Applying Web 2.0 principles to Microfinance

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1 Applying Web 2.0 principles to Microfinance Online Giving Marketplace Conference "Revolutionising how donors and lenders in the US are connecting with small entrepreneurs in developing countries Premal Shah President Kiva

2 Kiva 101 Internet Lender Online marketplace Local Partner (MFI) Entrepreneur Money Information

3 +340,000 social investors have lent +$45 million in first 3 years. Other Key Stats Growth: $1M loans every 10 days. Risk: 3.5% delinquency rate / < 0.5% default rate MFI Portfolio: 97 MFIs in 42 countries. Growing 3 a month. Traffic: 100,000 site visitors a week. Organization: 30 employees / +400 volunteers Leverage: Platform raises $10 in loans for every $1 donated. 5 yr goal = $1 Billion

4 Kiva utilizes 5 Web 2.0 principles 1. Create an Addictive User Experience 2. Be Radically Transparent 3. Crowdsource against constraints 4. Build in increasing returns on data 5. Reach The Long Tail 4

5 Create an Addictive User Experience Addictive = Easy + Fun 5

6 How Kiva tries to make it Easy Designed for everyday people, not affluent experts I can see the person I m lending to Low cost to entry Quick and easy checkout 6 Business relationship based on mutual dignity, not pity

7 How Kiva tries to make it Fun Rich user generated content, changing fast... Loans are fully funded in hours (MFI staff love this) Real time unedited progress updates from around the world Popular entrepreneurs rapidly rise to the top Transactions happen every 37 seconds Randomized 1 minute of fame for Lenders 7

8 How Kiva tries to make it Fun My Page, My Portfolio My Page encourages self expression, evangelism and loyalty My Portfolio concept encourages further lending, risk diversification and interlender competition Results: +270,000 lenders from +70 countries in 2.5 years

9 For some, Kiva is becoming very addictive! KivaFriends.org unofficial Kiva community forum (built by our users) Several results when searching for the word: Addicted 9

10 Be Radically Transparent Transparency Authenticity Trust

11 Kiva and Radical Transparency Paying for Kiva s overhead is an explicit choice Results: 7 out of 10 users pay an additional 10% to cover Kiva s cost. Kiva reached 70% selfsufficiency in year 2.

12 Kiva and Radical Transparency Data inaccuracy and defaults are made explicit Results: 3% delinquency rate. 3% refund rate. <1% default rate. TBD inaccuracy rate

13 Crowdsource against constraints Big constraint? + No resources? = Crowdsource

14 Kiva and Crowdsourcing Kiva Fellows Program How do we train MFIs, gather progress updates and verify data accuracy hyper-fast?

15 Kiva and Crowdsourcing Kiva Translator Program How do we immediately translate entrepreneur profiles from native language to English?

16 Kiva and Crowdsourcing We have little money, but great partners! Free payment processing and employee support 120 Million free banner impressions Free Google Adwords 25% of traffic Free promotion (Community Impact Award) Funding for Field Research and Development Free phones for cell based data upload pilot Free Yahoo Search Marketing and employee support Free promotion of Kiva widget to bloggers Free computers and early funder 16

17 Build in Increasing Returns on Data Leading public platform + Data integrity Increasing Returns on Data

18 Kiva and Increasing Returns on Data World s largest DB of microfinance investments Short Term: MFIs could use Kiva to build credit worthiness to other funders Long Term: Entrepreneurs could use Kiva as a public credit bureau Result: 30,245,763 loans found

19 Reach The Long Tail The Long Tail

20 Kiva can uniquely reach the microfinance long tail The Internet is a promising way to reduce costs and distribute risk in investing in smaller (Tier II - Tier IV) Microfinance Institutions. Current distribution of funds in microfinance Could Kiva help discover and scale the next Grameen Bank? Tier I (e.g. Grameen Bank) Tier IV (e.g. church congregation) Kiva s platform can aggregate and deliver risk capital unlike any commercial source Kiva lenders value social return / tolerate risk more than institutions $25 investments size ensures risk distribution across thousands of investors Less established MFIs can build a reputation slowly over time (like on ebay)

21 3 Key Actionable Takeaways # Web 2.0 Principle Actionable Takeaway 1 Addictive user experience 2 Radical Transparency 3 Crowdsource against constraints Make it Easy : PayPal is quick and easy credit card acceptance Tip: Get the PayPal ATM/Debit Card and withdraw funds from ANY country real time Make it Fun : Photo upload is the 80/20 of social networking get it done first! Start a blog Admit imperfection every step of the way Hard time getting traction in the beginning? Ink is cheap: Build a huge advisory board Everyone loves a party: Evite as a way to build brand 21

22 APPENDIX

23 Kiva s Risk Model helps manage risk on Kiva s platform and creates an incentive for MFIs to improve transparency and performance. Inputs 1) Self-reported MFI Data Organizational age Gross Loan Portfolio (GLP) Overall Portfolio At Risk (PAR) Organizational Self Sufficiency (OSS) Outputs 1. MFI Reputation on Kiva s site 2) 3 rd Party MFI Data Financial Audit Results Credit Rating Score Kiva Audit Results Outside funder Quality Network Affiliation Quality Kiva Risk Model 2. Monthly Fundraising Limit 3) MFI Performance on Kiva Total Outstanding Kiva Loans PAR on Kiva Loans Kiva Fellows Journaling Coverage 3. Kiva Audit Prioritization