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Kiva Chronicles
Follow the real-life story of a couple who decided to change the world, one loan at a time.
2008-10-09
Moral Hazard with Ducks
MFIs around the globe are being asked to provide "more than credit" to their clients. Funders and industry skeptics, more than ever, question the value in just providing banking services to the poor. I'm not writing here to weigh in on the veracity of that critique. However, today I got some insight into the difficulty MFIs face in mixing mentoring with credit.
I sat down with the General Manager of an amazing MFI here in Phnom Penh. I posed the question in the form of a challenge.
"Do you provide mentoring to the poor, or *just* banking services?" I asked.
He looked slightly troubled in replying that they do not discriminate between business activities and do not advise about the success or failure of a particular business venture.
A few years ago, they used to encourage borrowers to pursue certain business niches when there was a perceived opportunity. In one village, a credit officer advised a woman to get into the duck raising business, a particularly profitable one at the time. Duck is quite a specialty in Cambodia. The woman used her entire loan to purchase ducklings. A few months later, the ducks got sick and quickly died. Out of luck, the woman had little chance to repay. At the advice of the credit officer, she gambled away one of her only chances to lift herself out of poverty.
The credit officer was devastated, the woman protested, and the MFI forgave her loan repayment. Since that time, they have stayed out of the mentoring business and leave that to a separate NGO in the region. The story illustrates one of the dangers in providing both advice and credit tied to that advice. Not to say that MFIs shouldn't be mentors, but I thought the story illustrated a tension I hadn't pondered before.
I sat down with the General Manager of an amazing MFI here in Phnom Penh. I posed the question in the form of a challenge.
"Do you provide mentoring to the poor, or *just* banking services?" I asked.
He looked slightly troubled in replying that they do not discriminate between business activities and do not advise about the success or failure of a particular business venture.
A few years ago, they used to encourage borrowers to pursue certain business niches when there was a perceived opportunity. In one village, a credit officer advised a woman to get into the duck raising business, a particularly profitable one at the time. Duck is quite a specialty in Cambodia. The woman used her entire loan to purchase ducklings. A few months later, the ducks got sick and quickly died. Out of luck, the woman had little chance to repay. At the advice of the credit officer, she gambled away one of her only chances to lift herself out of poverty.
The credit officer was devastated, the woman protested, and the MFI forgave her loan repayment. Since that time, they have stayed out of the mentoring business and leave that to a separate NGO in the region. The story illustrates one of the dangers in providing both advice and credit tied to that advice. Not to say that MFIs shouldn't be mentors, but I thought the story illustrated a tension I hadn't pondered before.
2008-10-05
Now in Singapore
I'm on a flight again. We land in Singapore in a couple of hours. It will be my first time in Asia...almost.
One time I touched Asia by proxy -- in a boat in Istanbul. It was the summer of 1999, I had just finished my semester in France as a junior at Stanford. Paris was hot, and full of fanny-packed tourists. My time was up with my host family. I moved across town to my friend Larry's one room maid's quarters on the rue Marboef. It was hot and miserable, no bed, just some random books from Larry's shelf.
Larry's dad lived in Antibes. We took the train down there and sat by the ocean for two weeks, and then we got bored. Restless, we got in to his Dad's Mitsubishi Nimbus station wagon and drove to Italy. Italy was fun, we camped outside of Rome for a few days and then drove across the country. Pretty soon though we got bored and and set the goal to get to Asia. We needed to be back in 2 weeks. We took the ferry to Greece and drove the windy road to Istanbul, got on a boat and literally bumped into Asia. We never did step off that boat however. Instead, we went back to Europe and had to pretty much circle right back home to France.
I'm pretty full of anticipation to see something entirely new. I'm gonna be speaking at a Retail Banking conference in Singapore which picked up my ride out to Asia. For someone that's never been to Asia, and has never taken an econ or finance class in my life, this should be interesting. I've made the mistake several times of not wearing suits when I really should. Silicon Valley entrepreneurs often do that and get away with it, however a banking conference in Singapore is probably not the best venue to experiment.
Next I'm off to Cambodia for 7 days to meet with our field partners and borrowers in Phnomh Penh. 2 years ago at Kiva, when we actually started to hire people, we made the decision that every employee goes to visit a field partner at least once a year. The idea was to create an environment where everyone feels connected to those we serve -- the lenders, borrowers and the field partners. Without getting out of SF once a year, it would be hard to create that environment. Now that we are 35 employees, the benefit is alive and well at Kiva and proving to be huge in terms of our company's culture.
