A crowd of 400 (there were 100 people on the waiting list) attended the first ever Pacific Northwest Microfinance Conference on May 8-9, at Seattle Pacific University. The keynote speaker Friday night was Kiva co-founder Matt Flannery. If you ever have a chance to see Matt speak, do so!
Matt began by pointing out that nearly 50% of the world lives on less than $2 per day. Most of the working poor run small businesses. He was in Uganda when the idea for Kiva was hatched. At first, the idea percolated and started to take real shape in the offices of TIVO, his then employer. Then the Kiva operations moved to the neighborhood donut shop. Finally, they were doing well enough to move into the office building where Kiva is located now.
Kiva was still a very small operation, when lightning struck. Bill Clinton and Oprah talked about it. The national media discovered it. It took off. They have now loaned more than $70 million. Their overhead is about $5 million on revenue of $60 million. Lenders have the opportunity to contribute to overhead if they choose each time they make a loan.
Most of Kiva's clients are women. They have found that women are more likely to repay loans. While Kiva does not charge interest to the borrowers and the lenders do not get a financial return on their principal, the field partners (microfinance institutions, or MFI's) virtually all charge interest to the borrowers. This is necessary to defray the MFI's costs to, for example, visit borrowers (who often live in remote areas). In Muslim areas, where interest is forbidden, the pricing structure is different--for example, the MFI might charge a fee, rather than interest.
As the organization has grown, they have learned a lot, for example, how to do due diligence on their field partners. In the early days, sometimes they would discover that an MFI wasn't what it said it was and that embezzlement was occurring. They learned that the best policy was to be honest by disclosing the problem on the website. Cultural issues have also arisen: for example, one entrepreneur's business was cockfighting; there have also been issues with taking digital photos of women borrowers, especially in Muslim countries. For Iraqi borrowers, names and faces had to be concealed for their own security.
The current global economic crisis is having an impact. The borrower in Southeast Asia, for example, who weaves silk may not be able to tap as large an export market as before. Kiva also wondered whether lending would slow down. It did not. Kiva has been setting records in recent months for total amounts loaned.
Matt stressed that microfinance is not the total solution to world poverty.
Kiva hopes to be able to post loans to US borrowers sometime this summer. However, one of the big issues they are facing is the privacy rights of the borrowers.
Kiva is a Swahili word for harmony or unity.
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