Kiva (commonly known by its domain name, Kiva.org) is a 501(c)(3) non-profit organization headquartered in San Francisco, California, that allows people to lend money via the Internet to low-income entrepreneurs and students in 77 countries. Kiva's mission is "to expand financial access to help underserved communities thrive."
Since 2005, Kiva has crowd-funded more than 1.6 million loans, totaling over $1.33 billion, with a repayment rate of 95.8 percent. Over 1.8 million lenders worldwide use the Kiva platform. Lenders do not receive interest on the money they lend. Kiva includes personal stories of each person who applies for a loan so that lenders can connect with borrowers on a human level.
Kiva relies on a network of field partners to administer the loans on the ground. These field partners can be microfinance institutions, social impact businesses, schools or non-profit organizations. Borrowers pay interest on most loans to the field partners, and the field partners are charged small fees by Kiva. Kiva is supported by grants, loans, and donations from its users, corporations, and national institutions.
Kiva was founded in October 2005 by Matt Flannery and Jessica Jackley. The couple's initial interest in microfinance was inspired by a 2003 lecture given by Grameen Bank's Muhammad Yunus at Stanford Business School. Jackley worked at the school and invited Flannery to attend the presentation; this was the first time Flannery had heard of microfinance, but it served as a "call to action" for Jackley. Soon after, Jackley began working as a consultant for the nonprofit Village Enterprise, which worked to help start small businesses in East Africa. While Flannery was visiting Jackley in Africa, the two spent time interviewing entrepreneurs about the problems they faced in starting ventures and found the lack of access to start-up capital was a common theme. After returning from Africa, the two began developing their plan for a microfinance project that would grow into Kiva, which means "unity" in Swahili.
In April 2005, Kiva's first seven loans were funded, totaling $3,500, and the original entrepreneurs were subsequently deemed the "Dream Team". By September 2005, the entrepreneurs repaid the entirety of their original loans, and the founders realized they had developed a sustainable microcredit concept. After the success of Kiva's initial stage, Flannery and Jackley founded Kiva as a non-profit. In 2006, notable entrepreneurs and businessmen joined Kiva's staff, including Premal Shah from PayPal and Reid Hoffman, CEO and founder of LinkedIn. Shortly after its first anniversary in October 2006, Kiva reached $1 million in facilitated loans and acquired its twentieth field partner. To the present day, Kiva has continued to grow and expand its field partners while acquiring support from the media and the public.
Kiva works with more than 300 microfinance institutions, social impact businesses, schools and non-profit organizations around the world, called "Field Partners", that post profiles of qualified local entrepreneurs on the Kiva website. Lenders browse borrower profiles on kiva.org and choose an entrepreneur they wish to fund. The lenders transfer their funds to Kiva through credit card processing or PayPal, which waives its transaction fee in these cases. Lenders can loan money in increments of $25.
After receiving lenders' money, Kiva aggregates loan capital from the individual lenders and transfers it to the appropriate Field Partners, which disburse the loan to the borrower. Kiva does not charge interest on the capital sent to Field Partners, but often Field Partners do charge some level of interest to borrowers to cover administration costs. Interest is typically higher on loans from microfinance institutions in developing countries than interest rates on larger loans in developed countries because of the administrative costs of overseeing many tiny loans, and the increased risk. As the entrepreneurs repay their loans with interest, the Field Partners remit funds back to Kiva. As the loan is repaid, the Kiva lenders can withdraw their principal or re-lend it to another entrepreneur.
As of March 15, 2016, Kiva had distributed $827,356,850 in loans from 1,394,336 lenders to 1,928,760 borrowers, and a total of 1,036,558 loans had been funded through Kiva. The average loan size is $411.26, and the average Kiva user has made 10.17 loans. Kiva's current repayment rate for all its partners is 97.1%. According to Alexa: The Web Information Company, Kiva's website ranks in the top 15,000 of all websites worldwide and ranks in the top 5,000 for the United States.
