Monday, October 13, 2008
a ToASt to my good friends @ Kiva.org
Life in Africa community members at WE Center Kampala pose after receiving their Kiva loans (May 2006)
As I wrote in an earlier post, working online from Africa has brought me into contact with amazing people who are developing new systems and ideas that offer hope for better times ahead.
The folks I've had the pleasure of working with at Kiva.org are an amazing group of really dynamic people who are doing just that. Since I first met them in early 2006, they've made incredible strides in achieving their team's far-reaching vision for building a grassroots driven credit system for the world's poor.
Just think for a minute about how cool that is. At the same time as "extending credit to the poor" is being blamed in some circles for bank failures in the USA, my friends at Kiva have successfully created a whole new "system outside the system" for delivering credit to the poor in countries around the world. It occurs to me we ought to start paying closer attention to what this kind of system can teach us about lending to the poor without exposing unwitting investors (and national economies) to the risk.
Microfinance is a set of credit delivery and risk management systems that does not rely on traditional banks or banking structures, and it's already in place in many countries. 2006 Nobel Prize winner Muhammad Yunus started what's become the global microfinance movement when he founded the Grameen Bank in Bangladesh over 30 years ago. The Kiva team's innovation lies in effectively using technology and social media for engaging the global grassroots in making more lending capital available to the microfinance industry worldwide.
Unlike sub-prime lending banks, Kiva's lenders aren't losing money. Ordinary people like you and me are lending to the poor through Kiva, and getting their money back. One big reason they don't make money though, is a complex set of SEC regulations that won't allow the US based micro-lenders to earn interest. That doesn't mean that loans to the poor through Kiva are interest free. Micro-borrowers in Uganda pay interest rates ranging between 15 and 40% per annum. Local microfinance institutions who disburse and collect Kiva loans get to keep 100% of the interest they charge, and that works for everyone involved - Kiva's growing number of members willing to lend money at 0% interest shows that earning profit for investors is not necessarily a requirement for making credit available to the poor. (US regulators, take note!!)
Shortly after moving to Uganda 10 years ago, the first website I ever built at lifeinafrica.com was an attempt to do something very similar to what Kiva has done. While I received more professional recognition for that project than I ever imagined possible, I wasn't able with the means I had available to grow the concept to a larger scale. I can tell you first hand that the challenges involved in doing what Kiva does are numerous and complex. My hat goes off to the Kiva team for how well they have managed to handle those challenges so far. I feel honored to have had the opportunity to be a part of Kiva's exciting ride.
Years after my early attempt at online micro-lending died down, I'd started a new Life in Africa community project that would offer microfinance and other income generating opportunities to members. In late 2005 I was trying to reach someone at PayPal to discuss options for sourcing loan funds through our website with Paypal from Africa. I put out a call on my online networks requesting a connection, and someone put me in touch with Premal Shaw. The first time I talked to Premal by phone, he was still with Paypal/Ebay working on developing their microfinance marketplace venture that would launch 2 years later. The second time I talked to Premal - just a few weeks later - he had become the President of a new organization called Kiva.
Although LiA was not a microfinance institution but a community based social enterprise made up of craft-makers, we were invited to become an early Kiva field partner and allowed to experiment with community guaranteed lending. Instead of sourcing loan funds for our borrowers at LifeInAfrica.com, we sourced the funds for 135 Life in Africa member loans worth $37,700 through Kiva. Kiva's active press and marketing strategy meant all we had to worry about was getting the loan applications online, and our loans were typically funded within 4-12 hours of being listed. (Collecting the payments, of course, was a whole other story.)
While access to the loan funds was a huge benefit to the LiA community, what I personally enjoyed most about working with Kiva was the opportunity to get to know, brainstorm and innovate with the amazing Kiva team. Premal Shaw, who I finally got to meet in person when I visited the Kiva office in San Francisco in mid-2006, is simply one of the smartest and most sincere people you could ever hope to meet. Founders Matt and Jessica Flannery visited LiA a couple of times. How I envy their solid commitment to the Kiva cause as a couple. Jessica is a humanitarian sweetheart; Matt and I developed a mutual admiration for each other as renegades out to change the system. Chelsa Bocci, Kiva's partner relationship manager, is an incredibly diligent young woman whose love for her work shines through in what she does. Working with Fiona Ramsey, Kiva's lively press manager, we even got to participate in a couple of exciting film projects.
My favorite was this piece that PBS Frontline did, which even got shown on Oprah when Matt and Jessica graced her stage, making LiA's Grace Ayaa a TV star! Like the WE Center Gulu film I posted earlier, I love this video because it captures the spirit of what the WE Center Kampala community was like at the height of activity, before so many things changed. It also clearly demonstrates the amazing power of the Kiva concept. (The piece was so well loved by PBS viewers that they showed it about 10 times).
Maybe because the Kiva crew knew that I was open to letting all kinds of opportunities play out on the LiA stage, there were other opportunities that came about for the community as the result of our Kiva connection. A lovely pair of researchers funded by Microsoft's Digital Inclusion Program (friends of Matt) spent some time with us that was both fun and educational for the members who participated. Jessica Flannery came on a non-Kiva related visit once, and brought a whole busload of fellow students from the Stanford MBA program with her for a one day planning workshop with LiA members called "Planning the Life We Want." We also had really great experiences with some of the top class Kiva Fellows who came to meet and report on our members' loans. All in all, just a great partner to work with.
Unfortunately, sometime after the PBS film was made, there was a split within the LiA community that resulted in some difficulties collecting the loans. Although the community repaid Kiva for 100% of the funds that members borrowed, many former members still owe the community for repayments made on their behalf. Sometime along the way, Kiva also made a strategic decision to start partnering with larger microfinance institutions with 1,000 borrowers or more. The LiA community was too mired in sorting themselves out as a community to consider growing to that scale, and the metrics they had to offer as a community based social enterprise simply couldn't rate well in Kiva's partner rating system. In late 2007, the community leaders decided to put the LiA microfinance program on hold. A necessary decision, but sad to sever what had been a wonderful partnership with Kiva.
I will always be 100% grateful to Premal, Matt, Chelsa, Fiona and the rest of the Kiva team for allowing me to experiment with community guaranteed microlending on their wonderful platform. When I look at all they have achieved with it toward developing a new global system in such a relatively short time I am filled with awe, wonder and (ok, I admit it) a tad bit of jealousy. Kiva has brought microfinance into the mainstream of social media in ways I used to lie in bed dreaming about at night.
A ToASt to you, my good friends at Kiva! You are amazing. I am very sorry that I didn't get to spend more face to face time with you this year as planned, but I'm still with you in spirit and continue to be duly impressed at what I'm seeing from afar. Wherever I end up next, I'll be rooting for you. Keep doing what you do... and let's show those US bankers and regulators a thing or two about what it takes to lend to the poor, shall we?!
a ToASt to Stacey Monk @ EpicChange.org
Let's ToASt to hope for turbulent times