Bonus: One-on-one interview with Cynthia McLurry of Kiva]
Kiva, the Micro-Lending Crowdfund Platform: Fighting Poverty One Country At A Time.
Author: Diana Yazidjian, Crowdfunding consultant and Principal at Do-it-for-You Consulting.
I was looking forward to hearing Cynthia McMurry, Regional Director for Latin America and the Caribbean Kiva.org, speak at the KWS Forum conference held this Fall. Cynthia walked us through the success of this micro-lending crowdfunding platform and I later had the pleasure of interviewing her for more in-depth insight.
Kiva, active since 2005, is “a web site which allows you to lend to an entrepreneur in the developing world who needs a loan”. Kiva is the #1 micro-lending crowdfunding platform. Here are some key facts to support that.
- 1.4M borrowers of which 84% are women,
- 1.2M active lenders of which the vast majority are from the middle class and even a good number below povery line in the US
- $1M in loans every 3 days
- Average loan between $25 and $50 USD, representing a dozen lenders per project
- Delinquency rate is low: 5% for men, 4% for women
- No interest earned: you lend 100$, you receive your 100$ back
- Lender motivation: there are those that don’t care as long as it makes a positive impact and those that want to get their money back
Kiva works with 280 field partners (up from 80 just 6 years ago) across 42 countries! It would not be possible without them! This is why Cynthia’s job is to find partners that will not only identify high impact projects and sponsor them but educate the borrowers on how to build a business and use the proceeds wisely. There are capital restrictions in certain countries and Kiva is working to enter some of the more challenging ones.
Which loans get higher approval?
All loans that will help an entrepreneur build his micro business and have a positive impact in the area. A farmer producing energy, a widow in Africa, a taxi driver in Eastern Asia , etc..
Is Kiva’s business model sustainable?
100% of the loan goes to borrower. Kiva suggests that lenders ad a15% tip to support Kiva. Nearly 55-60% of their operation efficiency comes from those tips and another portion is covered by foundational or institutional grants.
Kiva plays a unique role and is much more risk tolerant, funding initiatives that VCs have no interest in.
“Is that sustainable? We’ve been successful for 9 years.”
Having said this, you can understand why I wanted to know more and go straight to the source with a one-on-one interview. Here are the questions we covered:
- What has motivated you to enter this area of expertise? A personal story you wish to share?
- How many lenders (%) would you say are more tolerant to non-repayment?
- How many lenders would you estimate are from the finance industry (VC, Angels)?
- Have you seen a change in lender behavior in 9 years? Would you say they make more educated choices or is it an emotional decision?
- Do they have the possibility of asking questions to the borrower directly or must they communicate with field partners?
- With regards to the nature of projects, have you seen a trend in a new breed of projects? What are these?
- With regards to community management, do you set up town halls or any form of public round table to answer questions from potential lenders?
- With regards to field partners, of the 252 partners, which geography would you say has the best success rate and why?
Chatting with Cynthia McMurry of Kiva.
1. What has motivated you to enter this area of expertise? A personal story you wish to share?
CM. Growing up in Minneapolis, I went to a Spanish Immersion public school, and a lot of my classmates were recent immigrants from Central America and Mexico. I learned Spanish from a young age, and developed a real love for Latin American people and culture. In college I spent my junior year studying in Chile, and knew that Latin America was the place for me. As soon as I left I wanted to go back, and I couldn’t graduate fast enough! I joined Kiva right after college, and spent the next 2+ years living in South America and working with Kiva’s field partners in the region. I started as a Fellow, and was hired after finishing my year-long fellowship. I’ve since had several different roles and eventually moved to San Francisco, and it’s been an incredible adventure.
I deeply believe in using my privilege to do something useful in the world, and Kiva offers me the ideal opportunity to do just that. Through my role as Regional Director for Latin America and the Caribbean, I get to combine my love for Latin America with my desire to have meaningful impact. I’ve learned so much along the way, and it’s also been immensely fun! My colleagues are a remarkably interesting, creative, and energetic group of people, and everyone joined Kiva because of a deep commitment to furthering our social mission.
2.How many lenders (%) would you say are more tolerant to non-repayment?
CM. It’s hard to know what percentage are more tolerant to defaults, and even hard to guess! We definitely see both sides. Some people lend on Kiva and aren’t interested in getting their money back, they just want to do good. This is especially evident whenever there’s a disaster — for example, after the earthquakes in Chile and Haiti, we heard from a lot of lenders who wanted to forgive their loans. We’ve actually even found some people who go in thinking it’s a donation, and didn’t realize they were going to get repaid! On the flip side, the recycling aspect of Kiva is really important to many of our lenders, and they want to make sure that they get repaid so that they can lend the money out again. At the end of the day, though, I think lenders generally just want to understand why a loan wasn’t fully repaid. They tend to be very understanding and forgiving of legitimate challenges that come up in borrowers’ lives.
