At Kiva US, we’re constantly exploring how we can better serve the hardworking, passionate, inspiring entrepreneurs and small business owners who crowdfund a loan with us. This exploration involves testing, learning, and innovating. Without this forward-thinking mindset, rethinking creditworthiness and creating systemic changes to make financial security and financial mobility in this country more equitable would not be possible – nor would facilitating the crowdfunding of $60M in microloans from 372k+ lenders to 9k+ borrowers in the US, in the past decade alone.
And one of the most important ways we can pursue our mission to increase financial inclusion is to listen to our borrowers.
That’s why, last year, the Kiva US program partnered with global impact measurement company, 60dB (60 Decibels) for its first-ever independent impact assessment. Between April and May, 60dB conducted 502 phone surveys, speaking with Kiva borrowers (80% of respondents) and Kiva applicants alike. The sample demographics of respondents are representative of Kiva US borrowers: 63% Women, 38% Men; 42% Black, 16% Latino/Hispanic-American, 26% White, 9% Other.
Questions aimed to capture borrowers’ perspectives and sentiments around their satisfaction with the Kiva process and, more importantly, on the impact the Kiva loan had for them – including whether and how it’s impacted their business outlook, their ability to access more capital elsewhere, and their financial situation as a whole (i.e., personal and business cash reserves, long-term financial plans).
Below are a few key insights* from the study – some confirm what we already knew to be true, some underline what we had hoped to be true, and some support what we desire to be true in the future, not only for the borrowers we serve but also for Kiva’s role in expanding financial inclusion in this country. *We encourage you to read the 60dB @ Kiva US report in its entirety here.
Kiva provides access to finance where others don’t
At Kiva, we firmly believe that, while dreams are universal, opportunity is not. But, where other loan providers may see risk, we see opportunity. We see humans who may not have access to other forms of capital for reasons far outside of their control. We see those who may be excluded from the traditional financial system but who, with the community-backed, crowdfunded Kiva loan, could transform their vision for their business and turn a dream into reality.
“[Kiva’s] criteria about loaning money is specifically geared toward people like myself. People who are financially struggling. They do not discriminate by creed, color, or geographic area. They just help people. I’m very appreciative of that [...].”
And this commitment to increase financial inclusion and to reach those otherwise underserved –even discriminated against – is both important and relevant, considering that only one in four respondents said that they could have easily found a good alternative to the Kiva loan.
Everyone has to start somewhere, after all:
“Kiva supports minority business owners. They provide opportunities for people to grow their credit where otherwise they might not have.”
Kiva is a stepping stone for access to more capital
While the Kiva loan may fuel the start of an entrepreneur’s journey, it often does not stop there. We are humbled to know that we are able to provide opportunities for otherwise excluded individuals with our socially-underwritten, 0%-interest, zero-fee, and zero-collateral loan product. But we also have another very important goal in mind: to not only serve as the first rung in the capital access ladder, but to help our borrowers continue to climb it.
We want to empower them to seek larger and perhaps more “traditional” forms of capital after their Kiva microloan, if that’s aligned with their aspirations.
“Kiva allowed me to bridge the gap from being “new” in the eyes of financiers to one that could have proven success and a track record. Now they can trust me with the proven track record of success.”
52% of borrowers shared that they have been able to secure additional financing since receiving a Kiva loan, and 55% of borrowers attributed their Kiva loan to their ability to secure that financing.
A virtuous cycle of improved business outlook, growth, and confidence
The community-backed, crowdfunded capital that is the Kiva loan may be inherently confidence-boosting, as well. Seven in ten borrowers reported an improvement in their business confidence as a result of going through the Kiva process.
“Having the support of an organization like Kiva made me feel like I was barking up the right tree. Seeing people around the world support me made me feel like I was doing the right thing.”
Borrowers shared this sentiment of increased confidence, and perhaps suggestive of a positive feedback loop, they have also reported more favorable outlooks for their business and their ability to access additional capital. 69% of Kiva borrowers are confident about accessing capital (compared to 49% of those who did not get a Kiva loan), and three in four borrowers indicated that their business outlook has improved since engaging with Kiva.
“I really felt welcomed by the Kiva community…I don’t feel I would receive that same warmth from a different [financial] institution. I felt like [Kiva] believed in me and I don’t know if I would feel that same thing with the banks. It was nice just to be welcomed or accepted by them.”
There may be a virtuous cycle, whereby the increased business confidence that entrepreneurs gain by going through Kiva’s process helps them make decisions that lead to business growth, and this in turn grows their confidence even more.
“My business not only survived, but has grown with the help of the Kiva loan.”
Respondents who received Kiva loans were nearly twice as likely to say they’re profitable (42%) than those who didn’t receive a loan (24%).
