1.
Reaching
the
Poorest
of
the
Poor
Abstract:
Kiva.org
revolutionized
the
field
of
microfinance
by
introducing
an
online
domain
to
allow
micro-­‐lending
on
a
global
scale,
in
an
engaging
and
interactive
manner,
on
a
person-­‐to-­‐person
basis.
Yet,
microfinance
has
been
criticized
for
its
inability
to
reach
the
poorest
populations,
which
arguable
need
such
financing
mechanisms
most.
Kiva
and
its
partner
MFIs
are
subject
to
this
criticism,
as
it
falls
short
in
achieving
its
mission
to
“alleviate
poverty”,
by
missing
those
at
the
bottom.
Kiva-­‐Didi.org
(Didi
~
sister
in
Hindi)
–
a
proposed
sister
website
to
Kiva.org,
could
bridge
the
gap
in
reaching
these
often
neglected
and
marginalized
populations.
By
leveraging
Kiva’s
existing
and
expanding
lender
base,
MFI
partnerships,
and
entrepreneurs
business
owners
(borrowers),
Kiva-­‐Didi
will
use
a
similar
platform
to
connect
users
to
the
poorest
populations,
allowing
for
an
easy
method
to
fund
essential,
non-­‐financial
support
that
target
the
root
issues
(access
to
food,
health,
education
and
employment)
that
plague
the
poorest
populations.
The
end
objective
being
that
those
at
the
bottom
can
“graduate”
to
a
level
where
accessing
microcredit
for
socioeconomic
sustainability
is
a
realistic
and
feasible
endeavor.
T s e l i
M o h a m m e d
C r e a t i n g
M i c r o f i n a n c e
I n s t i t u t i o n s
a n d
P a r t n e r s h i p s
H e l l e r
S c h o o l
f o r
S o c i a l
P o l i c y
a n d
M a n a g e m e n t
|
B r a n d e i s
U n i v e r s i t y

2. INTRODUCTION
Throughout history there have been many instances and iterations of
formal and informal microfinance institutions across varying cultures and
societies. Money-lending (or some form of currency) for later repayment, with or
without interest, is at the heart of daily economic transactions at differing levels
worldwide. In any such agreement, there is some mutual benefit to both the
lender and borrower, financial or otherwise.
“Some were born out of the spirit of mutual aid, some out of a search for profit,
and some out of a philosophy of charity that emphasizes self-reliance.”1
Microfinance institutions provide unemployed or low-income persons
(most often women) in resource poor settings, who have limited access to basic
education and avenues for economic gain, with financial services in credit,
savings and insurance1, with the end goal of self-sufficiency. The majority of
today’s microfinance institutions employ a credit-led approach in meeting its
mission of serving the poor. Credit-led Microfinance is a formal agreement
made between one party and another of lesser socioeconomic means, with the
former providing small loan(s) to the latter for later repayment. It can be
conducted in a for-profit (interest with repayment) or not-for-profit basis.1
Yet, though the target populations of credit-led microfinance institutions
(MFIs) are from low-income settings, often MFIs are not able to viably serve the
poorest communities – “those at the very bottom of the socioeconomic scale.”2
“Even in the case of MFIs that focus on reaching very poor clients, there are
substantial numbers of people who are too poor to participate”2
Criticisms such as this are grounded in the findings that more often, MFIs simply
cannot afford to make loans to the poorest populations, for they have no
income source and are least likely to be able to repay, deeming them too risky.
Additionally these populations are simply not in a position to incur debt of any
kind, for such loans would actually make them more vulnerable, as it would be
used for consumption (basic survival) rather than towards something for
economic sustainability. Furthermore, the sociocultural segregation that goes
hand in hand with this level of poverty proves to be a very real barrier, as others,
not quite as poor, may not be willing to account for their added risk.
“These choices by clients, borrower groups, and MFIs are generally sound…the
result is that MFIs are limited in their ability to serve the poorest—those who need
more help than any other group…”2
1
Rodman,
D.
Early
History
of
Microfinance.
DRAFT
Chapters
3
&
7.
CGAP.
Focus
Note:
34.
Graduating
the
Poor
into
Microfinance:
Linking
Safety
Net
and
Financial
Institutions.
2006.
2
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
2

