In lieu of a more traditional blog, I thought it would be interesting and potentially helpful to take a stab at answering 5 common questions from friends and family related to Kiva and the broader role of microfinance. While I am, by no means, an authority on microfinance, I hope this sheds some light on Kiva and provides some color on my experiences as a Kiva Fellow.
Is it true that most of the borrowers in Nicaragua and elsewhere are women? If so, what do you think are the reasons for this?
Indeed, 82% of all Kiva loans are directed to women. There are a number of reasons why this is the case. Foremost, many of Kiva’s microfinance partners specifically target women or minority groups for extension of credit. Additionally, often in many developing countries, assets are held in the husband’s name and thus, it is more difficult for women to obtain credit from more traditional banks. Many women also run small businesses in the informal economy (food, clothing stores) that make good use of microloans.
What are you less than impressed with after being on the ground?
The lack of differentiation among many businesses is somewhat perplexing. While not true for all businesses, many are often selling identical products, at the same price, as the vendor across the street. Furthermore, products often cost the same regardless of location. For example, if there is only general store at a tourist site, it might make sense for the vendor to charge more for that privileged location.
Does Kiva ever grow concerned that those responsible for making lending decisions will deliberately extend credit to friends where a borrower pays the loan officer something in order to get the loan, and neither side ever expects repayment?
Yes, this is certainly a concern but rest assured, Kiva has taken many steps to combat potential conflicts of interest. More importantly, the microfinance institutions (“MFIs”) themselves have mechanisms in place that make corruption difficult for any would-be offenders. At Fundación León 2000 (http://www.fundacionleon2000.org/) where I am currently based, for example, loan officers cannot extend credit to family members and multiple credit officials are involved with the loan process. Both Kiva and the MFIs do an excellent job at discouraging corruptive practices, as both parties understand that their credibility is on the line. The effort to increase this sort of transparency is a big reason why the Kiva Fellows program exists in the first place. With the dispersal of fellows throughout the world, Kiva’s microfinance partners become more accountable and transparent to all stakeholders. A huge part of being a fellow is confirming that entrepreneurs, their loans and loan terms are correct and are reflected as such for Kiva’s lenders. All of these steps are aimed at continually improving the level of transparency throughout the entire loan process and reducing the likelihood of corruptive behavior.
How, if at all, does Kiva try to measure the effects of its lending in particular countries? In other words, can you find some objective measurements from the loans that are made?
This is a very important question and one on which Kiva has spent extensive time. Naturally, after Kiva has scaled the network of microfinance institutions, it has sought to measure the social impact that its loans and partners are creating. This is vital in allowing Kiva to benchmark progress and illustrate the various social benefits that its partners are providing, as well as enabling the MFI to specifically target improvements in its own social performance. Currently, Kiva is in the early stages of reaching out to its partners to fill out an extensive survey that details the MFI’s various efforts to target the poor, provide a range of benefits and services to clients, and promote general goals of social responsibility. Currently, I am working with the CFO at Fundación León 2000 on this initiative.
Help me better understand Kiva in a broader context.
Kiva is a hybrid 21st century organization – part tech start-up, non-profit, international NGO, microfinance lender, social enterprise – all rolled up into one. I think it’s interesting to think of Kiva as an organization that simply brings together lenders, entrepreneurs and microfinance organizations all across the world – and does so by making the distance between these groups as short as possible. Kiva does this through its impressive technology platform and its Fellowship program, both of which help to bring these stakeholders closer.
Dan Tulchin (KF12) is enjoying the vibrant city of León in Northern Nicaragua as he revs up for another Yankee playoff run.