Applying ‘Web 2.0’ principles to Microfinance

Online Giving MarketplaceConference

Premal ShahPresidentKivawww.kiva.org

"Revolutionising how donors and lenders in the US are connecting with small entrepreneurs in developing countries”

InternetLender

Online marketplace

Local Partner(MFI)

Entrepreneur

Money

Information

Kiva 101

+340,000 social investors have lent +$45 million in first 3 years.

Other Key Stats• Growth: $1M loans every 10 days.• Risk: 3.5% delinquency rate / < 0.5% default rate• MFI Portfolio: 97 MFIs in 42 countries. Growing 3 a month.• Traffic: 100,000 site visitors a week.• Organization: 30 employees / +400 volunteers • Leverage: Platform raises $10 in loans for every $1 donated.

5 yr goal = $1 Billion

Kiva utilizes 5 “Web 2.0” principles

1. Create an “Addictive” User Experience

2. Be “Radically Transparent”

3. “Crowdsource” against constraints

4. Build in “increasing returns on data”

5. Reach “The Long Tail”

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Create an “Addictive” User Experience

“Addictive” = Easy + Fun

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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

Business relationship based on mutual dignity,

not pity

Quick and easy

checkout

How Kiva tries to make it “Fun” Rich user generated content, changing fast...

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Loans are fully funded in hours (MFI staff love

this)…

Transactions happen every 37

seconds…

Real time un-edited

progress updates from

around the world…

‘Popular’ entrepreneurs rapidly rise to

the top…

Randomized “1 minute of

fame “ for Lenders…

Results: +270,000 lenders from +70 countries in 2.5

years…

How Kiva tries to make it “Fun” My Page, My Portfolio…

“My Page” encourages self

expression, evangelism and

loyalty…

“My Portfolio” concept encourages further lending, risk diversification and inter-

lender competition…

For some, Kiva is becoming very addictive!

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KivaFriends.org – unofficial Kiva community forum

(built by our users)

Several results when searching

for the word: “Addicted”

Be ‘Radically Transparent’

Transparency Authenticity Trust

Kiva and Radical Transparency

Paying for Kiva’s overhead is an explicit choice

Results:7 out of 10

users pay an additional

10% to cover Kiva’s cost.

Kiva reached 70% self-

sufficiency in year 2.

Kiva and Radical Transparency

Data inaccuracy and defaults are made explicitResults:3%

delinquency rate.

3% refund rate.

<1% default rate.

TBD inaccuracy

rate

“Crowdsource” against constraints

Big constraint? + No resources? =

Crowdsource

Kiva and “Crowdsourcing”

Kiva Fellows Program How do we train MFIs, gather progress updates and verify data accuracy hyper-fast?

Kiva and “Crowdsourcing”

Kiva Translator Program How do we immediately translate entrepreneur profiles from native language to English?

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Kiva and “Crowdsourcing”

We have little money, but great partners!

Free payment processing and employee support

120 Million free banner impressions

Free Google Adwords – 25% of

traffic

Free Yahoo Search Marketing and

employee support

Free promotion (Community Impact

Award)

Funding for Field Research and Development

Free phones for cell based data upload

pilot

Free promotion of Kiva widget to

bloggers

Free computers and early funder

Build in “Increasing Returns on Data”

Leading public platform + Data integrity

“Increasing Returns on Data”

Result: 30,245,763 loans found

Kiva and “Increasing Returns on Data”

World’s largest DB of microfinance investments

Long Term: Entrepreneurs could use Kiva as a public credit bureau…

Short Term: MFIs could use Kiva to build credit worthiness to other funders…

Reach “The Long Tail’

“The Long Tail”

Kiva can uniquely reach the microfinance ‘long tail’

Tier I (e.g. Grameen Bank) ----- Tier IV (e.g. church congregation)

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The Internet is a promising way to reduce costs and distribute risk in investing in smaller (Tier II - Tier IV) Microfinance Institutions.

Could Kiva help discover and scale the next Grameen Bank?

Kiva’s platform can aggregate and deliver risk capital unlike any commercial source• Kiva lenders value social return / tolerate risk more than institutions• $25 investments size ensures risk distribution across thousands of investors• Less established MFIs can build a reputation slowly over time (like on eBay)

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3 Key “Actionable” Takeaways

# Web 2.0 Principle Actionable Takeaway

1 “Addictive” user experience

• Make it “Easy”:• PayPal is quick and easy credit card acceptance• Tip: Get the PayPal ATM/Debit Card and withdraw funds from ANY country real time

• Make it “Fun”:• Photo upload is the 80/20 of social networking – get it done first!

2 “Radical Transparency”

• Start a blog• Admit imperfection every step of the way

3 “Crowdsource” against constraints

Hard time getting traction in the beginning?• Ink is cheap: Build a huge advisory board• Everyone loves a party: Evite as a way to build brand

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APPENDIX

Kiva’s Risk Model helps manage risk on Kiva’s platform and creates an incentive for MFIs to improve transparency and performance.

Inputs

1) Self-reported MFI Data• Organizational age• Gross Loan Portfolio (GLP)• Overall Portfolio At Risk (PAR)• Organizational Self Sufficiency (OSS)

2) 3rd Party MFI Data• Financial Audit Results• Credit Rating Score• Kiva Audit Results• Outside funder Quality• Network Affiliation Quality

3) MFI Performance on Kiva• Total Outstanding Kiva Loans• PAR on Kiva Loans• Kiva Fellows’ Journaling Coverage

Outputs

1. MFI Reputation on Kiva’s site

2. Monthly Fundraising Limit

3. Kiva Audit Prioritization

Kiva Risk Model