3. Exclusion of the poorest, whether it is by their choice not to incur debt, or
by their perceived “too risky” label, is a reality in the arena in microcredit. Kiva
and their MFI partners are no exception to this reality, as they serve low income,
entrepreneurial populations, who have the ability to pay back their loans.
To better reach the poorest populations, microcredit is not necessarily the
answer. “Safety Nets”, described as programs that tackle root issues, providing
non-financial support such as food aid, guaranteed employment, financial
training and/or basic health services2, could be the first step in serving those
caught in the vicious cycle of extreme poverty. Such social strategies are often
linked to financial services, so this first step can lead to beneficial relationships
with MFIs that are in a position to serve their needs, as they “graduate” to the
next level of economic sustainability.
CGAP, a well-respected policy and research center focusing on financial
accessibility to the world’s poor, highlights this notion in its 11-step guide, Key
Principles of Microfinance3:
“Microcredit is not appropriate for everyone or every situation. The destitute and
hungry who have no income or means of repayment need other forms of support
before they can make use of loans. In many cases, small grants, infrastructure
improvements, employment and training programs, and other non-financial
services may be more appropriate tools for poverty alleviation.”
Kiva.org has been hailed a revolution in the field of microcredit, with its
introduction of an innovative, online platform to allow micro-lending on a global
scale, in an engaging and interactive manner, on a person-to-person basis.
Kiva’s unique micro-lending system places it in an inimitable position, as it can
leverage its brand and reputation, established user base, and distinctive
relationships with various field partners (MFIs) to extend its reach to the poorest
of the global poor.
This paper proposes that Kiva institutes Kiva-Didi.org4, a sister website to
Kiva.org. Kivia-Didi will target the poorest populations globally, those too poor to
access conventional microfinance. Leveraging Kiva’s existing and expanding
lenders base, field partners (MFIs), and borrowers (small business owners), each
will play an important role in the design and implementation of Kiva-Didi.
“The microfinance sector needs to explore new approaches if it is to extend the
impact of its services to the poorest…leave preconceptions behind, start talking
to each other more, and engage in mutually beneficial, collaborative efforts.”2
3
Consultative
Group
to
Assist
the
Poor.
Key
Principles
of
Microfinance:
6.
Microfinance
is
not
always
the
answer.
Retrieved
from:
http://www.cgap.org/p/site/c/template.rc/1.9.2747/
4
Didi
(n)
~
Hindi
meaning
sister
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
3

4. ABOUT KIVA
Kiva.org was launched in October 2005 as a non-profit organization with a
simple mission: “connect people through lending to alleviate poverty.”5
Consisting of just seven Ugandan entrepreneurs needing loans, with close friends
and family of co-founders Matt Flannery and Jessica Jackley as the initial lender
base, Kiva’s beta launch proved to be a success. Since its inception, in its
relatively short existence, Kiva has received much publicity, minor criticisms, and
many nominations and awards in innovation, charity, and socioeconomic
entrepreneurship6. Its rapid growth and success can be attributed to its unique
platform and forward-thinking, innovative approach to microcredit and social
good. Its thriving formula, which combines advances in technology and social
media, knowledgeable staff and voluntary labor, and on-the-ground field
partners (MFIs), achieves the perception of person-to-person lending, which has
propelled Kiva.org to the forefront of the microcredit field.
"If you look at Kiva.org, people with a very modest amount of money can make a
huge positive impact all around the world… Through Kiva.org, people around the
world can become micro-bankers to developing world entrepreneurs, who have
their own ideas..." ~ President Bill Clinton
About Field Partners
“We view our ideal portfolio to be a combination of very established and more
commercial MFIs and less established MFIs. Our ability to take risks and dip into
the long tail is what differentiates us from the microfinance investment funds.7
Kiva has developed a sustainable partner base by targeting “Tier 2-4”
MFIs, which it describes as non-commercial MFIs that seek to benefit from the
partnership by gaining “access to favorable debt and creditworthiness”7, and
increasing their reputation and clientele base. By targeting these MFIs, Kiva is
tapping into a large pool of MFIs that work in wide variety of countries,
communities and cultures. This mutually beneficial partnership is a key
component in Kiva’s strategic operations, allowing for an on-the-ground
approach to achieving its mission.
Kiva maintains a high level of transparency between its lenders and field
partners, and uses a sophisticated and thorough system to rank8 (1-5 star rating)
its field partners, allowing their lender base (users) the ability to make a more
informed loan decision.
5
Kiva.
About
Us.
Retrieved
from:
http://www.kiva.org/about
6
Kiva.
About:
History:
Timeline.
Retrieved
from:
http://www.kiva.org/about/history
7
Flannery,
M.
Kiva
and
the
Birth
of
Person-­‐to-­‐Person
Microfinance.
Innovations.
MITPress.
Winter&
Spring
2007.
Kiva.
Field
Partners.
Retrieved
from:
http://www.kiva.org/partners
8
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
4

