NSLC 2010 Premal Shah President Kiva www.kiva.org Parth Shah National Director Kiva High School"Revolutionising how donors and lenders in the US are www.kivahighschool.orgconnecting with small entrepreneurs in developing countries”
What is Microfinance?• Microfinance = small capital• The poor are typically excluded by financial service providers: • No collateral • No credit history • Illiteracy• The poor need financial services, and already use them informally: • Borrowing money from loan sharks with interest rates so high that it may be impossible to ever pay back • Savings accounts kept in the home, vulnerable to theft • Investing in livestock which is vulnerable to disease• Microfinance works to provide the poor with these financial services, in a• Safe and controlled environment, through a microfinance institution Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime. What if he knows how to fish, but just can‟t afford a fishing net? 2
Microfinance Institutions There are thousands of microfinance institutions around the world, and they all vary a little depending on the region they are in and people they are targeting to help • Some focus on women in places where women don‟t have the same rights as men and so have no economic empowerment • Some focus on the rural population in areas where people are isolated and cannot travel to cities to access services • Some focus on a comprehensive program which includes business training with financial products What ties them all together, however, is a desire to help the poor by providing them with financial services
Traditional Microfinance Lending Process Banks and NGOs • Microfinance institutions typically get the money that they lend, from banks or non-governmental organizations, or both • This can be expensive, as it is often borrowed with interest • There may also be difficult application procedures to access debt capital from non-governmental organizations • Some organizations can even find themselves shut out due to the region they operate in, particularly post-conflict regionsMicrofinance Institutions • Restrictions that microfinance institutions face ultimately affect the entrepreneurs, who rely on microfinance institutions to serve themEntrepreneurs
Why loans rather than charity?• Dignified Business Transaction• Spreading opportunity, rather than charity• Sustainable – A Hand-up not a hand-out! – Spreading opportunity rather than spreading wealth 5
Guiding personal principle "Dont ask what the world needs, do what makes you come alive; because what the world needs most are people who have come alive." -- Howard Thurman
Key milestones and how „alive‟ I felt SEWA PayPal Research acquired by OMG it‟s Project eBay working!“Alive-ness” Personal Joined small Leave for discovery of start up: Kiva.org Microfinance PayPal “I got this idea” Big company – Sophomore Management “do I matter?” slump Consultant in New angst York 20 33 Age
Kiva 101 Online marketplace Internet Local Partner Entrepreneur Lender (MFI) Money Information
550K people lent $120M to 200K entrepreneurs in 4 years 5 yr goal =Other Key Stats $1 Billion• Growth: $1M loans every week• Repayment Rate: 97%• Recycle Rate: 65%• MFI Portfolio: 115 MFIs in 50 countries.Growing 3 a month.• Traffic: 40,000 visitors / daily• Organization: 35 employees / 500 volunteers• Leverage: $10 in loans for every $1 donated.
Kiva utilizes 4 “Web 2.0” principles1. Create an “Addictive” User Experience2. Be “Radically Transparent”3. “Crowdsource” against constraints4. Build in “increasing returns on data” 10
Create an “Addictive” User Experience “Addictive” = Easy + Fun 11
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 Quick and easy checkout Business relationship based on mutual dignity, not pity 12
How Kiva tries to make it “Fun”Badging, Teams, fast changing UGC, stats... Real time un- edited updates… Loans are fully funded in hours Transactions happen Randomized every 18 “1 minute of seconds… fame “ + Lending Teams… 13
Be „Radically Transparent‟ Transparency Authenticity Trust
Kiva and Radical TransparencyPaying for Kiva‟s overhead is an explicit choice
Kiva and Radical TransparencyData inaccuracy and defaults are made explicit
“Crowdsource” against constraints Big constraint? + No resources? = Crowdsource
Kiva and “Crowdsourcing”Kiva Fellows ProgramHow do we train MFIs, gather progress updates and verify data accuracy hyper-fast?
Kiva and “Crowdsourcing”Kiva Translator ProgramHow do we immediately translate entrepreneur profiles from native language to English?
Build in “Increasing Returns on Data”Leading public platform + Data integrity “Increasing Returns on Data”
Public reputation system for MFI Risk and Social PerformanceKiva Social RatingKiva Risk Rating Social Rating Risk Rating
Kiva and “Increasing Returns on Data”World‟s largest DB of microfinance investmentsShort Term: MFIs could use Kiva to build Long Term: Entrepreneurs could usecredit worthiness to other funders… Kiva as a public credit bureau… Result: 30,245,763 loans found
Kiva High SchoolMission - to bring together and organize high schoolstudents interested in fighting poverty on both a localand national scale.How does Kiva High School Work?1.Starter-Kit • What is Kiva/Microfinance/Kiva High School? • How to setup a chapter • Chapter fundraising ideas • Chapter finances 24
Kiva High SchoolWhat does Kiva High School bring to your school? •Awareness of global issues such as poverty •Give high school students a platform to make a powerful impact •Show the capacity of microfinance and the ripple effects of your loan •A network of like-minded students that are unified through a central organization 25