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Las Vegas (airport)
I launched this blog a little over two years ago and did much of my first writing just after I quit my job. That was also the year I celebrated Kwanzaa for the first time; I never could find a black candle.
Oh man, so much has changed since then!
We had our annual board meeting in November. One thing we did was present a pretty aggressive budget. All in all, it adds up to about $4.7M in costs, up from just $1.7M in 2007 and $200K in 2006. The main drivers of the costs are training, relationship managers and audits. The staff costs associated with building an international partner base can be staggering.
That is some real growth and it was hard at first to swallow figures like that. Hey, but it's not us driving the growth. It's our lenders. They are demanding it. As I put it at a meeting with the Skoll Foundation a few weeks ago -- we feel like we are at a "go big, or go home" point in our history. Going small (or home) could be disastrous in a world as big as this one.
What did we learn this year? It boils down to three main lessons:
1) Lender enthusiasm is abundant
This is the biggest shock of the year -- the sheer enormity of enthusiasm and untapped demand in the space of online microfinance. In 2007, we went from $2M loaned to $18M in loans (cumulative). We went from 30K users to over 200K. We were on the Oprah Winfrey show, CNBC, the Today Show, ABC News, blah blah. Come on! That's crazy talk. Seriously, those numbers would have broken my brain a year ago. Scaling this model this year has felt like trying to fit the NBA finals into Stanford's Maples Pavillion -- not easy, but a lot of fun.
2) Scaling partnerships is difficult
We are reaching out to the long tail of MFIs. The microfinance world is colorful, scattered, bulging and full of promise. There are thousands of MFIs out there within our reach. That said, few of them are ready for truly commercial capital. Even more, those that are commercially viable are soaking in debt capital. Kiva is trying to change that game by creating a transparent, Internet based marketplace for MFIs of different shapes and sizes to reach out to the world of online lenders to raise capital for their borrowers. We are now helping around 80 of such organizations expand their reach...fast. Doing so can be a bumpy road. Many MFIs aren't equipped to handle rapid growth. We have found that out the hard way. The exuberance of this year has come back to haunt us at times. We've had a few MFIs flame out completely because of mismanagement and even fraud. Dealing with it has been heart-wrenching and has introduced a new pressure that sinks in as I sleep and jolts me awake in the morning.
3) Our users desire transparency above all
The Kiva community of lenders continues to amaze me. In effect, they are trading risk, and the hope of profits, for stories of impact and total transparency. The more transparent and site we can make this marketplace, the more our lenders respond. The site has gone through repeated, chronic and extended periods of inventory shortage. Instead of trying to artificially rush the marketplace and grow at an abnormal pace, we have learned to simply be OK with the fact that we can't grow the partner base as fast as the lender community demands. In doing so, we have built a level of trust and understanding with our users.
In addition, the site has seen MFIs with high delinquency rates and others that have collapsed all together. We currently have a 99% repayment rate, a 3% delinquency rate, and a refund rate of nearly 3%. The last statistic covers a number of loans that we refunded to users this summer because we learned that not all of the funds reached the intended recipients. We sent out a message to lenders indicating this fact and issuing the refund. The response was incredible and it turned out to be a teachable moment for both Kiva and it's lenders. Refunding loans is not something we intend to continue as a long term policy!
So those are the main lessons we learned this year. So what are we going to do? We reduced our high level strategic goals to four:
1. Double absorption capacity
2. Diminish fraud
3. Deepen lender engagement
4. Increase transparency
This blog is too long, and we are boarding now. I'll dive into these points in the weeks to come. Happy new year.
Intrsting qustn
Thanks for the question.
As I've learned more about microfinance, I've come to believe that the techniques of the lender, not the properties of the borrower, are the biggest predictor of repayment by an individual borrower. Two MFIs can lend to the very same person and have different results in terms of repayment. As we've experienced surges in lenders, Kiva has felt pressure to sign on riskier partners and also has felt pressure to allow our existing partners to raise more money. Early last year, when we had a very small staff, we really felt this pressure and made some bad decisions in choosing partners and allowing some partners to raise more than is sensible. As a result of this, we had some MFIs collapse as I mentioned in my blog entry. You can see the results at the bottom of our Field Partner list page!
- We have really come a long way since then...It's been a "coming of age" moment for our organization. We don't really feel the pressure anymore. We limit our partners to a fundraising cap of 30% of their gross loan portfolio and are unwaivering on that. We also hired some great people
- veterans -- that took us to school. It's been amazing experience.
Hope that answered yr question. best wishes,
matt
The techniques of the lender?
Matt,
I'd be really interested in hearing which lending techniques correlate with high repayment rates, with low fraud rates, etc.. I'd wonder if these vary by underlying culture or location (some work in matriarchal cultures, some in patriarchal, some in "absent men" cultures), by business type (some models work well for farmers or other long-gestation businesses, some for fishermen, some for retailers), gender (some models work well for male borrowers, some for female)...
Is there any opportunity for the lenders to teach each other what's working? I'm sure they're mostly pouring resources into what they're doing, but perhaps regional conferences, or at least email list exchanges among them, would be of some value to them, without putting Kiva in the (neocolonialist) position of telling the lenders how to run their projects.