5. About Borrowers
“Kiva's goal is to reduce poverty in developing countries by giving entrepreneurs
the ability to build their businesses through flexible loans.”9
Kiva.org provides an online platform to connect people worldwide,
allowing a unique vision into the lives of struggling small business owners in the
developing world, who lack access to traditional banking systems. Current
borrowers’ small businesses most often fall into the following categories:
• Retail: small generals stores to specific merchandizing (bikes, footwear, etc.)
• Food: small bakeries and restaurants
• Agriculture: crops, livestock and farming
• Transportation: taxis, delivery and moving services
About Lenders
“Our user base was growing faster than we expected and we saw little evidence
that our users wanted to earn interest on their loans. In fact, many considered
themselves donors…”10
In evaluating their lender base, though Kiva founders emphasized their
services as distinctly different from donations/charity, Kiva discovered that their
lenders thought of themselves more as donors9, rather than investors, and did
not want or expect interest with their loan repayment. Even when funds are
repaid (interest free) in full, they often choose to re-loan to another borrower,
rather than withdraw it from the system.
Kiva allows average persons, who may have little or no awareness or prior
knowledge of microfinance and/or microcredit, to contribute small loans (micro-
loans, relative to loans given by MFIs) to another person of lower financial
standings, in a secure, user-friendly manner. The simple to use platform has
gained traction over its short lifespan, as its lender base continues to expand to
through the developed world.
9
Kiva.
Press
Releases.
Retrieved
from:
http://www.kiva.org/press/releases/release_20051012
Flannery,
M.
Kiva
at
Four.
Innovations.
MITPress.
2009.
10
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
5

6. How Kiva.org Works
“Kiva lenders, we mean those individuals who lend money on the site; borrowers
are the entrepreneurs who receive users’ loans channeled through our field
partners - local micro-finance institutions (MFIs) that Kiva enrolls throughout the
developing world.”10
Kiva’s approach to person-to-person micro-lending can be broken up into
a number of key steps. Basically, an entrepreneur (borrower) is given a loan by a
local MFI (one of Kiva’s field partners). A profile the borrower, including pictures
and background story and full loan amount, is posted to the website. Kiva’s
registered users (lenders) make loans to borrower(s) of their choosing in $25
increments (choosing to loan full or partial amount of borrower’s loan). Users’
funds are sent to the field partner. Borrowers repay field partners, in accordance
with loan terms; partners send funds to Kiva; Kiva distribute funds back to the
appropriate lenders; lends re-loan, withdraw or donate funds.
Consider the flowchart11 below to better understand the process:
11
Kiva.
About:
How
Kiva
Works.
Retrieved
from:
http://www.kiva.org/about/how
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
6