For the fiscal year 2012, Kiva made $15,632,786 in total revenue and had $12,482,528 in total expenses, leaving $3,150,258 to invest. The organization's net assets in 2012 totaled $16,248,638. Kiva itself does not charge interest on its loans; they supply capital to microfinancing institutions for free. These microfinancing institutions then lend out money with high interest compared to bank finance in mature markets, averaging a portfolio yield of over 30%. The organization's main sources of funding are grants, financial backing, and discounted services from many major national corporations and institutions. Chevron Corporation, Visa Inc., and Skoll Foundation awarded Kiva a two-year $1 million grant, $1.5 million grant, and $1 million grant respectively. Kiva also won a $1 million grant in Sam's Club's "Giving Made Simple" campaign and $500,000 in American Express's "Take Part" competition. Additionally, Omidyar Network awarded Kiva a $5 million grant over five years to help Kiva expand its field partners and support due diligence.
In 2015, the non-profit employed seventeen persons with salaries totaling more than $100,000. The average salary at Kiva is $80,768.
Areas of work and loan use
As of October 2017, 81% of Kiva's loans have been made to women. Kiva emphasizes supporting women because women can gain the most from microcredit. Patriarchy and a strict division of labor still dominate the societies of many developing countries, and women often suffer the most from poverty because scarce resources are often allocated to a family's males, rather than its females.
In their non-fiction book Half the Sky, Nicholas D. Kristof and Sheryl WuDunn highlight Kiva's work along with that of some field partner organizations, such as the Kashf Foundation in Pakistan. With microloans, women gain spending power and spend less on instant gratification vices like alcohol and drugs. With extra income, they are able to educate their children, renovate their residences, or buy modern technologies and medicines. Along with economic power, a woman with a microloan often gains more independence and respect from her husband. Kristof and WuDunn note that microfinance can be a risky path out of poverty. "[Paying back the loan with interest] is fine when the money is pumped into a profitable new business, but if the money isn't invested soundly, then the borrowers become trapped in mounting debts." Nonetheless, the authors endorse Kiva and similar microfinance efforts, writing that "microfinance has done more to bolster the status of women, and to protect them from abuse, than any laws could accomplish."
In 2011, Kiva added a new category of loans to help borrowers move to cleaner and safer forms of energy, green agriculture, transport and recycling. Green Kiva loans help fund solar panels, organic fertilizers, high-efficiency stoves, drip irrigation systems, and biofuels. As of December 2013, Kiva lenders had crowd-funded 4,600 green loans.
Support for higher education
Getting access to university and graduate level education is extremely difficult for poor students in developing countries. Outside of a few a number of different countries, student loans are rare, leaving families without substantial savings, and with few options. As of 2007, in low income countries only 7% of the population received university or graduate level education.
Higher education has been shown to play a significant role in developing a country, and UNESCO reports that "higher education makes a significant contribution to reduction in absolute as well as relative poverty".
In 2010, Kiva began a Student Microloans program that allowed lenders to help support students seeking access to higher education. Student loans are funded with the same crowd-funding approach, and typically students have 1–3 years to pay back their loans.
In 2014, the education offerings on Kiva expanded greatly when the organization began a deeper partnership with Vittana. Vittana works on the ground in countries in Asia, Africa and Latin America, developing loan alternatives for low-income students. Through the partnership, all loans sourced by Vittana now appear on Kiva for funding.
Some Kiva field partners, such as Alivio Capital, specialize in funding medical loans. Others may fund medical loans as well as other loans. A development scholar in Ghana has suggested that microfinance medical loans can be an effective way to close the gap in medical care access in developing countries.
Support for refugees
In July 2017, Kiva launched a World Refugee Fund, a $250,000 matching fund to provide support to refugees and host communities in countries including Lebanon, Jordan, and Turkey. As refugees repay the loans, they build a track record in their new locations. The fund is to be followed by a rotating fund of up to $9M in loan capital.
Other Kiva programs
In 2011, Kiva launched Kiva U.S., a 0% interest peer-to-peer lending pilot program for entrepreneurs in the United States, as part of efforts to "cut lending costs through technology". The loans posted to Kiva U.S. are often from borrowers who have been rejected for loans by traditional banking institutions, but on Kiva U.S. they do not need to be able to produce high credit scores or collateral. Kiva U.S. uses a system of trustees, who vouch for the borrowers. Kiva U.S. trustees can be local non-profits, service organizations, businesses, faith organizations or community leaders.
Google awarded a $3 million Global Impact Award to Kiva in 2013 to fund the Kiva Labs project, which looks for ways to increase the flexibility and impact of microfinance. Labs initiatives include lowering interest rates, providing more flexible repayment terms that accommodate issues like seasonal profits in farming, and offering longer-term loans for investments like education. Labs also focuses on providing access to clean energy technology and using mobile technology in ways that will bridge the knowledge gap. At the time of the lab's launch, Kiva lenders had crowdfunded "132,000 agricultural loans; 4,600 green loans, and 670 mobile tech loans."
