Assessing Kiva.

org as a Microfinance Institution

Prepared for:

John Smith, President, Capilano Students Union

Capilano University
2055 Purcell Way
North Vancouver, B.C V7J 3H5

Presented by: Anny Studente

Date A Career in Law (as a Lawyer or Paralegal)

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Table of Contents
Title Page .................................................................................................................................i
Executive Summary................................................................................................................ii
Table of Contents...................................................................................................................iii
Introduction.............................................................................................................................1
Methodology..........................................................................................................................1-2
Findings.................................................................................................................................2-3
Conclusion................................................................................................................................3
Recommendations...................................................................................................................4
References................................................................................................................................5
Appendix..................................................................................................................................6

(((note about Appendix – Appendices if you are adding more than one document – you do
not have to add anything to your report, but it’s a good idea to do so if you conducted
original research. In that case, you might include an Appendix that consists of the survey
questions you asked, if you conducted survey related to your topic and included the results
in your report. You could also include copies of your email exchange if you interviewed
someone that way, or a transcript of your interview. In your Methodology section, you can
refer to your Appendix documents and suggest the reader look at those for more
information.)))

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Executive Summary
The purpose of this report is to assess the techniques used by www.kiva.org, the first online
micro-lending organization, which were responsible for the success of this organization. This
report was written for the Capilano University Students’ Union (CSU) to inform them about
microfinancing and microlending, specifically using Kiva, to alleviate poverty. It is my hope that
the CSU will consider working with Kiva on a charitable initiative. My report will specifically
address Kiva.org’s marketing methods currently being used in 2009 while providing some
comparisons to other microfinance institutions. My findings show that high repayment rates, a
strong sense of transparency, and the assurance that 100% of all loans reach the entrepreneur
have been successful techniques used by Kiva thus far. Recommendations for marketing
techniques attempt to educate and attract more student users. My sources for these findings
included the Kiva website (www.kiva.org), and a 2007 article from the New York Times by N.D.
Kristof, entitled, “You too can be a banker to the poor.”
My recommendations include creating an online link from Capilano University’s home page to
Kiva.org, and setting up posters throughout campus describing and outlining the advantages of
Kiva. With CSU help, we can create a Kiva group at Capilano University allowing anyone and
everyone to join. The group will focus on educating everyone in the group about Kiva as well as
marketing their group across campus to recruit other students. Other ideas to spread awareness
and encourage student involvement would be to set up a stand in the cafeteria with Kiva
information and a laptop so students can access Kiva.org, browse, and make a loan on the spot;
organize a walk or run to fundraise for Kiva where students have the option to make a loan of
$25 or more to participate; sell T-shirts at $15 with Kiva’s URL. For each t-shirt bought, a $5
contribution will go towards a mass loan that will be made on behalf of Capilano University. The
loan will be loaned again to more entrepreneurs after it is repaid.

Introduction
Kiva, an organization surviving to help alleviate world poverty, has produced the world’s first
online microlending website. Lenders are able to form their own user account, choose an
entrepreneur from around the world, and make a loan all through the internet in about 5 minutes.
The loan will be paid back by the entrepreneur within a one year term with zero interest as they
start to lift themselves out of poverty. Kiva was started in 2005 by Jessica Flannery and Matt
Flannery, two graduates from Stanford University, after being inspired by a presentation in 2003
held at the university by Dr. Mohammed Yunus on his accomplishments in starting the Grameen
Bank (Flannery, 2007, p.31). Kiva now has 578,827 lenders and 242,589 entrepreneurs that have
received loans as of October 22, 2009, exchanging a total of $97,900,435.

The goal of Kiva.org is to “connect people through lending for poverty alleviation,” Kiva co-
founder Jessica Flannery stated at an interview on Global X in 2007. I found out about Kiva
while I was travelling in Indonesia in the summer of 2009 and was immediately excited to be a
part of it. After another traveller shared his Kiva story with me, I became an online Kiva lender
when I came back to Vancouver in September 2009. My first loan of $25 was to a group of
female entrepreneurs needing a $700 loan to start a retail business in Sierra Leone. I am already
anxious to make my second loan.