Right now, I'm putting my electronic devices away...
One time I touched Asia by proxy -- in a boat in Istanbul. It was the summer of 1999, I had just finished my semester in France as a junior at Stanford. Paris was hot, and full of fanny-packed tourists. My time was up with my host family. I moved across town to my friend Larry's one room maid's quarters on the rue Marboef. It was hot and miserable, no bed, just some random books from Larry's shelf.
Larry's dad lived in Antibes. We took the train down there and sat by the ocean for two weeks, and then we got bored. Restless, we got in to his Dad's Mitsubishi Nimbus station wagon and drove to Italy. Italy was fun, we camped outside of Rome for a few days and then drove across the country. Pretty soon though we got bored and and set the goal to get to Asia. We needed to be back in 2 weeks. We took the ferry to Greece and drove the windy road to Istanbul, got on a boat and literally bumped into Asia. We never did step off that boat however. Instead, we went back to Europe and had to pretty much circle right back home to France.
I'm pretty full of anticipation to see something entirely new. I'm gonna be speaking at a Retail Banking conference in Singapore which picked up my ride out to Asia. For someone that's never been to Asia, and has never taken an econ or finance class in my life, this should be interesting. I've made the mistake several times of not wearing suits when I really should. Silicon Valley entrepreneurs often do that and get away with it, however a banking conference in Singapore is probably not the best venue to experiment.
Next I'm off to Cambodia for 7 days to meet with our field partners and borrowers in Phnomh Penh. 2 years ago at Kiva, when we actually started to hire people, we made the decision that every employee goes to visit a field partner at least once a year. The idea was to create an environment where everyone feels connected to those we serve -- the lenders, borrowers and the field partners. Without getting out of SF once a year, it would be hard to create that environment. Now that we are 35 employees, the benefit is alive and well at Kiva and proving to be huge in terms of our company's culture.
Right now, I'm putting my electronic devices away...
2008-09-20
Kiva, AMEX
One thing we've worked pretty hard on is keeping a high "leverage ratio". By that, I mean the ratio between our orgs expenses and the amount our users send in loans to the low-income entrepreneurs on the site. Traditionally, for every dollar spent on our infrastructure, our users lend out 8.
We have the chance right now to get the biggest grant in our short history. $1.5M could come from AMEX which would translate to $12M in 2009 if our ratios hold. Given the fact that most of our users relend, most the $12M will continue to recycle in the system into perpetuity in and out of the hands of borrowers in over 40 countries. So, this week, here's a serious way to help Kiva and to help hundreds of thousands....Vote on the AMEX challenge if you got an AMEX card and a free minute.
We have the chance right now to get the biggest grant in our short history. $1.5M could come from AMEX which would translate to $12M in 2009 if our ratios hold. Given the fact that most of our users relend, most the $12M will continue to recycle in the system into perpetuity in and out of the hands of borrowers in over 40 countries. So, this week, here's a serious way to help Kiva and to help hundreds of thousands....Vote on the AMEX challenge if you got an AMEX card and a free minute.
2008-09-14
Mission Unrest
Usually at our office we concern ourselves with fermenting unrest in other parts of the world. Earlier this year, it was Kenya. Before the election, we heard rumors of the potential for civil war. After the election, we witnessed the mass migration of hundreds of Kiva borrowers away from the riots.
Lately, it's our own SF Mission that is full of unrest. Every day now, I walk to work down Folsom street from 24th to 18th to our office in the Mission. For the past couple of weeks, I've been doing so among daily reports of another shooting in this neighborhood.
This week, our neighborhood promises to turn into a mini-police state. Two weeks ago, the SF president of the Hells Angels was murdered on 24th. The killer was apparently a member of a rival bike gang. The other killings have been mostly affiliated with Latino gangs like the "Surenos", "Nortenos" and "MS-13". Latino gangsters are a common part of my daily life and are usually harmless to us non-gangsters. The Hells Angels are now an interesting recent addition to the mix.
The blogoshere is mad with rumors about what's going to happen. Tomorrow, we will reportedly see an influx of Hells Angels rolling into this neighborhood for a funeral procession. Just a few minutes ago, a bunch of them rode by thunderously.
I love this neighborhood, but am sad to see it turning to hell. SF is a crazy place. Despite the pervasive affluence -- homelessness, drugs and violence are concentrated in pockets throughout the city. I live near one of them pockets. It's also one of the most interesting, uplifting and family-oriented places around.