Kiva City provides local business owners and entrepreneurs in U.S. cities with the opportunity to crowdsource loans. It was launched by Kiva and former US President Bill Clinton at the Clinton Global Initiative America conference in Chicago in 2011. Kiva City locations include: Detroit, New Orleans, Los Angeles, Washington D.C., Newark, Richmond, Little Rock, Pittsburgh, Philadelphia, Milwaukee, Louisville, San Francisco, New York City, and Oakland.
As of November 2018, a total of 1,530,180 loans had been funded on Kiva. The following table shows these loans sorted according to interest rate.
|Number of loans||Interest rate|
|1,653||No interest rate listed|
Some people, including microfinance pioneer Muhammad Yunus, argue that the interest rates of many microcredit institutions are unreasonably high. In his 2007 book he argues that microfinance institutions that charge more than 15% above their long-term operating costs should face penalties.
According to its web site, Kiva quotes interest rates as the "self reported average rate charged by the Field Partner to the entrepreneur." Kiva does not publish the interest rates charged for the individual loans funded through its website. However, it does publish the average "Portfolio Yield" of each of its field partners, as a way for prospective lenders to estimate the cost to the borrower of the loans they consider funding. The "Portfolio Yield" measures the average income earned from the field partner's outstanding loan portfolio. Some observers have pointed out that the "Portfolio Yield" measure is unreliable, and does not directly reflect the actual price that borrowers are paying for the loans.
Kiva defends the interest rates of its field partners, however, saying its field partners provide much better rates than local alternatives, but must charge what they do because "the costs of making a micro-loan in the developing world are higher versus larger loans in the West." Kiva itself does not keep any of the interest collected, but operates instead exclusively on donations.
For example, in 2009, micro-loans from Kiva partners in Guatemala averaged 23.16% for the equivalent of US$430 lent on average, comparable to the commercial BanRural rate of 24.5% for a loan of US$635. (For reference, the inflation rate for Guatemala typically varies between 5 and 10% and was just 0.62% in 2009).
The high interest rates inherent in the Kiva model have inspired several other online microlending services which aim to reduce the cost to borrowers. One example, United Prosperity, uses lender funds as security to leverage matching loan amounts from local banks, at lower interest rates than would otherwise be available to the borrowers. United Prosperity works with field partners in India and Sri Lanka.
Kiva itself launched a more direct peer-to-peer microlending platform, called Kiva Zip, in 2012. Kiva Zip transfers funds directly to borrowers without outsourcing disbursements and repayment collection to field partners. Instead, Kiva Zip partners with local institutions called Trustees, who vet loan applicants, provide mentorship, and may post profiles and updates on their behalf. Currently, Kiva Zip borrowers do not pay any interest or fees. Lenders are protected from currency risk but do not earn interest. Kiva Zip is considered an experimental platform, and offers loans in the United States and in Kenya. In the future, it hopes to expand to other locations. Kiva Zip's repayment rate is 89.4%.
Interest rates by field partner
As of November 2018, there are a total of 332 field partners listed on the Kiva website and their status is as follows: 173 Active, 41 Inactive, 14 Paused, and 104 Experimental. In addition, 178 former field partners are listed as Closed.
The following table shows the "portfolio yield" of a sampling of field partners. "Portfolio yield" figures are calculated by dividing all interest and fees paid by borrowers to the field partner by the average loan portfolio of the field partner that given year. The figure provides a more accurate insight into the costs of borrowing because it includes fees associated with borrowing.
Pre-disbursement of funds
When Kiva began, borrowers had to wait until their loans were funded on the Kiva website to receive the funds. Since then, the system has changed, so that loans are disbursed to borrowers before their stories are posted to Kiva's website. Disbursing loans sooner has a positive impact on the borrowers, who no longer need to wait weeks to receive their funding and can thus take advantage of time-sensitive business opportunities. This is disclosed on Kiva's site; each loan proposal states whether funds were pre-disbursed. Thus, lenders' loan funds are likely to go to borrowers other than those chosen by the lenders. However, since the pay-back behaviour of the specific borrower chosen by the lender does influence whether or not the lender gets their funds back (except when an MFI has chosen to cover for borrower defaults), there is at least some connection between the lender and the specific borrower. Whether lenders' preferences are used for lender preference trend analysis by any field partners or Kiva is not stated. Kiva's response has been to keep pre-disbursing but be clearer about the process.