7. KIVA-DIDI.ORG: Reaching the Poorest of the Poor
(proposed sister website to Kiva.org)
Given the criticism that most MFIs are not able to reach the poorest
populations, and that Kiva and their partner MFIs, definitively fall into this
category – Kiva-Didi.org will be a bridge to reaching this overlooked population.
Leveraging the existing and growing user base and MFI relationships nurtured
and maintained by Kiva, Kiva-Didi will provide a similar platform to engage and
invest in the socioeconomic growth of the poorest populations in the
communities in which their field partners and entrepreneurs (borrowers) work.
Kiva’s mission to “connect people through lending to alleviate poverty”12, can
be extended with introduction of this “sister site.”
Kiva-Didi’s objective is to specifically target the root problems of people
at the bottom of the economic ladder, and mitigate those problems by
leveraging Kiva’s relationships with its lenders base, field partners and borrowers.
In doing so, Kiva-Didi will support a systemized, staged process to guide,
empower and aid individuals and their families that live in destitution, to be able
to graduate to become microfinance clients with Kiva.org (Kiva borrower), thus
bringing them one step close to socioeconomic sustainability.
Mission of Kiva-Didi.org
Graduate the poorest individuals at the bottom of the
socioeconomic ladder to become microcredit clients by
the provision of essential non-financial support, in
collaboration with local entrepreneurs and MFIs, using a
dynamic, online platform to connect people globally.
12
Kiva.
About
Us.
Retrieved
from:
http://www.kiva.org/about
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
7

8. To accomplish this, Kiva-Didi.org will be an online platform in which users
(currently Kiva.org lenders) will be given the opportunity to provide non-financial
support to identified individuals (and their families) in five main categories:
Training & Health &
Food Education Medicine Guaranteed
Supplies Livestock Employment
Note: Potential icons to represent five categories on Kiva-Didi.org
General examples of support:
• Food Supplies: fund rice & grain for a month for family of eight in Chad
• Livestock: fund purchase of a milk-producing goat for farmer in Somalia
• Training & Education: fund towards girl’s continued education for year in Peru
• Health & Medicine: fund malaria medication for a year for family in Congo
• Guaranteed Employment: fund towards woman’s monthly salary in Ukraine
Kiva-Didi Recipients
The first step in implementing this system is the identification of Kiva-Didi’s
target population. In collaboration with Kiva volunteers, field partners (MFI
partners), and entrepreneurs (Kiva borrowers), all of who work on-the-ground in
with or near poverty stricken communities, individuals that match the following
criteria will be chosen for piloted program:
• Too poor to use or access the services (microcredit) offered by Kiva’s field
partners, working in their community.
• Interest in non-financial support geared towards being able to use
microcredit for economic sustainability.
• Specific, self-identified needs that can be translated into viable option for
Kiva lenders to eventually fund (background story, pictures, video), which will
lead to use of microcredit.
• Interest and time to commit to learning more about how microcredit and
financial guidance can lead to economic sustainability.
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
8

9. Role of Partners MFIs (Kiva.org Field Partners)
Kiva’s established field partners, those which have high ratings (4-5 stars) that
have proven to be less risky, trustworthy and have the time and capital to invest
in Kiva-Didi, would be the MFIs chosen to collaborate in this endeavor. In
addition to identifying any individuals that match the above criteria, the field
partners would have an arm of its operations that work solely with these
individuals, and would be responsible for administering weekly/monthly trainings
in financial undertakings (at the appropriate stage in each individual’s level),
such as savings and loan management.
Field partners would then be in the best position to know when the
recipients who have benefited from their specified non-financial support, are
ready to “graduate” to the accessing microcredit through them, and allowing
them one step closer to poverty alleviation.
Role of Users (Kiva.org Lenders)
Given that the majority of Kiva lenders thinks of themselves as donors and
is undoubtedly interested in aiding poverty alleviation and economic
sustainability for the poor, active lenders may easily transition to also become
Kiva-Didi users, choosing who individuals they want to fund based on their stories
and connection via Kiva-Didi.org similarly engaging and interactive platform.
Role of Entrepreneurs (Kiva.org Borrowers)
In addition to identifying individuals that can be recipients on Kiva-
Didi.org, Kiva.org’s borrowers are in a particularly useful position, as a
entrepreneur in a growing small business, can present specific recipients with
employment opportunities, is available, again depending on the stage at which
recipients are in the graduate process.
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
9