Lately, it's our own SF Mission that is full of unrest. Every day now, I walk to work down Folsom street from 24th to 18th to our office in the Mission. For the past couple of weeks, I've been doing so among daily reports of another shooting in this neighborhood.
This week, our neighborhood promises to turn into a mini-police state. Two weeks ago, the SF president of the Hells Angels was murdered on 24th. The killer was apparently a member of a rival bike gang. The other killings have been mostly affiliated with Latino gangs like the "Surenos", "Nortenos" and "MS-13". Latino gangsters are a common part of my daily life and are usually harmless to us non-gangsters. The Hells Angels are now an interesting recent addition to the mix.
The blogoshere is mad with rumors about what's going to happen. Tomorrow, we will reportedly see an influx of Hells Angels rolling into this neighborhood for a funeral procession. Just a few minutes ago, a bunch of them rode by thunderously.
I love this neighborhood, but am sad to see it turning to hell. SF is a crazy place. Despite the pervasive affluence -- homelessness, drugs and violence are concentrated in pockets throughout the city. I live near one of them pockets. It's also one of the most interesting, uplifting and family-oriented places around.
2008-09-08
What Happened
It's been about ten days since released the community and liquidity features. I'd say it worked out slightly better than I expected. Here's roughly what happened.
On Thursday the 29th we started the process of making liquid all of the payments that had been returned to Kiva, but which had not been returned to our users. We ran a script which 'settled' all of these 'unsettled but received' funds into our users accounts. The script walked through every unsettled payment and settled it, a process which took several hours. While this was being initiated we took the site down. After the payments were settled, we began the process of emailing each user who received Kiva Credit and let them know the good news.
At the same time, we released the Lending Teams feature. So, as users were coming back to use their new Kiva Credit they also learned about the new ways they can connect on the site by joining a team.
We had a lot of activity, in the first 10 days since the event, our users have lent about $2.5M on the site. Before that, we had been lending about $3M every month, so this is a significant jump. However, instead of new funds being injected into the system, this surge of lending is compromised mostly of dollars that are already in the system. Instead of sitting in our account, they been liquidated...headed next into the hands of entrepreneurs on the site with the help of our Field Partner MFIs.
As far as Lending Teams go, that generated a lot of activity as well. Right now, we have over 700 teams in the last 10 days. Just by glancing at the community page, it seems like a few thousand users joined teams since the 29th. The Teams feature is allowing for higher engagement among existing users and certainly making the site more interesting and increasing page views. It's unclear, however, the extent to which the community will generate a significant number of new users or whether it will just strengthen an existing community.
The increased liquidity will certainly create more movement of funds and more frequent calls to action for existing users. However, it does remain to be seen whether the liquidity will do anything to expand our user base.
It's interesting to think about how the liquidity will affect the actual amount of money that resides in the Kiva User Funds account. As you may recall, Kiva houses all of the funds that are owed to our users in an account separate from the operational funds account. Money comes in through PayPal, and we send it out monthly to our partners. At the same time, money comes from our partners once a month in the form of repayments. For nearly wire outgoing to the field, there is an equal and opposite wire incoming from the field. Often, two transactions to/from the same place net out to zero. Thus, my postulation here is that the net balance in the User Funds account won't significantly change. Thus, the interest (float) income Kiva accrues won't change either. This is different than what most would expect. Whatever the impact on our float, the decision is worth it, IMHO. Increased activity is inherently good, no matter if it takes a short term bite out of revenue to Kiva.
Our site has been selling out constantly since August 30th. We've had briefs periods of plenty, and many more of scarcity. We're not doing anything to control supply and demand this time. We slowly sign up partners being careful not to rush the process. My guess is that the rest of the year is going to look this way, teetering right on the edge the whole time. In a way, that's how I like it.
On Thursday the 29th we started the process of making liquid all of the payments that had been returned to Kiva, but which had not been returned to our users. We ran a script which 'settled' all of these 'unsettled but received' funds into our users accounts. The script walked through every unsettled payment and settled it, a process which took several hours. While this was being initiated we took the site down. After the payments were settled, we began the process of emailing each user who received Kiva Credit and let them know the good news.
At the same time, we released the Lending Teams feature. So, as users were coming back to use their new Kiva Credit they also learned about the new ways they can connect on the site by joining a team.
We had a lot of activity, in the first 10 days since the event, our users have lent about $2.5M on the site. Before that, we had been lending about $3M every month, so this is a significant jump. However, instead of new funds being injected into the system, this surge of lending is compromised mostly of dollars that are already in the system. Instead of sitting in our account, they been liquidated...headed next into the hands of entrepreneurs on the site with the help of our Field Partner MFIs.