The purpose of this report is to assess the techniques used by Kiva that account for the success of
its website, Kiva.org. This report is an attempt to educate the administrators of the Student Union
at Capilano University about microlending through Kiva to encourage students to become
involved in poverty alleviation. My report will specifically address Kiva’s website, Kiva.org, and
its current marketing methods used in 2009, with some reference to tactics used by other
competing online world-help institutions. Like Kiva.org, my report is directed at people who
have Internet access and possess a credit card. My report will answer these questions: What is
microfinance and microlending and what is the benefit of making a microloan for Kiva lenders?
How does Kiva get the loans (from the Internet) to the entrepreneurs? What percentage of the
money lent goes directly to the entrepreneur?

Methodology

As a new Kiva lender I have been actively browsing Kiva’s website, www.kiva.org, which will
account for most of the information that will be provided in my report. I will also be referencing
a video found through Youtube.com of Kiva president Premal Shah being interviewed by British
television reporter and interviewer Riz Khan in 2007, and another video of Jessica and Matt
Flannery interviewed by Global X found through Youtube. In my report I will be providing a
definition for the word “microfinance” of which I found through the online Concise Oxford
English Dictionary. Using the Capilano University’s databases and Academic
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Search Premier the New York Times article “You Too Can be a Banker to the Poor,” and “Be my
PayPal” from the Economist will both be referenced in my report. Lastly, “Kiva and the Birth of
Person-to-Person Microfinance,” a journal written by Kiva Co-founder Matt Flannery, and “The
Only Nonprofit That Matters” from Fortune magazine’s Jeffrey M. O’Brien will be cited. I have
made minor mentions of other microfinance institutions like Accion.org, Unitus.com and
Globalgiving.com. The information I have included on these organizations can been found on
their websites as shown, unless cited otherwise in my report.

Findings
Microfinance is “the lending of small amounts of money at low interest to new businesses in the
developing world.”(Soanes & Stevenson, 2008) Kiva is a microfinance institution connecting
itself with the technological world by using microfinance over the Internet. Lenders make small
loans, or microloans, to the poor through the Internet to help others lift themselves out of poverty
(Shah, 2007).
What separates Kiva from other microfinance institutions like Accion.org and Globalgiving.com
is that
Kiva exercises the concept of lending rather than donating. (Kristof, 2007, www.accion.org)
Kiva lenders get their money back! Users of Kiva are part of a business agreement where the
expected outcome is to receive the entire loan back at zero interest from the business partner
(entrepreneur). The chance that a Kiva lender will get their loan back is very high; this week, to
date (October 22), the repayment rate of loans for all users is 97.87 percent. Repayment terms
are negotiated through the website between the lender and entrepreneur before the transaction
takes place and business begins. There is a risk that lenders will lose their money. This is a rarity
(less than a three percent chance of losing your loan) that Kiva tries to avoid, but on a positive
note, consider it a contribution to the developing world.
Kiva puts a face on your borrower. Other organizations such as the previously mentioned
Accion.org and Seattle-based Unitus.com remove the person-to-person connection that Kiva has
by withdrawing the option to choose to whom your money goes. Kiva provides all users with
access to information on how the money lent reaches the entrepreneur. It can be found directly
on Kiva’s website! This is part of Kiva’s promise of transparency. Kiva partners with Micro
Finance Institutions (MFIs) known as Field Partners in countries all around the world. These
Field Partners screen entrepreneurs in their communities for approvable loans. The
entrepreneur’s picture is then taken, their sorry is recorded, a loan is disbursed, and their profile
is shown on Kiva.org. Kiva lenders then browse through the website and place loans using
PayPal or credit cards. Once the loan is complete the money is then reimbursed to the Field
Partners who have already disbursed the loan to the entrepreneur.

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“PayPal denotes free transaction processing to us, which means we aren’t charged the usual three
percent of every transaction. Our model would be more difficult to pull off without PayPal’s
partnership ” (Flannery, 2007, p. 52).
Kiva has partnered with PayPal, an online business allowing people to make transactions and
money transfers (compatible with credit cards) online by simply typing their e-mail address and a
dollar amount. As shown on Kiva’s website, the organization receives funding from numerous
companies such as Ernst and Young and the Skoll Foundation, but a large part of the funding
comes from the lender optional donation fee of 10% on each loan. Because of these supporters
and the generosity of PayPal, Kiva is able to remain a non-profit organization where 100 percent
of the loan goes to the entrepreneur (O’Brien, 2008).

