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Center for
Social Innovation

Center for Social Innovation


Academic Case Study by:
Garth Saloner, Bethany Coates
Published: 2008
[photo - Garth Saloner]

By the end of 2007, Kiva, the first online person-to-person microfinance organization, had produced a number of compelling results. The site regularly “sold out” of loans. Every business listed on the site was funded within hours. New borrowers were added hourly and potential lenders were urged to check back often in order to participate.

Kiva also capped loans at $25 so that more people had a chance to get involved. The loan cap move received positive feedback. Gabriela Villegas, a Kiva investor, commented, “Twenty-five dollars, that’s probably how much I spend on just one meal. But with that same money, I was able to change someone’s life.”

The nonprofit had 77 field partners in 39 countries around the globe. Average loan repayment rates were above 99.5 percent. Kiva's CEO and co-founder Matt Flannery noted, “Repayment rates in the microfinance industry are much higher than for U.S. domestic loan lending. That’s because microfinance institutions are lending to people for whom getting a loan is their only shot at anything. If you’re given a $60 loan, your chance of getting another loan is contingent on you paying that back.” Cumulative loan volume approached $16 million. Both the number of lenders and the average number of businesses funded by each single lender had steadily increased since the beginning of the year.

The Kiva team felt affirmed by the growth of their organization, the positive media attention, and by the moving anecdotal evidence of poverty alleviation among the entrepreneurs listed on the site. Co-founder Jessica Flannery noted, “Instead of sleeping on a reed mat, someone could buy a blanket. Instead of mud walls, they have concrete.” One loan officer told Kiva that a female entrepreneur had greeted him with tears of happiness—this was the first year she had been able to purchase textbooks for all of her children.

The Flannerys hoped to capture more formal data about the impact that Kiva was having on its borrowers. The quality and detail of updates from microfinance institutions (MFIs) varied, and did not yet systematically address poverty alleviation. Going forward, the Flannerys wanted answers to questions such as how many borrowers lived on $2 per day now rather than $1, how many could afford to feed their families at least two or three times daily, and how many no longer had to regularly choose between nutrition, schooling and medication for their children.

To gain more information, the organization needed to build a more robust technical infrastructure with more monitoring and auditing functions, as well as training MFIs around the world -- demands it could not meet then. In the meantime, the Kiva team felt content to help the world’s poor one entrepreneur at a time.

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Case No: E288

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