As far as Lending Teams go, that generated a lot of activity as well. Right now, we have over 700 teams in the last 10 days. Just by glancing at the community page, it seems like a few thousand users joined teams since the 29th. The Teams feature is allowing for higher engagement among existing users and certainly making the site more interesting and increasing page views. It's unclear, however, the extent to which the community will generate a significant number of new users or whether it will just strengthen an existing community.
The increased liquidity will certainly create more movement of funds and more frequent calls to action for existing users. However, it does remain to be seen whether the liquidity will do anything to expand our user base.
It's interesting to think about how the liquidity will affect the actual amount of money that resides in the Kiva User Funds account. As you may recall, Kiva houses all of the funds that are owed to our users in an account separate from the operational funds account. Money comes in through PayPal, and we send it out monthly to our partners. At the same time, money comes from our partners once a month in the form of repayments. For nearly wire outgoing to the field, there is an equal and opposite wire incoming from the field. Often, two transactions to/from the same place net out to zero. Thus, my postulation here is that the net balance in the User Funds account won't significantly change. Thus, the interest (float) income Kiva accrues won't change either. This is different than what most would expect. Whatever the impact on our float, the decision is worth it, IMHO. Increased activity is inherently good, no matter if it takes a short term bite out of revenue to Kiva.
Our site has been selling out constantly since August 30th. We've had briefs periods of plenty, and many more of scarcity. We're not doing anything to control supply and demand this time. We slowly sign up partners being careful not to rush the process. My guess is that the rest of the year is going to look this way, teetering right on the edge the whole time. In a way, that's how I like it.
2008-08-26
Liquidity and Community
Kiva has a pretty important software release in a couple of days.
First, we are releasing a "community" section of the site. The purpose of the section is clear enough -- to foster a sense of community among the 300K plus Kiva lenders. The way we are going about this is somewhat incremental. We are starting Thursday by launching Lending Teams on the site. This is way overdue. Lending Teams provide a way for lenders to group themselves together around certain affinities or themes of their choosing. Lenders can then choose to "count" their loans to one of their teams and the teams performance is statistically tracked and compared with other teams.
We've been getting requests to help serve groups like schools, churches, book clubs, etc for over two years. It just took this long to get the feature up there because of our org's historical focus on getting partners signed up and reducing risk on the platform. User facing features were de-prioritized in 2007 and half of 2008 because of chronic inventory shortages. Supply and demand have stabilized in recent months. This spring, we started really prioritizing our lenders again and that will bear fruit in many ways between now and the end of the year.
We originally called the feature "Lending Groups" internally. That became problematic when we introduced "Borrowing Groups" (aka Groups) on the site at the end of last year. Instead of having two things called "Groups" on the site, we chose to cluster our lenders into so-called "Teams". This then led to a series of metaphor overextensions. We have Teams. You can "recruit" for your team, you can "quit" the team and you can be a "captain" of a team. You can even "bestow captainhood" to other members of the team you are on. That sounds a little medieval if you ask me. You can tell we had a little too much fun designing and coding....
Over the last few years, major websites, no matter what space, introduced some sort of social networking element to their service. Sometimes, social features are tacked on to businesses as an awkward appendage. Pretty late to the game is Kiva with the lending teams feature entering the fray as well. I'm hoping we do it right, and do it in our own unique way. My take on socializing on Kiva is that the socializing should come within the context of making loans. I don't desire for Kiva to become a dating site or a Facebook ripoff. However, I hope that we can leverage the basic human need to socialize for the higher cause of serving the working poor in this world. We will see if we can pull off that delicate balance and walk that fine line with grace.
Of course, the biggest risk is that we spent all this time and nobody will use it. Inactivity is the biggest enemy of any web-based business. Afterall, the vast majority of websites have little usage. Non-profit websites are particularly at risk. Activity is a rare gem. I'll be tracking that pretty closely on this blog in the weeks to come.
Maybe more exciting than our foray into social networking is a second feature we will release on Thursday -- increased liquidity. For the first time, our loans will begin repaying you -- the user -- throughout the loan term. Up until this point in time, users needed to wait until the end of a loan to receive Kiva Credit which they can withdraw, relend, gift or donate. Meanwhile, Kiva was receiving monthly wire transfers from our Field Partner MFIs and holding the cash in our bank account. The origin of this decision dates back to 2004 when we did not have the sophistication to settle payments more frequently. We've been working for most of the year to correct this decision. The result is that now, when Kiva actually receives the cash in our bank account we will allow our users to access these funds. I read somewhere once that increased liquidity is always good for a market. We will see if this axiom reigns true for the infantile marketplace of Kiva in the coming months. On Thursday, we will make about $10M in Kiva Credit liquid!