10. How Kiva-Didi Works
Kiva-Didi’s innovative, social strategy will be collaborative and mutually
beneficial to all parties involved. Though there is a level of risk and trust involved,
Kiva-Didi is dedicated to maintaining transparency and accountability
throughout its operations and partnerships. The following is an overview of how
Kiva-Didi.org may operate:
STAGE 1:
• Identified Recipient(s)’ background story and specified non-financial
support (5 categories) requested is posted to Kiva-Didi.org
• Kiva-Didi Users (registered lenders of Kiva.org) choose Recipient(s) and
the specific non-financial support they would like to fund.
• Funds are sent to Field Partner.
• Field Partner distributes the non-financial support to Recipient.
STAGE 2:
• Field Partners begin weekly trainings on financial undertakings.
• Recipient secures guaranteed employment from Entrepreneurs.
• Recipients' progress updated on Kiva-Didi.org, including new non-
financial requests (guaranteed employment).
STAGE 3:
• Field Partners continue financial training on monthly basis.
• Recipients’ progress evaluated and when ready, graduates to receive
loan from Field Partner.
• Transition to Kiva.org as Borrower.
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
10

11. Challenges
To pilot Kiva-Didi.org and accomplish its objectives, there will be many
hurdles to overcome. The initial capital, time and vested efforts necessary to
pilot Kiva-Didi in terms of its online platform, may not be very much, but the steps
necessary to collaborate get the buy-in of its field partners and entrepreneurs
involves much time and commitment. The process involves a high level of risk, as
there is no assurance or time-allotment guarantee that the non-financial support
provided to the poorest populations will be enough to over their daily hardships,
demographic impediments (geographic location, weather, etc.) and/or
sociocultural barriers.
Most significant to the success of piloting Kiva-Didi.org is open and clear
communication and collaboration, with distinct objectives and benchmarks, to
monitor, measure and evaluate outcomes, in a flexible and malleable
environment that can accommodate and adapt to the contextual settings of
recipients and partners (field partners and entrepreneurs).
Benefits:
In gaining buy-in from all parties that will be involved in this piloted system,
the demonstrated benefits to each if committed to its implementation, despite
the admitted risks and challenges, are highlighted below.
Kiva:
• Expand reach to further its mission of to alleviate poverty.
• Requires little investment to develop and launch Kiva-Didi.org, a sister site
to Kiva.org, that will be the online platform for the pilot.
• Leverage systems already in place – on-the-ground volunteers and field
partners, and growing lender base.
• Additional individuals for lenders to access, given the seasonal flow and
spikes in demand from lenders13.
Recipients:
• Empowerment, motivation and means out of poverty cycle.
• Self-specified non-financial support and link to financial training.
Entrepreneurs (Kiva Borrowers):
• Opportunity to expand small business with subsidized labor.
• Invest in own community and stimulate economy.
13
Flannery,
M.
Kiva
at
Four.
Innovations.
MITPress.
2009.
Pgs
30-­‐31.
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
11

12. Field Partners:
• First link to an expanded network of clients.
• Promotion and further opportunity for reputation and brand building.
• Expand services (financial training) and expertise.
• Further relationship and partnership with Kiva and affiliates.
Lenders/Users:
• Expanded network of individuals from which to choose.
• Gain understanding of barriers faced by poorest populations.
• Knowledge of progress of individuals over time.
Marketing and Communications:
In launching Kiva-Didi.org there are several ways that Kiva can publicize it
to gain traction and to jump-start the system. For example:
• Do a Press Release detailing Kiva-Didi.org – purpose, who it targets, how it
works, why it is important and how it aligns with its overall mission.
• Share the press release with all registered users (lender base), highlighting
that the site is accessible via their Kiva.org’s user account.
• Link to Kiva-Didi.org from Kiva.org in on every page of site, including the
opportunity to make donation to another individual when a loan is made.
• Feature a “graduate-to-be” of the month on Kiva.org
SUMMARY
Kiva’s commitment to economic sustainability for poverty alleviation,
through person-to-person micro-lending; its maintained partnerships with highly
ranked, growing MFIs; network of small business owners; and its dynamic, online
platform, are key components already in place, which can be leveraged to
pilot Kiva-Didi.org.
Given the criticisms of MFIs in reaching the poorest of the poor, Kiva is in a
unique position to bridge this overt gap in social service. As Kiva.org was to
microfinance, Kiva-Didi.org could be an innovative and, most importantly,
economically sustainable break-through in meeting this global need.
KIVA-­‐DIDI.ORG:
REACHING
THE
POOREST
OF
THE
POOR
12