KIVA – Loans that Change Lives
Group Members
Devon Kelly
Kieran Mara
Robert Swanson
Nicole Fernandez
Kathleen Iannone
General Information
What is Kiva?
Kiva is the world's first person-to-person lending website. It allows anyone with internet capability to donate to entrepreneurs in developing countries. It's stated mission is "to connect people through lending for the sake of alleviating poverty." Kiva's website is set up so that someone looking to donate can browse entrepreneur's profiles and then choose who to lend to. You are able to receive email journal updates about your loan and track repayments throughout the course of the loan, which is usually 6-12 months. Kiva also partners with microfinance companies in order to gain access to entrepreneur's profiles. Their microfinance partners distribute the loans to the entrepreneurs and provide training to help maximize the entrepreneur's chances of success.
Kiva uses a system that is constantly improving. They are always striving to make the lending platform more transparent in order to show how money flows throughout the entire cycle and what effect it has on the people and institutions lending it, borrowing it, and managing it along the way. (http://www.kiva.org/about). Kiva creates an interpersonal connection for the donor and the entrepreneur at low costs by capitalizing on inexpensive, internet delivery.
How Does It Work?
This video sums up essentially how Kiva works. The maker of the video traced his $25 dollar loan from London, England to a rice farmer in Preak Tamao village, Cambodia: "A Fistful of Dollars: The Story of a Kiva.org Loan by Kieran Ball."
The Kiva Cycle
Kiva explains how it works very simply in "The Kiva Cycle: Choose an entrepreneur, lend, get repaid."
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1. Lenders browse the profiles of entrepreneurs in need and choose someone to lend to. They usually lend using credit cards or PayPal, and then Kiva collects the money. |
Kiva's Founders
The Inspiration
Kiva was founded in October 2005 by Matt and Jessica Flannery. The couple's initial interest in microfinance was inspired by a 2003 lecture given by Grameen Bank founder Muhammad Yunus at Stanford Business School. Jessica worked at the school and invited Matt to attend the presentation; this was the first time he had heard of microfinance, but it served as a “call to action” for his wife. Soon after, Jessica began working as a consultant for the nonprofit Village Enterprise Fund, which worked to help start small businesses in East Africa. While visiting Jessica in Africa, Matt spent time with his wife interviewing entrepreneurs about the problems they faced in starting ventures and found the lack of “access to start-up capital” was a common theme. After returning from Africa, they began developing their plan for a microfinance project that would grow into Kiva, which means “unity” in Swahili. Kiva is run by a team with experience in microfinance and technology.
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| Muhammad Yunus | Jessica and Matt Flannery |
Matt and Jessica Flannery (Co-Founders of Kiva)
Matt and Jessica Flannery founded Kiva after a trip to East Africa. Jessica was working in microfinance consultation in East Africa in 2004 when her husband accompanied her on a trip. There, the two conceived the idea to create a website that could match philanthropic lenders with lose seeking loans in improvised nations. The couple wanted to make this a loaning service rather than a donation service because entering in a loan with another is a sign that the two are in a trusting and equal relationship. In 2005, Matt Flannery left his job as a programmer for TiVo to dedicate his time to Kiva. He currently serves as the company’s CEO.
Kiva's Use of Technology
Semi-Horizontal Integration
While Kiva's relationship with PayPal does not constitute horizontal integration, its involvement with the online pay-site is certainly advantageous. PayPal waives its usual payment processing fee for users' donations. This deal is unique to Kiva; PayPal enforces the fee for every other organization that uses its services. In exchange for PayPal's generosity, Kiva agreed not to employ the serives of any other pay-site besides PayPal. With the exception of donations exceeding $1,000 – which can be paid by check – the only way to loan through Kiva is PayPal.
Market Making
This IT enabled process allows an organization to bring together buyers and sellers. Kiva's innovative website has created a community where lenders can find entrepreneurs to lend money to. The website provides a safe, trustworthy environment in which the lender can research which entrepreneur to lend to and track his or her loan's progress through online journals (similar to blogs). Kiva also has an online store where it sells products like t-shirts, mugs, etc. to help spread the word about Kiva and also gift certificates. As Kiva puts it, what better gift is there to give someone than "the power to change lives."