Piece by piece, we are assembling an awesome engineering team at Kiva. I didn't make these features happen, it was the team. In no particular order, Zvi, Jeremy, Roma, Johnathan , Noah, Sam were able to boil down these complicated problems into manageable steps. This is not non-profit engineering, this is not charity work. These are serious problems of finance, scale and user-experience. It's all done with a small team that constantly overcomes seemingly massive obstacles. Props to my fellow engineers. Gnite.
First, we are releasing a "community" section of the site. The purpose of the section is clear enough -- to foster a sense of community among the 300K plus Kiva lenders. The way we are going about this is somewhat incremental. We are starting Thursday by launching Lending Teams on the site. This is way overdue. Lending Teams provide a way for lenders to group themselves together around certain affinities or themes of their choosing. Lenders can then choose to "count" their loans to one of their teams and the teams performance is statistically tracked and compared with other teams.
We've been getting requests to help serve groups like schools, churches, book clubs, etc for over two years. It just took this long to get the feature up there because of our org's historical focus on getting partners signed up and reducing risk on the platform. User facing features were de-prioritized in 2007 and half of 2008 because of chronic inventory shortages. Supply and demand have stabilized in recent months. This spring, we started really prioritizing our lenders again and that will bear fruit in many ways between now and the end of the year.
We originally called the feature "Lending Groups" internally. That became problematic when we introduced "Borrowing Groups" (aka Groups) on the site at the end of last year. Instead of having two things called "Groups" on the site, we chose to cluster our lenders into so-called "Teams". This then led to a series of metaphor overextensions. We have Teams. You can "recruit" for your team, you can "quit" the team and you can be a "captain" of a team. You can even "bestow captainhood" to other members of the team you are on. That sounds a little medieval if you ask me. You can tell we had a little too much fun designing and coding....
Over the last few years, major websites, no matter what space, introduced some sort of social networking element to their service. Sometimes, social features are tacked on to businesses as an awkward appendage. Pretty late to the game is Kiva with the lending teams feature entering the fray as well. I'm hoping we do it right, and do it in our own unique way. My take on socializing on Kiva is that the socializing should come within the context of making loans. I don't desire for Kiva to become a dating site or a Facebook ripoff. However, I hope that we can leverage the basic human need to socialize for the higher cause of serving the working poor in this world. We will see if we can pull off that delicate balance and walk that fine line with grace.
Of course, the biggest risk is that we spent all this time and nobody will use it. Inactivity is the biggest enemy of any web-based business. Afterall, the vast majority of websites have little usage. Non-profit websites are particularly at risk. Activity is a rare gem. I'll be tracking that pretty closely on this blog in the weeks to come.
Maybe more exciting than our foray into social networking is a second feature we will release on Thursday -- increased liquidity. For the first time, our loans will begin repaying you -- the user -- throughout the loan term. Up until this point in time, users needed to wait until the end of a loan to receive Kiva Credit which they can withdraw, relend, gift or donate. Meanwhile, Kiva was receiving monthly wire transfers from our Field Partner MFIs and holding the cash in our bank account. The origin of this decision dates back to 2004 when we did not have the sophistication to settle payments more frequently. We've been working for most of the year to correct this decision. The result is that now, when Kiva actually receives the cash in our bank account we will allow our users to access these funds. I read somewhere once that increased liquidity is always good for a market. We will see if this axiom reigns true for the infantile marketplace of Kiva in the coming months. On Thursday, we will make about $10M in Kiva Credit liquid!
Piece by piece, we are assembling an awesome engineering team at Kiva. I didn't make these features happen, it was the team. In no particular order, Zvi, Jeremy, Roma, Johnathan , Noah, Sam were able to boil down these complicated problems into manageable steps. This is not non-profit engineering, this is not charity work. These are serious problems of finance, scale and user-experience. It's all done with a small team that constantly overcomes seemingly massive obstacles. Props to my fellow engineers. Gnite.
2008-07-16
Farewell Mr. Capstick
I've had long bouts of bachelordom. When I'm home alone for weeks on end, what do I do? I rent documentaries.
A few years ago I acquired one of my favorite possessions: a pass to the San Francisco Library. A good way to spend a Saturday morning is to walk down Valencia to Market to the main branch in city center. The VHS rack is my FAO Schwartz.
