Fresh (Southern) Voice on Kiva

November 25, 2009

Most of the verbiage about Kiva recently has come from northerners. Here’s Kenyan Margaret W. Karuri, who founded the microcreditor People Microcredit Investment Bureau (PEMCI). PEMCI was a Kiva partner until it was upended by regional violence after the Kenyan election two years ago. She defends Kiva while arguing that the cost of its capital for partners such as PEMCI is not trivial:

Kiva is a noble innovation which has changed the lives of many across the globe. I feel like some of us are playing the “devils advocate”. Not bad, as long as we come up with some constructive recommendations and suggestions on how Kiva can improve its administration. To Kiva, Kudos’ for the good work you are doing. My advice, “All things work together for Good”. Other than kill a noble initiative like this, let us suggest ways, in which we can further grow the idea, improve on it, and ensure that it continues to deliver on its mandate. Today it is Kiva, who will it be tomorrow? We don’t want to discourage innovative ideas and mechanisms that are essential in changing the way we carry out the microfinance business.
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We identified the client, posted their pictures and business/personal profile on Kiva website. Kiva raised the funds and transferred this to us for on lending….Through frequent reporting and updates Kiva ensured that there was transparency and complete disclosure in the operations of the MFI. Lender also received frequent updates on the client through the Journal postings. In 2007, to improve our reporting to Kiva we were obliged to install Loan Performer, a loan management system which carries an annual fee. You can imagine the challenge that this whole process posed for young MFI’s with limited capacity like ours. Not to mention staff time and technological challenge of generating such reports in an underdeveloped environments like ours. But we had to do it, to satisfy Kiva requirements and qualify for funding. Funding from Kiva does not come as cheap as some would make it look.
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Can the lenders bypass Kiva and go directly to the clients/beneficiaries as suggested by some as per eBay and the financial area, Prosper.com, models? Maybe! But, would this move the kind of resource volumes that Kiva has managed to do? How would a lender in North America identify a needy entrepreneur in a remote village in Kenya? Internet? I think less than 2% of our clients had access to a computer or internet. By working with MFI partners like us, Kiva is able bridge the gap and change lives. As we know, commercial banks shy away from rural areas and places which they consider not viable. Most purely for profit MFI also avoid rural area preferring towns and peri-urban centers. For a rural based MFI like ours, interest free loans from Kiva enabled us to extend loans to clients who are marginalized by such mainstream institutions. Because of the challenging nature of this environment, the interest charged although higher than normal, hardly covered delivery costs.

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1. Ben Says:
   November 26th, 2009 at 6:37 am

   David,

   This is great that you’ve been able to speak to some of those who use Kiva in the field and, especially, those with a perspective from the Global South.

   While Margaret’s comments are quite helpful, I wanted to add a few notes for context:
   - PEMCI was an early stage MFI and did not have an automated MIS system when they first joined Kiva. However, most MFIs who currently use Kiva (and most MFIs in general who have more than a few thousand clients) have MIS systems to manage their own portfolios. It is hardly a Kiva-specific expense and having a functional MIS is a prerequisite for most funders. (Note: Kiva does not require MFIs to have any specific MIS system to use the website)
   - Kiva’s systems have improved markedly since PEMCI posted its last loans to Kiva (around the time of the post-election violence) and is much more efficient to use now
   - As with many things, there are economies to scale in using Kiva. Since PEMCI was only able to raised a limited amount of funds, they had less operating leverage and lower average costs per dollar raised than many of our bigger partners.

   Best,
   Ben

   Ben is Kiva’s Microfinance Partnerships Manager for Anglophone Africa.

2. James Dillard Says:
   November 27th, 2009 at 12:22 pm

   Great perspective. Thanks for bringing it forward.

3. JJ Says:
   December 1st, 2009 at 7:23 pm

   As a former Kiva Fellow who served in Lebanon, I must say I can appreciate the significant challenges that MFIs face when they choose to work with Kiva. MFIs come in many shapes and sizes, and some MFIs certainly find the reporting and other requirements which Kiva expects from its partners to be too cumbersome. But to be sure, Kiva-sourced funding is a two-way street: much is expected for 0% interest capital. The reason for many of Kiva’s reporting, management, and transparency requirements is the very reason it has been able to be so effective: these requirements facilitate a tremendous degree of trust between lender (Kiva user) and borrower (MFI/entrepreneur). I do not think it would be possible for a rural MFI in a remote location to solicit a $20 loan from even the most trusting E-Bay user in Des Moines, Iowa, without the ostensible (if only perceived) protection that photos, stories, first-hand journal entries, financial reports, historical site performance, and rigorous documentation provide. This is surely the great benefit of Kiva for an MFI; it provides a degree of confidence to the lender that one’s investment (loan) is being used as advertised. Furthermore, while an MFI may adhere to Kiva policies out of a desire to obtain access to the Kiva community, one cannot ignore the positive externalities that many of Kiva’s requirements will have on the MFI for its own future growth. I am confident that as time goes by and creative minds continue to prosper, the burden on MFIs who work with Kiva will lessen, while both user and borrower will have greater access to one another.