A Network of Lenders
Kiva utilizes Web 2.0 tools to create a network of lenders. As individual members of Kiva, one can make a personal loan. However, by combining into teams and donating together, a team can make a larger loan to help contribute to a bigger project. Once a user creates an account, he or she can easily join a team by clicking on the "Community" tab and browsing the existing teams. There are closed teams made by private individuals who invite one another to the team and open teams which are usually larger and anyone can join. Each team is listed and they have descriptions so a user can identify which team, if any, they would like to be a part of. Joining and leaving teams is an easy process. A user can also create an open or closed team and invite people to join. Commonly, users create teams for a certain cause or event. In a perfect world, every little sixteen year old girl's birthday party might instruct all of her guests to sign on to Kiva and join her team to loan money to help an entrepreneur in a third world country start a business. Sigh.
Globalization 3.0
Kiva is a perfect example of globalization 3.0 as explained by Thomas Friedman. This era consists of globalization by individuals and small groups (as compared with globalization by countries in globalization 1.0 and companies in globalization 2.0). Kiva creates an easy venue for individuals to participate in international loan markets and/or join international groups in these markets. The loans themselves allow entrepreneurs in poorer areas of the world to establish the technology and tools to compete in the newly leveled economic playing field.
Is Kiva's Use of IT a Double-edged Sword?
Some potential donors are afraid that investing in Kiva – while still donating to a worthy cause – is pointless because it is impossible for people in developing nations to repay their loans. If Kiva's default rates were high, this would be a legitimate excuse not to donate. But Kiva proudly posts on its website they have only had a 2.2% default rate for the $24,589,785 in loans. These numbers should allay any worrisome investors and free itself from the stigma of having a double-edge sword facet to their business
A Personal Experience With Kiva
For my high school graduation, I recieved a $25 Kiva gift card. My friend explained to me that with this gift card, I could invest in small businesses around the world. Having done work in Honduras in the summer of 2007, I decided to find an entrepreneur in Honduras that I could help. Browsing through the directory in Kiva, I found the Solidaridad y Union Group based in Tegucigualpa, Honduras. Run by four hard-working Hondurans out of their homes, this group makes different types of food and deserts. Since my loan of $25 in July 2008, I have recieved monthly updates through Kiva about how the group is using the money and expanding their business. This business is very reliable in terms of repaying their loans, as I have already been repaid half of my loan. I can now re-loan this credit to another deserving business. All together through Kiva, the group has received a loan of $1,250 which has been a great help to them and their business. Without the help of the web 2.0 enabled Kiva, this group would not have had the resources or capital to keep their business going. It is a great alternative to banks who would normally turn these types of business away.
Lending with Kiva is very easy and simple. Once you create a lending profile, you can choose which business to help and then you received updates on their affairs and when you have been repaid; with the credit that you are repaid, you can loan to another business.
Kiva and Competition
Echoage is a recently founded website that is a potential competitor for Kiva. Echoage eliminates the paper invitations and wrapped, less meaningful presents from a child's birthday party. First, a child chooses which charity to donate to from a variety of charities. Next, online invitations with the charity shown on them are sent to guests who, instead of buying trivial gifts and wasting paper by wrapping them, give a secure online gift of money. All of the money is pooled together to give the child one meaningful gift and support the cause that he or she chose. Echoage helps the environment, various charities around the world, and the pockets of the guests since all donations are tax deductible.
Kiva in the News
- Author Bob Wood is a prominent advocate for Kiva Loans.
- Nicholas D. Kristof wrote about the organization in "You, Too, Can Be a Banker to the Poor", New York Times, March 27, 2007.
- Former US President Bill Clinton exhorted the students of Brandeis University to use Kiva in a speech given on December 3, 2007.
- Frontline and The Oprah Winfrey Show had segments devoted to Kiva.
- Kiva is mentioned in Giving: How Each of Us Can Change the World by Bill Clinton.
- “Lending Hope over the Web” Los Angeles Times archive article, October 18, 2007
- The founders were on the Oprah Winfrey Show November 2007 “Oprah features Kiva founders”
- “Kiva PR Director”, Fiona Ramsey, was interviewed on “CBC Radio One’s, Search Engine”.
- Greta Van Susteren is a supporter of Kiva and has made loans through the organization.
- A Kiva Success Story in The Huffington Post
