluent experts “ I can see the person I’m lending to…” Low cost to entry Business relationship based on mutual dignity, not pity Quick and easy checkout
How Kiva tries to make it “Fun” Rich user generated content, changing fast... Loans are fully funded in hours (MFI staff love this)… Transactions happen every 37 seconds… Real time un-edited progress updates from around the world… ‘ Popular’ entrepreneurs rapidly rise to the top… Randomized “1 minute of fame “ for Lenders…
Results: +270,000 lenders from +70 countries in 2.5 years… How Kiva tries to make it “Fun” My Page, My Portfolio… “ My Page” encourages self expression, evangelism and loyalty… “ My Portfolio” concept encourages further lending, risk diversification and inter-lender competition…
For some, Kiva is becoming very addictive! KivaFriends.org – unofficial Kiva community forum (built by our users) Several results when searching for the word: “ Addicted ”
Be ‘Radically Transparent’ Transparency Authenticity Trust
Kiva and Radical Transparency Paying for Kiva’s overhead is an explicit choice Results: 7 out of 10 users pay an additional 10% to cover Kiva’s cost. Kiva reached 70% self-sufficiency in year 2.
Kiva and Radical Transparency Data inaccuracy and defaults are made explicit Results: 3% delinquency rate. 3% refund rate. <1% default rate. TBD inaccuracy rate
“ Crowdsource” against constraints Big constraint? + No resources? = Crowdsource
Kiva and “Crowdsourcing” Kiva Fellows Program How do we train MFIs, gather progress updates and verify data accuracy hyper-fast?
Kiva and “Crowdsourcing” Kiva Translator Program How do we immediately translate entrepreneur profiles from native language to English?
Kiva and “Crowdsourcing” We have little money, but great partners! Free payment processing and employee support 120 Million free banner impressions Free Google Adwords – 25% of traffic Free Yahoo Search Marketing and employee support Free promotion (Community Impact Award) Funding for Field Research and Development Free phones for cell based data upload pilot Free promotion of Kiva widget to bloggers Free computers and early funder
Build in “Increasing Returns on Data” Leading public platform + Data integrity “ Increasing Returns on Data”
Result: 30,245,763 loans found Kiva and “Increasing Returns on Data” World’s largest DB of microfinance investments Long Term : Entrepreneurs could use Kiva as a public credit bureau… Short Term : MFIs could use Kiva to build credit worthiness to other funders…
Reach “The Long Tail’ “ The Long Tail”
Kiva can uniquely reach the microfinance ‘long tail’ Tier I (e.g. Grameen Bank) ----- Tier IV (e.g. church congregation) Current distribution of funds in microfinance The Internet is a promising way to reduce costs and distribute risk in investing in smaller (Tier II - Tier IV) Microfinance Institutions. Could Kiva help discover and scale the next Grameen Bank?
Kiva’s platform can aggregate and deliver risk capital unlike any commercial source
Kiva lenders value social return / tolerate risk more than institutions
$25 investments size ensures risk distribution across thousands of investors
Less established MFIs can build a reputation slowly over time (like on eBay)
3 Key “Actionable” Takeaways # Web 2.0 Principle Actionable Takeaway 1 “ Addictive” user experience
Make it “Easy”:
PayPal is quick and easy credit card acceptance
Tip: Get the PayPal ATM/Debit Card and withdraw funds from ANY country real time
Make it “Fun”:
Photo upload is the 80/20 of social networking – get it done first!
2 “ Radical Transparency”
Start a blog
Admit imperfection every step of the way
3 “ Crowdsource” against constraints
Hard time getting traction in the beginning?
Ink is cheap: Build a huge advisory board
Everyone loves a party: Evite as a way to build brand
Kiva’s Risk Model helps manage risk on Kiva’s platform and creates an incentive for MFIs to improve transparency and performance. Inputs
1) Self-reported MFI Data
Gross Loan Portfolio (GLP)
Overall Portfolio At Risk (PAR)
Organizational Self Sufficiency (OSS)
2) 3 rd Party MFI Data
Financial Audit Results
Credit Rating Score
Kiva Audit Results
Outside funder Quality
Network Affiliation Quality
3) MFI Performance on Kiva
Total Outstanding Kiva Loans
PAR on Kiva Loans
Kiva Fellows’ Journaling Coverage
Outputs 1. MFI Reputation on Kiva’s site 2. Monthly Fundraising Limit 3. Kiva Audit Prioritization Kiva Risk Model