Kiva and Online Micro-Finance

The Skoll World Forum on Social Entrepreneurship included well-known non-profit Kiva.org in a panel discussion titled “(Financial) Power to the People.” Non-profit Kiva has generated widespread attention for its innovative online approach to giving. Permal Shah, President, recounted that the company is only 3 1/2 years old.

Kiva provides an internet marketplace for microfinance. A person can choose an entrepreneur in the developing world and lend $25 or more and repayment usually occurs within 10 months. Shah stated that the payback to lenders is 97.7%. Thus far, they have raised US$65m from over 500,000 people in more than 100 countries. Shah noted that in spite of all the positive press they received for their pioneering efforts, they are still an extremely small part of the overall micro-lending market worldwide.

Shah explained that it took Kiva an entire year to solicit their first US$1 million in loans. At present, they process that much per week. They now work with 115 micro-finance institutions (MFIs) in order to source worthwhile projects. Shah suggested that this is probably the largest microfinance network in the world. The MFIs are in 45 countries, ranging from young non-governmental organizations with little finances to large MFIs that resemble banks. They are constantly looking for reputable MFIs to help handle the overload of would-be lenders

Tom Watson, of CauseWired.com, the moderator of the panel, asked about whether they have widespread demographic support or if they rely on a core of do-gooders. Shah suggested that they presently appeal to a general rather than a segmented demographic, just like Amazon would. Shah’s view was that the market exists, but it is an awareness issue especially in comparison to well-established brands for giving. On a more general note, he lamented that “The big enemy is apathy; you have to get people engaged; it must be two times better than alternatives so that people will tell friends of friends”.