Full-repayment frequency uncertainty
Whether defaults are extremely low has been questioned on the ground that a field partner may pay Kiva for loans defaulted to the field partner in order to maintain the field partner's good credit with Kiva. Whether interest rates collected by field partners are enough to pay for significant defaults depends on local economic conditions for each field partner.
In 2008, Kiva featured the borrowing profile of a Peruvian woman asking for a loan to buy equipment for her cockfighting business. This sparked debate among the Kiva lending community about the principles of the organization, and many complained that the organization was promoting cruelty to animals. Matt Flannery responded to the debate by providing an overview of the legal issues surrounding the debate, and took a more relativist stance. Flannery wrote on Socialedge.org, a blog site designed to connect entrepreneurs for social benefit:
I think that allowing our partner to decide which loans to post without much interference is a good thing. We can be paternalistic when we start imposing our moral framework upon societies half a world away. Cockfighting in Peru is legal and part of a rich cultural tradition. It may not be humane or palatable from a Western perspective, but that misses the point. Kiva, the organization, should not be making those decisions. Our lenders should be the ones voting with their dollars.
This position has caused some lenders to pull their funds (often moving them to other microfinance sites such as United Prosperity, Zidisha.org, Wokai, Energy in Common, etc.). Others who wanted to continue to lend through Kiva created "Kivans Against Cockfighting Loans" in May 2009, and, as of June 8, 2012, it has lent $15,625 to borrowers pursuing projects that do not involve the harming of animals.
Controversy regarding Strathmore University and Opus Dei
In Spring 2013, one of Kiva's field partners, Strathmore University, posted many large loans to cover full tuitions for students from low-income regions in Kenya who could not otherwise afford higher education. Kiva also established a field office on the Strathmore campus. Shortly after, many lenders raised concerns because Strathmore University is a corporate undertaking of Opus Dei. This spawned a debate in the Kiva forums, leading to an open letter from Kiva's CEO Matt Flannery addressing the issue.
Promotions and marketing strategies
In March 2012, Reid Hoffman, LinkedIn's co-founder, lent Kiva $1 million. Kiva then allowed 40,000 people to lend $25 for "free". Lenders still choose a borrower, but the borrower will pay back Hoffman instead of the lender who chose them. Kiva hopes that the "free" users will lend to more of their projects, and thus increase their overall user base.
In his 2007 book Giving: How Each of Us Can Change the World, Bill Clinton covers Kiva.org and the work the organization is currently doing and has done in the past.
The following independent entities have reviewed Kiva.
- On October 1, 2019, charity evaluator Charity Navigator downgraded Kiva from 4 (out of 4) to 3 stars; Kiva had been top-rated at 4 stars since 2010 (with one exception in 2016).
- In 2013, foundation Google.org conducted extensive due diligence on Kiva and awarded it a $3 million Global Impact Award for the creation of Kiva Labs.
- In 2012, charity evaluator Philanthropedia awarded Kiva its Top Non-Profit Award based on topic area expert opinions.
- In 2011, The Economist honored Kiva with its Innovation Award.
- In 2010, foundation Omidyar Network conducted extensive due diligence and awarded Kiva a $5 million grant to scale its impact.
- In 2010, Kiva was selected as one of Oprah's Ultimate Favorite Things.
- In 2009, charity evaluator GiveWell published a generic critique of giving marketplaces including Kiva and Global Giving, and specific critiques of Kiva.
- In 2008, TIME magazine named Kiva a Top 50 website.
- In 2007, Skoll Foundation conducted extensive due diligence and awarded Kiva a $1 million grant as part of its recognition of the world's best social enterprises.
- Flat rate (finance)
- List of microfinance sponsors
- Microcredit Summit Campaign
- Social entrepreneurship
- United Prosperity
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- Official website
- Kiva Friends web forum
- Microfinance at Curlie
- Podcast interview with Jessica Jackley Flannery, Feb 2008
- Interview with Premal Shah, President of Kiva
- PBS's Frontline - World on Kiva
- TED: Jessica Jackley: Poverty, money -- and love
- Interview with Matt Flannery, Aug 2007