Kiva Zip: People’s Insights Volume 2, Issue 22

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This week, we distill insights around Kiva Zip - a true person-to-person micro-lending platform which enables people to lend directly to entrepreneurs in the U.S. and Kenya without a middleman.

100+ thinkers and planners within MSLGROUP share and discuss inspiring projects on social data, crowdsourcing, storytelling and citizenship on the MSLGROUP Insights Network.

Every week, we pick up one project and do a deep dive into conversations around it -- on the MSLGROUP Insights Network itself but also on the broader social web -- to distill insights and foresights. We share these insights with you on our People’s Insights blog and compile the best insights from the network and the blog in the People’s Insights Quarterly Magazine, as a showcase of our capabilities.

We have further synthesized the insights to provide foresights for business leaders and changemakers — in the ten-part People’s Insights annual report titled Now & Next: Ten Frontiers for the Future of Engagement, now available as a Kindle eBook.

For more, see: http://peopleslab.mslgroup.com/future-of-engagement

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Kiva Zip: People’s Insights Volume 2, Issue 22

  1. 1. crowdsourcing | storytelling | citizenship | social data Kiva Zip People’s Insights Volume 2, Issue 22
  2. 2. Volume 2, Issue 22, April - June, 2013 Future of Money Kiva Zip 100+ thinkers and planners within MSLGROUP share and discuss inspiring projects on social data, crowdsourcing, storytelling and citizenship on the MSLGROUP Insights Network. Every week, we pick up one project and curate the conversations around it — on the MSLGROUP Insights Network itself but also on the broader social web — into a weekly insights report. Every quarter, we compile these insights, along with original research and insights from the MSLGROUP global network, into the People’s Insights Quarterly Magazine. We have synthesized the insights from our year-long endeavor throughout 2012 to provide foresights for business leaders and changemakers — in the ten-part People’s Insights Annual Report titled Now & Next: Ten Frontiers for the Future of Engagement. People’s Insights In 2013, we continue to track inspiring projects at the intersection of social data, crowdsourcing, storytelling and citizenship. Do subscribe to receive our weekly insights reports, quarterly magazines, and annual reports, and do share your tips and comments with us at @PeoplesLab on Twitter. People’s Insights weekly report People’s Insights quarterly magazines People’s Insights Annual Report
  3. 3. 3 What is Kiva Zip? Founded in 2011, Kiva Zip is a true person-to-person micro-lending platform which enables people to lend directly to entrepreneurs in the U.S. and Kenya without a middleman. Entrepreneurs share their business ideas online and lenders can directly contribute to the amount they need. Like Kiva, Kiva Zip does not charge any fees, and service provider PayPal waives its fees. Because there is no middleman, borrowers receive loans at 0% interest. Source: fastcoexist.com Kiva Zip is still in alpha, but is a good indication of where charitable lending is going: from indirect P2P to direct P2P and from supporting overseas borrowers to supporting local and foreign entrepreneurs. Source: zip.kiva.org Background: How Kiva works Founded in 2005, Kiva was the first online platform to indirectly connect lenders with borrowers in developing countries, via its extensive network of field partners (microfinance institutions, social businesses, schools and non profits). Field partners approve borrowers, collect their photos and stories and share this with Kiva volunteers, who translate and upload these to Kiva.org.
  4. 4. Volume 2, Issue 22, April - June, 2013 Future of Money Kiva Zip Source: kiva.org/lend Source: How Kiva Works Blogger David Roodman pointed out the importance of these stories: “People donate in part because it makes them feel good. Giving the beneficiary a face and constructing a story for her in which the donor helps write the next chapter opens purses.” Lenders browse through borrower profiles, by location and type of loan (educational, personal etc), pick a borrower to lend to and transfer money to Kiva using PayPal. Kiva aggregates the micro loans and distributes money to its field partners who in turn lend it to the next set of borrowers. Over time, borrowers pay back the field partners who return the capital to Kiva, which in turn returns the loan to lenders as Kiva Credits. Lenders can choose to withdraw their money, or fund another loan. Several lenders have