Post on 15-May-2015
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)
Cu
rre
nt
dis
trib
uti
on
of
fun
ds
in
m
icro
fin
an
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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