Netflix can't touch the selection at the Library. You know how many good documentaries have never been distributed on DVD? So many! Plus, the Library is faster. I can walk there in 30 minutes and have a stash of VHS in short order. Try to put that in your queue.
Back when Kiva was a dream, I had a dream of Africa as well. I think many of us Mzungus go through a stage like that -- Africa as the final frontier. It feels so remote, so exotic and beautiful. The sky is so big. More importantly, it's a place where I can have an impact, and that makes me feel good (or powerful). I'm needed there.
My Dad spent much of his childhood in Ceylon and South Africa. From these places came great tales of adventure that filled my six-year-old sleep. It was post WWII and times were good for an American living abroad. Dad grew up in primarily British colonial settings. Hired help, Landrovers, snakes, small planes and skin diving are images that come to mind. English Patient material. I wanted to be like Dad.
In my recent adult life, my thirst for information about Africa took me to the documentary rack. I've rented old movies on the Serengeti, Maasai, Amin, gravel, big game, mau mau, gorrillas, leopold, liberia, mandela, leakey, pygmies, nubians, witch doctors and more. Because VHS are old, they are almost always shot through a white man's lens. The dream continued.
Kiva provided me a vehicle to live out a boy's dream of the white man in Africa. There was certainly something sub-conscious there that fueled countless late-nite work binges...the desire to reach through my computer screen to a land half a world away...to *connect* to something much more tangible than code. I've been to East Africa three times in the past three years and am hardly well-versed. Now, Kiva has a host of expert staff that make decisions about Africa much more rationally than we did in the first year after the Kiva launch. They do the traveling to Africa. I spread the word closer to home.
It hasn't been easy in Africa for Kiva in the past 1.5 years. The parabolic velocity of lending in late '06 and early '07 caused us to rush into partnerships during that time. Our lack of budget prevented us from visiting before partnerships were initiated. Lenders wanted to send their money to Africans, so they did. They sent a lot. In the majority of cases, this has worked out well. However, there are some notable disasters that took forever to resolve. This below is no shabby (sh**)list of partnerships that closed in bad faith:
WEEC
SEED
AE&I
WITEP
RAFODE
Behind each of these break-ups, there is a story. Usually, there lies a patriarchal figure who viewed his organization as an extension of himself and a Kiva which was way too naive. The abridged stories don't always make it far beyond the inboxes of the lenders and the partner pages deep in our website. But I've arranged them neatly for you here. The extended versions live in my mind.
Am I disillusioned about working in Africa? No, not at all. Do I have a distrust complex. Probably. It's an interesting question, why Kiva had so many early problems in one region relative to others. Here are some possible reasons:
1) Kiva's first partners were in Africa and Kiva was a very small organization during this time
2) There is more corruption in Africa than in the other regions where we work
3) Kiva was over-eager to work in Africa because it felt pressured by the lender demand for African loans
4) The microfinance sector is much less developed in Africa as opposed to other regions
I don't have the time to write an essay about which answer is correct. It's certainly some combination of the above, IMHO. Gotta go. In case you were wondering, I didn't work the whole weekend. I watched a documentary too. Jimmy Carter: Man from Plains, if you get a chance. On DVD!
A few years ago I acquired one of my favorite possessions: a pass to the San Francisco Library. A good way to spend a Saturday morning is to walk down Valencia to Market to the main branch in city center. The VHS rack is my FAO Schwartz.
Netflix can't touch the selection at the Library. You know how many good documentaries have never been distributed on DVD? So many! Plus, the Library is faster. I can walk there in 30 minutes and have a stash of VHS in short order. Try to put that in your queue.
Back when Kiva was a dream, I had a dream of Africa as well. I think many of us Mzungus go through a stage like that -- Africa as the final frontier. It feels so remote, so exotic and beautiful. The sky is so big. More importantly, it's a place where I can have an impact, and that makes me feel good (or powerful). I'm needed there.
My Dad spent much of his childhood in Ceylon and South Africa. From these places came great tales of adventure that filled my six-year-old sleep. It was post WWII and times were good for an American living abroad. Dad grew up in primarily British colonial settings. Hired help, Landrovers, snakes, small planes and skin diving are images that come to mind. English Patient material. I wanted to be like Dad.
In my recent adult life, my thirst for information about Africa took me to the documentary rack. I've rented old movies on the Serengeti, Maasai, Amin, gravel, big game, mau mau, gorrillas, leopold, liberia, mandela, leakey, pygmies, nubians, witch doctors and more. Because VHS are old, they are almost always shot through a white man's lens. The dream continued.