reported the process can be addictive. Luz Iglesia reflected: “You can link Kiva to your social network, so you can celebrate with your friends – like Greg and Lindsay and Pearl – when they make a new loan or get a repayment. You can be on a lending team, like we are at the Ian Martin Group, and work together to increase your pool of loans. You can recruit friends with “free” loans so that they can try it out (the loans are funded by angel donors). And if you’re nerdy like me, you can track your Kiva metrics against the averages of other users.” While Kiva does not charge any money from these transactions, Field Partners charge interest fees to cover their costs and safeguard against defaulters. Kiva covers its operation costs through grants, donations and discounted services from corporations and foundations. To date, Kiva has enabled 951,000 people to lend $449 million to 1 million borrowers in 69 countries. From Kiva to Kiva Zip: Demand for a true P2P Network The design of Kiva.org makes it seem like loans go directly to the borrowers that
  5. 5. 5 Source: sfweekly.com, kiva.org/team/kacl and gopetition.com lenders have picked. This is not so. Borrowers actually receive the loan before their profile is uploaded to Kiva.org – the money lent “backfills” all the loans – a fact that not many lenders were initially aware of. In a comprehensive post on this topic, micro- finance specialist David Roodman explains why Kiva follows this process: “What Kiva does behind the scenes is what it should do. Imagine if Kiva actually worked the way people think it does. Phong Mut approaches a MAXIMA loan officer and clears all the approval hurdles, making the case that she has a good plan for the loan, has good references, etc.” “The MAXIMA officer says, ‘I think you deserve a loan, and MAXIMA has the capital to make it. But instead of giving you one, I’m going to take your picture, write down your story, get it translated and posted on an American web site, and then we’ll see over the next month whether the Americans think you should get a loan. Check back with me from time to time.” Lender Monika Jankun-Kelly commented: “I find it very troubling that Kiva *needs* to rely on mythology and oversimplification to draw in lenders, yet that’s the way it is. Human nature is what it is, our society is what it is. Let’s improve those, and Kiva’s advertising methods will follow suit.” However, many lenders were unhappy when they understood the process. Some shared their discomfort through their blogs and videos. Source: The Truth About How Kiva Works Others were unhappy that they money was going to causes they did not support, like a loan to support a cockfighting business in Peru (legal in Peru but illegal in California). Yet others were unhappy with the heavy interest rates charged by the middlemen, especially when other platforms, like Zidisha, had found a way to connect people directly at significantly lower interest rates. Lender melliecarma commented: “after 106 microloans to kiva borrowers in two years time i came to a similar conclusion and invest on zidisha.org now as i’m fed up with micro finance institutions getting in the way between lenders + borrowers.” Some, like pss1, justified the need for interest rates: That “middleman” fee covers the cost of making the loan and working on the KIVA platform. As described above, they are paying people (and a relatively high local wage) to vet the clients to eliminate scammers, take pictures, write the client stories, and put them on the internet. Interest rates are much lower than the typical local “money lender” rates. To address the concerns of lenders, Kiva introduced many design changes to Kiva.org and introduced Kiva Zip. How Kiva Zip works The Kiva Zip platform is similar in design and concept to crowdfunding platforms (like Kickstarter). Instead of facilitating loans to anyone in need, Kiva Zip focuses on entrepreneurs in the U.S. and Kenya. The Kiva Zip website says: “Now, Kiva Zip will enable lenders in the United States to make loans more directly to