3.How many lenders would you estimate are from the financial industry (VC, Angels)?
CM. A recent survey of a random sample of lenders found that 6% worked in the financial services industry. I think it’s fair to say that venture capitalists and angel investors are probably a very small fraction of our lender community.
4.Have you seen a change in lender behavior in 9 years? Would you say they make more educated choices or is it an emotional decision?
CM. Great questions! We’re really interested in what motivates our lenders to lend, and have done extensive surveys with lenders to try and understand this better. We’ve found that motivations are pretty diverse, given the size of our lender community, but that they tend to fit into several broad categories:
- Driven by faith
- Driven by an interest in the larger world around them and the people and cultures in it
- Motivated to lend to a specific country or a specific sector because of personal experiences
- Activists passionate about a particular social issue.
- Most to do something good! They don’t have a ton of time to spend thinking about it but trust Kiva to ensure their money goes to worthy causes and recipients.
5.Do they have the possibility of asking questions to the borrower directly or must they communicate with field partners?
CM. We don’t facilitate direct connections between lenders and borrowers on kiva.org — our borrowers often don’t have internet access, and may not speak the same language as a given lender. We do facilitate the flow of information between lenders and our field partners to resolve any issues or questions that come up, and lenders sometimes reach out to field partners directly.
This is different on Kiva Zip, a direct lending program we’re currently piloting in Kenya and the United States. On Zip there is a conversation feature where borrowers and lenders can communicate directly, and we’ve seen that to generally be a really effective way to engage borrowers and lenders. It’s a bit of a fine line, though, and something that challenges us.
On the one hand, “connecting” is in our mission and I think we’ve been successful precisely because we do connect specific individuals across the world to each other. That said, we also want to ensure that communication is appropriate and respectful, which is hard to control if you allow everyone to communicate freely with everyone else. For example, we would never want a lender to directly message a borrower to scold them for a late repayment.
6. With regards to the nature of projects, have you seen a trend in a new breed of projects? What are these?
CM. In the early years, Kiva partnered exclusively with microfinance institutions (MFIs), and we built a really strong network of MFI partners doing highly impactful work.
A few years ago, though, we started to realize that other types of highly social organizations also had a need for credit within their models and were interested in partnering with Kiva. Think of a university that wants to fund student loans, for example, or a coffee cooperative that wants to offer its members the financing they need to convert from conventional to organic production. These organizations brought expertise in other impact areas, and had the potential to affect borrowers’ lives in different and equally important ways relative to our MFI partners. So we decided to open up the platform and started partnering with all kinds of different organization of different sizes:
- vendors of solar lighting products, clean cookstoves, water filters, and biodigestors;
- higher education institutions;
- agricultural cooperatives;
- healthcare providers,
Today, we have more than 100 “non-MFI” partners. These partnerships have made Kiva a more diverse, vibrant site and have allowed us to broaden our impact and even enter some new countries that don’t have strong microfinance industries.
7. With regards to community management, do you set up town halls or any form of public round table to answer questions from potential lenders?
CM. Not potential lenders specifically, but we stay really connected to active lenders (and put a lot of effort into reengaging inactive lenders). We have a Community Support team that’s constantly talking to lenders, both individually and through our lending teams.
Our most active, engaged lenders are often members of teams; for example, the Kiva Milepointers, Kiva Christians, or the Late Loaning Lenders (who try to prevent loans from expiring). These teams have message boards where they have in-depth discussions (and sometimes vigorous debates!) around Kiva policies, field partners, the merits of a particular loan, etc. They can also surface questions to Kiva staff here. We do set up periodic calls with the lender community and are also piloting a stewardship program to provide more direct access to our biggest lenders.
With regards to field partners, of the 252 partners, which geography would you say has the best success rate and why?
CM. We assess portfolio risk as part of our initial due diligence and ongoing monitoring processes, and risk can be found on the country level, region level, institution level or loan product level. For example, many traditional international funders are hesitant to support credit programs in conflict zones and politically unstable countries, and that’s a niche we believe we’re really well suited to fill. A loan in South Sudan or Gaza might be higher risk than a loan in Mongolia, for example, but oftentimes those conflict zone loans are the fastest to fund on Kiva.
You can find up to date stats on our number of field partners, repayment rates, loans funded, etc., at www.kiva.org/about/stats.
Thank you so much, Cynthia, for sharing this valuable information and your personal story. Kiva is truly a humane organization, making deep change, one country at a time, one person at a time.