-antonio
congrats to a great year!
i read your blog but i've never commented. i've been a fan ov kiva for several years now...my friend was a classmate's of jessica's at stanford. :) by the way, i love the way you guys have designed the website. simple and streamlined- like most websites should be!
Use me, Matt
Hey Matt, I’ve been watching for months, and I am utterly enthralled by what you've done.
I'm in Central America, working in grass-roots entrepreneurialism. I'm looking for my next assignment, and I feel certain that you could use me in your partnership development.
I have resources and experience you need in the field, but lack the "hard banking" requirements for your Partner Development Specialist. I don't need the salary. Surly you can use me somehow?
I am preparing to submit my resume for the Fellowship position, but feel that you may have other immediate needs for my skills. Where else might I send my resume?
'Lena
PS - This gives a pretty good sense of what I'm about: http://galenaalysoncanada.blogspot.com/2007/04/back-home.html
Use me, Matt
Hey Matt, I’ve been watching for months, and I am utterly enthralled by what you've done.
I'm in Central America, working in grass-roots entrepreneurialism. I'm looking for my next assignment, and I feel certain that you could use me in your partnership development.
I have resources and experience you need in the field, but lack the "hard banking" requirements for your Partner Development Specialist. I don't need the salary. Surly you can use me somehow?
I am preparing to submit my resume for the Fellowship position, but feel that you may have other immediate needs for my skills. Where else might I send my resume?
'Lena
PS - This gives a pretty good sense of what I'm about: http://galenaalysoncanada.blogspot.com/2007/04/back-home.html
How to partner?
Greetings Matt -
Hey - love what you are doing, found you on the web, read Clinton's book on giving and saw the Oprah Show. My daughter gave me a gift certificate to get me started on my first loan - noticed that you are overwhelmed by support - a GREAT problem to have. I work for a 60 year old NGO that also make some micro-loans - they have a great wealth of contacts in over eighty countries around the world with staff local to the countries working our programmatic efforts - would they be able to meld their need for micro-loans with your system of lenders?
Patrick Walker, www.churchworldservice.org
Congratulations
Matt, Bill Nicolson sent us a copy of the article in the Stanford paper. Since it has been a while since we haved talked wit you we weren't aware how successful your venture has become. I just wanted to share how proud dottie and I are of you and pleased for you. Your creative success and social value is an inspiration. We'll lend for sure but if there is anything else we can do please let us know. P.S. Dottie is working on getting you the latest music from all the kids.
Website Boards Page
Hi Matt,
I've been following kiva.org and your blog for a while. I noticed the site added a new "boards" page under "team". I wish there was more information on what these individuals do for kiva.org.
I was also wondering why there hasn't been much activity with Facebook. I noticed the "causes" application has a kiva group, but the response and activity is minimal. Is the organization doing anything to capitalize on some of the social networking sites out there?
By the way - I purchased two shirts and a cap from the site and have been amazed how often the "I'm a Loaner" shirt allows me to spread the word. Great marketing idea!
Keep it up - the advocates are doing our job!
Willing to help more but.......
Matt, I joined Kiva last year; so far I've made 44 loans i.e. $1,500. The impersonal bounce back messages I guess are a have too. Still at times it makes me feel like I'm dealing with an answering machine versus an organization that is sincere and appreciates the help. I'm willing to assist your organization FREE and serve as a consultant for nonprofits i.e. www.nonprofitexpert.com. So you can understand my background you might want to review: www.nonprofitexpert.com/resume.htm. First let me say, I'm not looking for a job, but simply to help, if you want help! Honestly, however it is difficult if not impossible to connect with any of your team. You do not list email addresses or phone numbers etc. Last year I did finally find a contact for Rupa after searching in the internet and I sent her some free grant research but eventually felt blown off. Maybe it is because you have all this growth or maybe it is something else. Anyway, good luck! John
HR Concerns
Hello Matt, and Happy New Year. My comment does not address the story related above, but rather is an issue I have had in mind for some months as I have watched Kiva grow. Given that Kiva’s staff has doubled (perhaps even more than doubled?) in the past year, I cannot help but notice a lack of black and Latino employees. Has this been an oversight? Kiva serves African and Latin American field partners, so it would seem natural to see this diversity reflected on staff. I am certain that many talented and qualified African American, Latino and other underrepresented applicants would love to serve on Kiva’s staff. Perhaps this issue will be addressed when the Human Resources Manager is hired?
making larger loans
- It is common knowledge
- even made the NYT -- that Kiva seems to be finding it easier to attract lenders than borrowers. I am wondering whether it might be possible to move up-market so to speak and lend to larger projects. For example, I know of a charity which buys and equips co-operative farms, and trains the workers in sub-Saharan Africa. A typical project costs about $50K and helps a whole village. It is currently done on a straight donation basis, but the availability of loans would increase the reach. There must be many other potential projects, like small factories or whatever. Maybe this is not "micro" enough, but the term is surely relative and it seems a shame that willing lenders cannot find borrowers.
Question for Matt
Hi Matt,
Over the past few months Kiva has been working hard to prevent the number of loans reaching zero. You've done that by restricting the amount people can lend per loan to 25 dollars.
Currently, there are no loans available on kiva.org - this is great news! But my question is this:
How difficult is it to get the balance between keeping interesting in kiva (and making loans available) with only lending to creditworthy people? i.e. do you feel pressure to lower the requirements when the number of loans available gets low?