Alleviating Poverty through Internet Microfinance: Interview with Kiva President

Alleviating Poverty through Internet Microfinance: Interview with Kiva President
 
By Annie Brown, Assistant Editor, Microfinance Focus

Microfinance Focus, March 29, 2011: This past January, I attended a presentation on Kiva, a web-based microfinance lending NGO and one of America’s most recognized microfinance brands. The presentation, which took place at The College of William and Mary in Williamsburg, Virginia included an informal meeting between Austin Choi, Kiva’s general counsel and aspiring professionals at William and Mary’s law school, followed by a presentation on Kiva’s mission and methods. Kiva strives to “connect people and help people,” said Choi during the presentation. Inspired by Kiva’s creative use of technology and modern business practices, I contacted Kiva President Premal Shah to discuss the story of Kiva’s success.

Kiva.org, based in San Francisco, California, addresses global poverty by enabling members of the online Kiva community to provide loans to potential small business owners in developing countries. On the main page of the Kiva website, the quote “Empower people with a $25 loan,” reads in large white letters against a green background. The Kiva network is user friendly, aesthetically pleasing and an impressive example of how the Internet can make the world a better place.

In an online poll, Kiva lenders said that they choose to loan through Kiva because “I can make a difference in someone’s life without spending a lot of money.” Kiva members can lend any amount between $25 and the total amount of the loan request of any borrower profiled on the network. The first seven Kiva loans were funded in 2005, for a total of $3,500. Today, there are over 565,079 Kiva lenders and the organization has raised nearly 200 million dollars for people wishing to start a business and strengthen their community.

The Kiva lending model is innovative, interactive, and allows a large number of loans to be funded without much overhead cost. First, Kiva partners with a microfinance institution (MFI), then Kiva’s field partners disburse loans and upload pictures and stories to the Kiva website. Online lenders browse stories and decide which loans they would like to donate to. According to the Kiva website, the last step in the process occurs when “the field partner uses the funds to replenish the loan they've already made to the entrepreneur.” Through the Kiva system, MFIs can afford to make more loans and people are connected for a cause.

Kiva met some controversy a few years ago when it was revealed that Kiva’s MFI partners were dispersing loans before loan requests were fully funded online. It was explained at the William and Mary presentation that Kiva’s field partners want to fund a loan request as quickly as possible, especially since borrowers cannot afford to wait. However, members believed their sponsorships determined whether or not a loan request would be funded and complained to Kiva management about the lack of transparency between Kiva and the Kiva community.

Kiva says it did not intend to mislead its lenders, but was just taking the casual lender into account when creating KIVA’s “About” page. The correct information was located elsewhere on the website. When this controversy arose, Kiva quickly changed its “About Us” page to more accurately convey the Kiva lending process (see flow-chart below).

During this time of controversy and change, the microfinance industry can learn from Kiva’s ability to partner with the public, respond quickly to criticism and provide a transparent lending model.i Matt Flannery responded in an article that Kiva could “do better” and that “Although the ‘Make a Loan’ pages contained the disbursal date, the ‘How Kiva Works’ page was over-simplified to a fault. To address this, in the short term, we updated the page last week. It now contains more detail with regard to pre-disbursals.”

--
---------------------------------------------
CARLOS ANI - SEEDFINANCE Corporation - http://www.seedfinance.net
Email: carlosani@seedfinance.net
Landline: +63495010127 Cellphone: +639152919580
DEVJOBS - http://www.devjobsmail.com
PHILDEVFINANCE - http://phildevfinance.posterous.com http://phildevfinance.wordpress.com
CONSULTING - http://www.carlosani.com
My Clippings - http://www.myclipps.posterous.com
------------------------------------------