No more cash, please, we're drowning in it
Kiva has had an enviable default rate of just 0.3 per cent
TINA PITTAWAY | October 25, 2007 |
The microcredit website kiva.org was hit with a credit crunch of an unusual kind in early September. It ran out of entrepreneurs to loan money to. Launched two years ago, Kiva lists profiles of struggling entrepreneurs from around the world; anyone with an email address can pick a project and offer up a loan. This fall, in what is surely a marketer's dream, Bill Clinton gave the site a mention in his new book, Giving: How Each One of Us Can Change the World. And on Sept. 4, the site's co-founders, Matt and Jessica Flannery, joined Clinton on The Oprah Winfrey Show. Oprah declared the site "addictive," and clearly her viewers agreed. Over the next two days 8,455 new users signed up, raising US$298,000 in new loans that helped out everyone from a goat farmer in Ghana to a seamstress in Guatemala.
There was one catch: very soon, virtually every borrower had his or her loan 100 per cent financed. Visitors to the site discovered there were no more projects to fund. This was despite a $25 cap on the amount funders could loan to individual entrepreneurs — which the site had placed, anticipating a post-Oprah avalanche.
In the weeks since, the site has listed dozens more projects, but the cap is still in place. The slow, steady approach is partly a reflection of Kiva's diligence, says a spokesperson. "We have 62 microcredit partners around the world," explains Fiona Ramsey. "And we're working hard to only fund individuals who have a solid plan and more than one source of income for their projects." Kiva's partners assess each case, she says, "so no one winds up with more money than they need, or in a position where they can't repay."
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The approach has worked. Since 2005, Kiva's users have loaned more than $13 million, and the default rate is an enviable 0.3 per cent. "It's a little mind-blowing when we think of what we could have brought in if we'd had more businesses listed," says Ramsey. The cap will now be lifted and reinstated, as needed, depending on traffic on the site. It's a gamble Kiva hopes won't break the bank.
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