Kiva provided me a vehicle to live out a boy's dream of the white man in Africa. There was certainly something sub-conscious there that fueled countless late-nite work binges...the desire to reach through my computer screen to a land half a world away...to *connect* to something much more tangible than code. I've been to East Africa three times in the past three years and am hardly well-versed. Now, Kiva has a host of expert staff that make decisions about Africa much more rationally than we did in the first year after the Kiva launch. They do the traveling to Africa. I spread the word closer to home.
It hasn't been easy in Africa for Kiva in the past 1.5 years. The parabolic velocity of lending in late '06 and early '07 caused us to rush into partnerships during that time. Our lack of budget prevented us from visiting before partnerships were initiated. Lenders wanted to send their money to Africans, so they did. They sent a lot. In the majority of cases, this has worked out well. However, there are some notable disasters that took forever to resolve. This below is no shabby (sh**)list of partnerships that closed in bad faith:
WEEC
SEED
AE&I
WITEP
RAFODE
Behind each of these break-ups, there is a story. Usually, there lies a patriarchal figure who viewed his organization as an extension of himself and a Kiva which was way too naive. The abridged stories don't always make it far beyond the inboxes of the lenders and the partner pages deep in our website. But I've arranged them neatly for you here. The extended versions live in my mind.
Am I disillusioned about working in Africa? No, not at all. Do I have a distrust complex. Probably. It's an interesting question, why Kiva had so many early problems in one region relative to others. Here are some possible reasons:
1) Kiva's first partners were in Africa and Kiva was a very small organization during this time
2) There is more corruption in Africa than in the other regions where we work
3) Kiva was over-eager to work in Africa because it felt pressured by the lender demand for African loans
4) The microfinance sector is much less developed in Africa as opposed to other regions
I don't have the time to write an essay about which answer is correct. It's certainly some combination of the above, IMHO. Gotta go. In case you were wondering, I didn't work the whole weekend. I watched a documentary too. Jimmy Carter: Man from Plains, if you get a chance. On DVD!
2008-07-08
5 days, 40K views
Notice this. in 5 days over 40K people have watched that precious little video. My guess is that it's probably more influential than the billboard, at least for the first 5 days. Also, I forgot to thank Involver, who provided the technology for free. I'm pretty impressed with the app they have built...
2008-07-03
Facebook + Video = ?
Thanks to VideoJug and Fiona, we have our first "viral video" on facebook. How viral is it? Let's wait a week and see how it does compared to the Billboard on 101.
2008-06-22
Catfood and Commoditization
Last month I was at Google Zeitgiest in London. I was able to see the esteemed Salmon Rushdie speak about his new book, The Enchantress of Florence. He gave me a signed copy after the talk, it was a big honor. It's right here on my mantle. It's about time I started to read it. This week, I promise.
The speakers at Zeitgeist included Queen Rania of Jordan, Gordon Brown, Larry, Sergei and many more. I was most excited to see Mr. Rushdie. He's a big Google user, getting all of his news straight from news.google.com. He also spoke about Facebook and Youtube which contribute to what he calls the "endless confession" that we are seeing pour out over the social web. Youth, globally, are uploading terrabytes of data about the most trivial issues. A sea too big to parse through.
Certainly this blog at times has been part of my confession. It's pretty easy to confess things here that I would never think about confessing in other mediums. My Blog, My Powerbook, Sunday evening. Who knows what I will write. Thankfully, Kiva is not a public company.
Kiva is seeing these days seeing an uptick in pet pictures posted in lender profiles. Lenders love their pet pics maybe moreso than they love their own headshots. Cats, more than dogs, make great lenders on the site and together these cat herds have lent many millions of dollars to real people in 40+ countries. American kitties are having a huge social impact and it is cute.....sort of.
The entrepreneurs on the site don't get the chance to mask themselves behind a feline facade. Rather, they are baring it all: their work, their families, their struggles, their finances and most importantly their hope for a better life. Most of the time, they don't fully understand the role of the Internet and that their funding is coming from dozens of computer users in over 70 countries who want them to succeed. Explaining the people aspect of this is hard enough. How could a person in Fresno really care about me here in Samoa? Explaining the dynamic gets even trickier when the entrepreneurs scans a printout of her lenders and sees that a cat is actually her main financier.
I heard a story recently from a Kiva Fellow stationed in Africa who, when showing the entrepreneur his lenders, was asked the cat question. How does that work? Why has a cat lent to me? How can a cat lend to me? Does that cat really want his money back? (he looks pretty fat).