“As a direct result of the Kiva loan, I was able to acquire more vehicles for my business in a faster manner. I was able to rapidly expand and increase my profitability, so that greatly improved my outlook for the business.”
When borrowers were asked to elaborate as to why they believed their business outlook had improved, three common themes emerged: 46% said the Kiva loan helped their business grow, 28% talked about various topics (brand visibility and impacts in their personal lives), and 20% reported being able to cover operating costs.
“Getting the loan in such a timely manner put me in a position to hire staff sooner than I would have been able to.”
“It just helps give exposure to a community that wouldn’t otherwise.”
“...my industry is back and running. Instead of looking for cash, I can focus on how we are going to survive this catastrophe.”
Three in five borrowers reported increased business income thanks to their Kiva loan, further underscoring that increased confidence and an improved business outlook often go hand in hand with more favorable financials.
Gauging the financial health of those Kiva serves
As part of our mission at Kiva to increase financial inclusion, we aim to increase the overall financial health of those we serve. Financial health encompasses:
Financial security: one’s ability to meet ongoing financial commitments
Financial resilience: one’s ability to respond to and recover from shocks
Financial control: one’s ability to feel in control of one’s finances
Financial freedom: one’s ability to meet financial goals and enjoy the things one values.
These concepts are not entirely mutually exclusive, and although we are not explicitly gauging these through this study, we have been able to acquire some insights into our borrowers’ financial health.
For example, over half of all borrowers said their ability to manage their finances has increased because of the Kiva loan, alluding to an increased sense of financial control and perhaps increased financial security, as well.
Furthermore, more than three in four borrowers reported having cash reserves to cover their normal operating expenses for an average of four and a half months. In a country in which half of all small businesses hold a cash buffer of less than one month, it’s reassuring to learn that the majority of our borrowers perceive this sense of financial security regarding their business operations.
The study also elucidated the relationship between our borrowers’ amount of savings and their confidence in their ability to access business capital. Although neither proof of business savings nor personal savings is necessary for small business owners to receive a Kiva loan, they may be hesitant to take on other, larger amounts of debt if they do not have savings to lean on.
We learned that 80% of borrowers who are ‘very confident’ about their ability to access business capital have savings vs. 53% who are ‘not confident at all.’ Black-owned businesses are more likely to have no savings (21%) compared to White- (13%) and LatinX-owned businesses (12%). This emphasizes the importance of Kiva loans as a lifeline for the BIPOC community.
Also pertinent to the discussion around financial health is the finance-related stress which our borrowers report to experience. Three in five borrowers shared that their stress levels related to their finances have decreased since receiving their Kiva loan. The study outcomes also revealed strong correlations between finance-related stress levels and income levels, emphasizing that these loans often truly serve as lifelines. 42% of low-income borrowers (<50% Area Median Income, AMI, which refers to the household income in a given region) reported that their stress levels have ‘very much improved’, compared to 29% of higher-income borrowers (>=80% AMI). Borrowers who have already paid back their Kiva loans see the largest improvement (69%), compared to 56% of ‘paying back’ borrowers.
Finally, nearly nine in ten respondents shared that they are counting on the value of their business to play a pivotal role in their long-term financial plans. Kiva borrowers’ commitment to the success of their business is closely aligned with their pursuit of financial freedom.
What we’re doing with these results
We’re already acting on some of these insights (i.e., looking into how we can let borrowers choose their monthly repayment date, which is something that respondents shared would significantly reduce their repayment burden). We’re also exploring how we can best move forward strategically when it comes to other insights like how to provide all of our borrowers with technical assistance, should they want it; how to continue to capitalize on our borrowers’ positive experience with Kiva (see pp. 27-28 in the report for more on client satisfaction); and how to engage borrowers as Kiva ambassadors, among other things.
At Kiva US, we look forward to continuing to support our borrowers in ways that go beyond the loan. We are deeply grateful for partnerships such as this one with 60dB which enable us to hear directly from those whose opinions and aspirations mean the most to us, while also helping us identify where and how we can scale our impact. After all, with only 12 years into the US program and $60M in microloan disbursements, we’re just getting started.
We would like to extend our gratitude once more to the 60dB team for their expertise, collaboration and insights on impact data that matter.
We would also like to express our deep appreciation for our Kiva Hub partners – local organizations nationwide who support small businesses and foster economic development and financial inclusion in their communities. Their commitment to increasing access to capital to those who need it most inspires us, and we are grateful for their partnership and dedication to Kiva stakeholders. The disaggregation of borrower insights (Hub borrowers v. Non-Hub borrowers) in the study highlights just how impactful and vital to our mission our 38 Hub partners are to the success of Kiva US.
Read the entire 60dB report here, or see some of the key results here.