  6. 6. Volume 2, Issue 22, April - June, 2013 Future of Money Kiva Zip Source: huffingtonpost.com borrowers. Instead of working with a local partner on the ground to facilitate your loan, we’re sending your funds to the borrower electronically (e.g. using mobile and electronic payment methods). This increased efficiency allows for 0% loans to the borrower, but a greater risk for the lender.” (Emphasis in original) Blogger Dave Algoso wrote: “Kiva [Zip] is using mobile and other technology to offer very low cost loans to borrowers who don’t even have access to normal microfinance institutions. Pilot borrowers for the new system are in the United States and Kenya, because of M-PESA. In place of local microlending partners, Kiva Zip uses “trustees” who vouch for the borrowers but never handle any money.” Trustees and borrowers must both submit an application online to be considered for a loan. Once the loan is approved, it is posted on Kiva Zip and must be funded within 90 days. If the loan is not fully funded, the money is returned to the lenders. On Kiva Zip, the minimum loan amount is $5. This new model adds even more importance to the reputation and social presence of borrowers and even the trustees. Borrowers need to rely on their networks to recruit support. Trustees need to rely on their reputation to increase the borrower’s chances of getting loans. Fast Co Exists’s Alex Goldmark points out that Kiva Zip makes loans available to people who may not qualify for bank loans, and stresses the importance of distributed risk and trust: “The average Kiva lender puts up $25, not a disaster if it vanishes. That helps increase the risk tolerance for users. And the average loan size is just $250 to Kenyan borrowers and $4,000 in the U.S. The small scale keeps defaults from devastating any one lender’s assets. But nobody likes to lose their money. So the trust network remains an important, if still experimental, aspect.” In addition to endorsing borrowers, trustees also help identify local businesses and entrepreneurs who could benefit from Kiva Zip. Here’s the role Kiva Zip Trustee AEDC will play: “AEDC is partnering with the Alaska Small Business Development Center (SBDC) to identify Alaska businesses that would benefit from the Kiva funding model. As a trustee to Kiva Zip, AEDC will play a crucial role in the program by recommending borrowers for the Kiva Zip loan and ensuring they meet the criteria for the program. In addition, AEDC and SBDC will provide borrowers with ongoing support and business coaching.” The Kiva Zip model ensures that borrowers receive financial support and also community support. Trustees and lenders can offer business advice and feedback, and promotional support to help them successfully fund their loan. They may also become customers of the new businesses they helped set up!
  7. 7. 7 Source: pandodaily.com Pushing the barriers of micro- lending In addition to connecting lenders and borrowers directly and creating a local support system for borrowers, Kiva Zip is also exploring partnerships to help borrowers succeed in their businesses. Source: zidisha.org Pando Daily’s Carmel Deamicis reports on Kiva’s new partnership with startup Zaarly: “Kiva is giving micro loans to a handful of Zaarly’s storefront owners that need a loan to take the next step in growing their businesses. In exchange, Zaarly will provide online storefronts and resources for a few Kiva borrowers.” Other approaches to P2P lending We are seeing several types of P2P lending platforms in the social good space. Zidisha connects lenders and borrowers directly, and allows lenders to decide the interest rate. Vittana (video) focuses on borrowers who need educational loans. United Prosperity uses micro-loans to guarantee borrower’s bank loans, helping them qualify for larger loans and build credit history. LendwithCare (video) connects lenders and borrowers through microfinance institutes vetted by CARE International.
  8. 8. People’s Lab is MSLGROUP’s proprietary crowdsourcing platform and approach that helps organizations tap into people’s insights for innovation, storytelling and change. The People’s Lab crowdsourcing platform helps organizations build and nurture public or private, web or mobile, hosted or white label communities around four pre-configured application areas: Expertise Request Network, Innovation Challenge Network, Research & Insights Network and Contest & Activation Network. Our community and gaming features encourage people to share rich content, vote/ comment on other people’s content and collaborate to find innovative solutions. The People’s Lab crowdsourcing platform and approach forms the core of our distinctive insights and foresight approach, which consists of four elements: organic conversation analysis, MSLGROUP’s own insight communities, client- specific insights communities, and ethnographic deep dives into these communities. The People’s Insights Quarterly Magazines showcase our capability in crowdsourcing and analyzing insights from conversations and communities. People’s Lab: Crowdsourcing Innovation & Insights Learn more about us at: peopleslab.mslgroup.com | twitter.com/peopleslab
  9. 9. For People’s Lab solutions, contact pascal.beucler@mslgroup.com

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