In light of the current discussions about a possible bubble in microfinance and my recent acceptance to be a Kiva Fellow, working with Asociacion Arariwa in Peru, I started thinking more about trust and personal connections.
- One example is a recent WSJ journal article about women in Ramnagar, an Indian city using microfinance loans for consumption instead of a business, after lying on their loan applications.
- In contrast, I remember listening to a story on NPR about a lender to an Amish community who has never seen a default. He knows and visits all of his customers in person.
The credit crisis occurred in part because people misstated (or didn’t state) their ability to pay back and mortgage brokers were incentivized to hide this info. But a big problem was that lenders didn’t know their customers. Loans were anonymized and packaged with other loans through intermediaries to become even more anonymous (if that’s even possible).
These examples illustrate the value of trust and knowing your connections. Specifically for me, they illustrate the value of Kiva Fellows and Microfinance Loan Officers, who are on the ground interviewing entrepreneurs, checking loans and ensuring that people are using the loan for what they said in their application. But more broadly, these stories show the importance of knowing your connections – online and offline.
In my Kiva Fellows interview, I learned that Kiva Fellows have uncovered instances of fraud, inflated loan amounts and organizations using some part of the loans for operational expenses instead of loaning the money directly to an entrepreneur as they are supposed to do. Kiva Fellows are Kiva’s eyes and ears and hands on the ground. They foster Kiva’s commitment to transparency. Here is one unfortunate example from the Kiva website – MIFEX Ecuador. The only connection between the lender and borrower is through profiles and journal updates. Through this writing, Kiva Fellows play a critical role in connecting people in a personal way.
I asked Zack Turner, the Kiva Fellows program coordinator (also a Kiva Fellow in Kenya) about quantifying the value of the Kiva Fellows program. He mentioned
“… the stat that we do know is that for each time a Kiva lender receives a journal update written by a Kiva Fellow they on average turn around and invest another $50 into Kiva. So you could estimate the number of journals and the impact that you received. During my fellowship I added up the number of lenders that received a journal from my work and the total number of dollars in loans that represented.
Also, we have a deliverable called “Cost of Kiva” in which a fellow analyzes the MFI’s operational cost for working with Kiva. We believe that part of the Kiva Fellows ROI is when the “Cost of Kiva” is reduced.”
So far, there are have more than 43,000 journal updates on the Kiva website. Multiplied by $50, that is $2,150,000. I am not yet in a position to dig into these numbers and calculate my own Kiva Fellows ROI, but when I am, I fully intend to explore this further.
Of course, there are other factors involved in Kiva’s growth. However, I believe the value of the Kiva Fellows program is even higher and much of it is probably not contained in tangible ROI in terms of loans or donations given. The personal connection has an intangible value that adds to Kiva’s brand.
As an online marketing professional, I am fully convinced by the value of the internet to spread, connect, and educate. But even I (a gadget and google fanatic) know that trust mainly comes from personal connections and experiences offline.
So I am looking forward to trading in my wifi for one-to-one interviews with entrepreneurs (like the lender to the Amish) to help build trust for Kiva.
Please join me for a Going Away / Kiva Support BBQ on Saturday September 12th at my place in Fort Greene or support my Kiva Fellowship.
All photos courtesy of Kiva.