Kiva did billboard advertising on highway 101. Apparently the ad was sponsored by Paypal.
Matt Flannery of Kiva speculates whether the board brings 125 additional visits per day to the website (0.04% conversion rate) or if user growth on the sampled weeks had other causes.
Kiva.org, which allows everybody to help funding microloans to entrepreneurs in developing countries, will achieve the milestone of 25 million US$ loan volumn within the next two days.
Launched 2005 the amazing growth curve can be seen on this Kiva stats page. The growth accelerated in 2007 driven by major media coverage. Up to now more then 260,000 individual lenders have funded more than 37,000 loans in 42 countries.
The current default rate is only 0.11%. While Kiva lenders do not receive interest, borrowers pay interest to the local Kiva Field partners (microfinance institutions).
Kiva, founded by Matt and Jessica Flannery (picture), is a non-profit which currently has 16 employees paid by optional 10% lenders can donate on top of loans. Apart from them many volunteers aid the Kiva cause.
A February 2006 survey showed that Kiva donors were evenly distributed between 25 and 60. Slightly over half were males, and 65% made more than $50,000 a year. But a $25 cap on individual donations is causing the demographics to spread; more older, younger, and less-well-off people are signing up. Kiva has about 15,000 to 20,000 visitors a day coming to the site now.
While lenders may withdraw funds via Paypal upon repayment, 90% decide to reinvest the money into new loans.
(Picture courtesy Kiva.org)
A very interesting study that mainly concentrates on donations covers aspects of social lending too. Among the 24 online philantrophy markets examined are Kiva and MyC4. The study gives great advice what users (donors and lenders) expect from the market (the service) as functionality.
The study comments on Kiva:
Kiva’s entire business model was, from the start, faced with seemingly insurmountable logistical issues. From verifying the legitimacy of entrepreneurs’ claims straight through to delivering repayments to investors. In addition the challenges of distance, cost, and time were considerable. By partnering with carefully-selected microfinance institutions (MFI) already working in a particular area, however, Kiva has been able to overcome all of these hurdles. … And each MFI’s reputation as an accountable, socially responsible organisation must be unimpeachable with Kiva or another highly regarded organisation such as the US Peace Corps. Partnering with MFIs also overcomes the communication issues encountered working with small businesspeople in developing countries. Whereas very few small business owners in developing countries have Internet access or English language skills, all of the MFIs must have these in order to work with Kiva. This compromise enables individual stories from entrepreneurs, relayed by MFIs, to reach investors both before a loan is disbursed and after its effects are felt. Though loan repayments have been generally taken as a ‘proxy for success’ in the MFI industry, it is these personal stories, says Kiva’s Ben Elberger, which are
most important to most of its donors: ‘The lenders are more interested in the qualitative results than the quantitative…They are more interested in learning what happened to the entrepreneur than they are in getting their money back.’ Thus, the information provided by Kiva’s partners in each of their business’s journals is very rarely financially detailed; rather, it tells the story of how the loan will (or has) impacted on the day to day life of the business owner.What does the future hold for Kiva? One of its primary goals has become strengthening their partner MFIs, helping them reach a more sustainable financial position so that fluctuations in funds received from Kiva will not impact their overall ability to lend. It is also developing an internal reporting system, but identifying common indicators for MFI and businesses has been extremely difficult, and it is unsure that such a framework is even possible. The biggest variable for the future, it says, is to what degree the public’s moral attention to sustainability and development will last.
MyC4 is given as example for the useful integration of Web 2.0 technologies to create an interactive market.
While a long read (over 50 pages without appendix) I believe it to be interesting for all p2p lending services especially the product development and marketing managers.
Kiva.org send a newsletter to lenders yesterday with current numbers:
Kiva has grown a widespread group of supporters, ranging from Kiva Fellows over company supporters to a lively community discussing at Kiva Friends or contributing at Kivapedia.
KivaTV is showing a mix of promotional, educational and informational video clips.
Kiva still maintains a low default rate, which currently is 0.2%. The 20 Kiva loans I myself have invested in are all repaying on time.
Matt Flannery of Kiva.org describes in a blog post which obstacles Kiva has to overcome to make accounting not a too time consuming task for the local fireld partners (MFIs). With some MFIs having over thousand loans and slow internet connection Kiva needed to find a solution that saved time.
About a year ago, we realized that many of our Field Partners were having trouble doing so. The sheer number of page loads was making it prohibitively difficult for a Field Partner to register repayments on time, even when the actual borrower collections in the field were happening like clockwork. Thus, we introduced "exception-based" repayments. The idea, used widely in MFI accounting systems already, is to have regularly scheduled payment registered automatically in a system unless the loan officer marks an exception — an event signaling that something went wrong and the borrower did not pay the full amount. Since borrowers typically repay 95% (or so) of the time, loan officers only need to register something 5% of the time.
Kiva's first whack at exception based payments was very crude. The feature was written by me in late '06 in between blog entries and trying to keep the site up. Many of our Field Partners adopted the feature out of necessity and it saved them a lot of time. However, it was very difficult to mark an exception, so most of them never did. Thus, many of our Field Partners never mark exceptions and just repay all of their loans on time, even in the 5% case where the borrower defaults. This creates misleadingly high repayment stats on the site and we are working to correct that.
Kiva plans to have group loans. The post does not describe in detail, how group loans will work, but I am looking forward to examine this feature:
In addition to that, we are rolling out a number of features to further reduce the work required by our Field Partners and increase transparency. Group Loans will go live on the site this week. This will allow Field Partners to post up groups of up to 50 on the site as an individual loan application on the site. Group-lending is common practice in microfinance, but was not well supported by Kiva until now.
Also Kiva will change how currency exchange risks are handled:
we will be introducing local currency support for all of our Field Partners. This will allow the disbursement and repayment amounts on the site more closely mirror the actual accounting books of each MFI. This creates more transparency around financial flows. It also paves the way for a future reality where our partners will not need to bear currency risk. Hard currency lending has fallen out of favor in the microfinance world and we hope to soon be on the cutting edge of local currency lending.
Note that on MyC4.com for most loans the borrower has to take the currency exchange risk. Loans with small amounts are paid out in local currency, while large loans are paid out in Euro.
Social lending service Kiva has refined its risk assessment for participating MRIs (microfinance institutions). The changes and the mechanism are described here. Risks for Kiva lenders include Entrepreneur Risk, Fieldpartner Risk and County Risk.
So far the default rate for Kiva has been 0.17% on a loan volume of $9.965.000 (4.4% of loans are one month late). When compared to Prosper.com default rates, that is an extremly good result. So far the MRI on Kiva with the worst performance is REDC Bulgaria, followed by an MRI that organizes loans to people in Uganda, Kenya and Tanzania.
Another interesting figure: The average time a listing is online at Kiva.org until it is fully funded is 1.24 days.
So far all my Kiva loans are repaying on schedule.
