> Lenders and Givers: Analyzing Kiva and Positioning GlobalGiving <

Kiva has experienced a tremendous amount of success in the International Development space as a progressive organization wrapped around a Web 2.0 tool that facilitates microfinance. The organization achieved success in three very different ways: 

1. By Deliberation and Design – Strategic choices and decisions made by the organization that provided it with a competitive advantage and positioned it for success. 
2. Opportunity and Chance – Choices and decisions that were made out of convenience, without much deliberation or by default, and which were later recognized (and even capitalized upon) as strategic advantages.
3. By Speculation and Hypothesis – The less obvious, yet potentially relevant, choices and decisions that may be contributing to the success of the organization, though cannot yet be “confirmed”. 

By Deliberation and Design 

Giving vs. Lending: The “lender” experiences a high-level of engagement throughout their experience with Kiva since the completion of a cycle is not just selecting a project and contributing funds, it is also awaiting full repayment. This repayment can then be “cashed-out” or loaned again, extending the experience even further. As Kiva founder Max Flannery says, “So it’s really a situation where this loan that occurs, it’s sticky. When you loan someone money, you are waiting to get paid back. So it’s a sustained connection, and it can create more of a connection than donating.” 

Lending vs. Lending with Interest: Kiva does not put the “lender” in a position to accept or collect interest from the loan recipient. This keeps the focus of the loan on the “giving” experience as opposed to introducing some extrinsic incentive for the “donor” (such as interest collected driving income generation). Note: MicroPlace (eBay’s foray allowing for the securitization of loans) was launched in October 2007 and it is too early to evaluate its position and impact on the marketplace. The standards for “lender” satisfaction are therefore lowered (at least with respect to the financial realm), and the experience is focused on giving, empowering, and then collecting (which is arguably the clearest indicator of the loan recipient’s success). 

Kiva’s Cost of Capital vs. Industry Cost of Capital: Kiva is at 2% vs. an industry standard of 12% and at some points creeping into 30% (for struggling MFI’s). This compares favorably with GlobalGiving’s (target?) 10% hurdle rate. Kiva is also considering the introduction of a voluntary donation by lenders to cover transaction fees to further subsidize the overall process. It makes sense for mFI’s to do business with Kiva because their costs are so low. 

By Opportunity and Chance 

California vs. Washington DC: Kiva was able to establish strong connections with Bay Area stalwarts such as PayPal (free credit card processing, which it does only for Kiva), MySpace, Google (free advertising), eBay and YouTube (40 million impressions a month driving 15% of Kiva site visitors). In addition, the implications and stigmas (a potentially harsh term) attached to both cities dramatically affect the perceptions and types of partnerships available. Beyond the types of cultures and organizations that dominate each respective geographic location, this is most clearly evidenced in the differences between the types of media coverage one will secure (progressive, newsworthy blogger/grassroots momentum in California vs. traditional media outlet coverage, such as the Washington Post, in Washington DC). Kiva’s promotion through volunteer channels and through its informal network of bloggers and promoters cannot be understated. Though Kiva deserves substantial credit for optimizing its network, the windfall takes strong root in the culture and spirit surrounding Kiva’s founding location. 

2004 vs. 2005: Kiva was started in late 2004 as a side project. It was a progressive concept at the forefront of the Web 2.0 revolution. What could not be predicted was the whirlwind of support that microcredit and microfinance would receive over the course of the 18-24 months that followed, from the UN declaring 2005 as “The Year of Microcredit”, to the Nobel Foundation recognizing the Grameen Bank and its founder, Muhammad Yunus with the Nobel Peace Prize in 2006. Kiva was optimally positioned to benefit from the tremendous attention given to the industry overall. Kiva was also optimally positioned to provide individuals in the US with a convenient and accessible outlet through which to explore the international “phenomenon” of microfinance. 

By Speculation and Hypothesis 

Structured Payment vs. Flexible Payment: Kiva divides all donations into $25 “shares”. As opposed to leaving the options open to the “givers” as to the amount, Kiva has quantified and branded its increments. There is a positive feel of accomplishment when a Kiva visitor lends the equivalent of a “share”, as opposed to a platform that enables an individual to give at absolutely any level which implies flexibility, but compromises on that feeling of accomplishment. Think personally, would you feel better about lending two full shares, or lending someone $50? 

Translating Kiva’s Success 

We took the above approach to analyzing Kiva’s success to show the different types of factors, controllable and uncontrollable, that drive an organization’s success. Some of Kiva’s success was dictated by its strategic decisions, others were dictated by opportunities and how Kiva capitalized on what was presented, and some were altogether impossible to identify and account for—just luck. All of these factors made Kiva the right idea, in the right place at the right time—a scenario that is almost impossible to replicate

If one is to glean a tactical lesson from Kiva, the focus should be on Kiva’s ability to create intimacy and connections—creating community. In an online case study titled “Destruction Equals Production; The Kiva Case Study”, the author highlights the creation of community as the core principle of the organization’s success. Community is not simply defined as the interaction between the lender and the recipient; it is also about relationships between the lender and Kiva, and between all of the lenders who have bought shares to fund a particular project or entrepreneur. By employing tactics that make the Kiva world smaller, Kiva has managed to make everyone involved in a Kiva transaction feel like an integral part of the equation. But we feel strongly that replicating Kiva’s model (from introducing lending products to formally developing an army of advocates and evangelists) is only one option for success, and a short-term one at that. Real success can be found in replicating Kiva’s approach and not its activities. A more thorough engagement of one’s providers, partners and donors will help the organization identify obvious ways to create deeper and more meaningful relationships with its donors.  

Our initial research indicates an avenue GlobalGiving should evaluate further. Kiva embraced its position as an enabler of microfinance activities. In a similar fashion, GlobalGiving should recognize itself as a unique player in the international development space and the perfect complement to Kiva’s mission. Kiva has established itself as the premier platform for supporting microenterprises that drive self-sustainability. Such enterprises are just one part of the overall solution (and enough critical research exists to even question the success and scalability of social enterprises and micro-entrepreneurs). There still exists a tremendous need for contributions without stipulations and without expectation for payback—not everything is a business, and not every solution generates (nor should generate) a financial return. Purely funding private, micro-enterprises will not ensure that the total of the world’s problems are solved. Some (even a disproportionately large percentage) of the issues will require donations and charitable contributions. I

It is within this space, and as a key and crucial player in the total solution, the GlobalGiving can grasp its fullest potential. Developing and promoting a holistic model that highlights this interplay between giving and lending will take GlobalGiving farther than any tactical replication of Kiva’s model can possibly do.