Conclusion

As statistics in my introduction show, Kiva.org has rapidly expanded since its start in 2005. With
Kiva’s honesty and transparency presented in their website, users know where their money is
going, how it is getting there, and how much of it is reaching the intended entrepreneur, crucial
attributes that people look for in a microfinance institution. Kiva’s use of microlending rather
than Accion.org and Globalgiving.com’s donating is a perfect match for students wanting to help
poverty alleviation. Students get their loans back with Kiva’s high repayment rates, get to
participate in a business agreement with a real person abroad, and get to learn someone else’s
story, not to mention helping another lift themselves out of poverty almost always at no cost. The
risk is minimal at less than three percent, and the benefits are numerous. By going online,
Kiva.org has already done a great job at targeting the student world. If Capilano University
participates in the effective marketing strategies presented below I believe that once Capilano
students are educated on Kiva.org, there will be a significant increase in Kiva lenders helping to
alleviate poverty $25 at a time.
 4

Recommendations
My recommendations include creating an online link from the CSU’s home page to Kiva.org,
and setting up posters throughout campus describing and outlining the advantages of Kiva. With
CSU help, we can create a Kiva group at Capilano University allowing anyone and everyone to
join. The group will focus on educating everyone in the group about Kiva as well as marketing
their group across campus to recruit other students. Other ideas to spread awareness and
encourage student involvement would be to set up a stand in the cafeteria with Kiva information
and a laptop so students can access Kiva.org, browse, and make a loan on the spot; organize a
walk or run to fundraise for Kiva where students have the option to make a loan of $25 or more
to participate; sell T-shirts at $15 with Kiva’s URL. For each t-shirt bought, a $5 contribution
will go towards a mass loan that will be made on behalf of CSU. The loan will be loaned again to
more entrepreneurs after it is repaid.

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Appendix
Latest Statistics (from www.kiva.org)
Total value of all loans made through Kiva:
$97,900,435
Number of Kiva Lenders:
578,827
Number of countries represented by Kiva Lenders:
185
Number of entrepreneurs that have received a loan through Kiva:
242,589
Number of loans that have been funded through Kiva:
139,522
Percentage of Kiva loans which have been made to women entrepreneurs:
82.69%
Number of Kiva Field Partners (microfinance institutions Kiva partners with):
103
Number of countries Kiva Field Partners are located in:
49
Current repayment rate (all partners):
97.87%
Average loan size (This is the average amount loaned to an individual Kiva Entrepreneur. Some
loans -- group loans -- are divided among a group of borrowers.):
$405.02
Average total amount loaned per Kiva Lender (includes re-loaned funds):
$169.41
Average number of loans per Kiva Lender:
4.84
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References

Be my PayPal. (2002) Economist, 364 (8281), 56-57. Academic Search Premier

http://search.ebscohost.com. Retrieved October 22, 2009.

Flannery, M. (2007). Kiva and the birth of person-to-person microfinance. Vol. 2, No. 1-2, MIT
Press. http://www.mitpressjournals.org/doi/pdfplus/10.1162/itgg.2007.2.1-2.31 Retrieved
October 15, 2009.

Flannery, J., & Flannery, M. (2007). Global X.

http://www.youtube.com/watch?v=YNA4Fi11ycM Retrieved October 17, 2009.

Kiva website (2005). http://www.kiva.org Retrieved October 12, 2009.

Kristof, N.D. (2007, March 27). You too can be a banker to the poor. New York Times, p. 19.
Academic Search Premier http://search.ebscohost.com. Retrieved October 19, 2009.

O’Brien, J.M.(2008)The only nonprofit that matters. Fortune Magazine

http://money.cnn.com/magazines/fortune/fortune_archive/2008/03/03/103796533/index.h
tm Retrieved October 22, 2009.

Shah, P. & Khan, R. (2007). Becoming a banker to the poor.

http://www.youtube.com/watch?v=x-mwp-VdK0Q Retrieved October 17, 2009.

Soanes, C. & Stevenson, A. (2008) Microfinance. The Concise Oxford English Dictionary,
twelfth edition. Oxford University Press.
http://www.oxfordreference.com/views/ENTRY.html?subview=Main&entry=t23.e35318
Retrieved October 17, 2009