We had never trained our Fellows to answer this question, and there was no prepared response. The fellow postulated "Well, maybe he needs to buy catfood???"
Oh man!
I just heard this story for the first time last week and it was pretty disturbing. Kiva is all about connecting people over disparate worlds as equal business parters. It will be harder and harder to make the case that we are fulfilling our mission as cats become an increasing constituency among the lenders. I'm sorry, you can't be a business partner with a cat. Certainly, it can be very degrading to learn that the pet of an American was able to make a life changing loan to your business in Western Kenya. Are we commoditizing, rather than dignifying the low-income entrepreneurs getting loans on our site? If so, we need to pull a u-turn fast.
Two summers ago I had the joy of hosting my Kenyan friend Rowland in San Francisco. The one thing that amazed him the most was the pet store in Noe valley. He was visibly shaken. Cats in SF enjoy an existence much more comfortable than most in his country. The resources available for a Noe cat are overwhelming. No wonder they become lenders. They have it all.
The speakers at Zeitgeist included Queen Rania of Jordan, Gordon Brown, Larry, Sergei and many more. I was most excited to see Mr. Rushdie. He's a big Google user, getting all of his news straight from news.google.com. He also spoke about Facebook and Youtube which contribute to what he calls the "endless confession" that we are seeing pour out over the social web. Youth, globally, are uploading terrabytes of data about the most trivial issues. A sea too big to parse through.
Certainly this blog at times has been part of my confession. It's pretty easy to confess things here that I would never think about confessing in other mediums. My Blog, My Powerbook, Sunday evening. Who knows what I will write. Thankfully, Kiva is not a public company.
Kiva is seeing these days seeing an uptick in pet pictures posted in lender profiles. Lenders love their pet pics maybe moreso than they love their own headshots. Cats, more than dogs, make great lenders on the site and together these cat herds have lent many millions of dollars to real people in 40+ countries. American kitties are having a huge social impact and it is cute.....sort of.
The entrepreneurs on the site don't get the chance to mask themselves behind a feline facade. Rather, they are baring it all: their work, their families, their struggles, their finances and most importantly their hope for a better life. Most of the time, they don't fully understand the role of the Internet and that their funding is coming from dozens of computer users in over 70 countries who want them to succeed. Explaining the people aspect of this is hard enough. How could a person in Fresno really care about me here in Samoa? Explaining the dynamic gets even trickier when the entrepreneurs scans a printout of her lenders and sees that a cat is actually her main financier.
I heard a story recently from a Kiva Fellow stationed in Africa who, when showing the entrepreneur his lenders, was asked the cat question. How does that work? Why has a cat lent to me? How can a cat lend to me? Does that cat really want his money back? (he looks pretty fat).
We had never trained our Fellows to answer this question, and there was no prepared response. The fellow postulated "Well, maybe he needs to buy catfood???"
Oh man!
I just heard this story for the first time last week and it was pretty disturbing. Kiva is all about connecting people over disparate worlds as equal business parters. It will be harder and harder to make the case that we are fulfilling our mission as cats become an increasing constituency among the lenders. I'm sorry, you can't be a business partner with a cat. Certainly, it can be very degrading to learn that the pet of an American was able to make a life changing loan to your business in Western Kenya. Are we commoditizing, rather than dignifying the low-income entrepreneurs getting loans on our site? If so, we need to pull a u-turn fast.
Two summers ago I had the joy of hosting my Kenyan friend Rowland in San Francisco. The one thing that amazed him the most was the pet store in Noe valley. He was visibly shaken. Cats in SF enjoy an existence much more comfortable than most in his country. The resources available for a Noe cat are overwhelming. No wonder they become lenders. They have it all.
2008-06-11
Snapshot from 101
Thanks to Scott on KivaFriends, here's a look of the Kiva-PayPal billboard...
The Billboard Bump?
Does a massive billboard on a popular highway spike website traffic? This one is a follow up from Chirag on the BIllboard effect, one week in...
Hi guys -
I know you guys were trying to speculate in the car what was driving the new user growth, and one possibility was the billboard on 101. Google Analytics shows that we are getting 125 additional visits per day from San Francisco and San Jose users since the billboard has gone up.
- The billboard conversion rate is .04% (125 visits per day / 300,000 people view the billboard daily).
- The 6 month billboard campaign will drive an additional 22,500 visits (125 visit per day * 1,800 days).
I think a lot of people who drive down 101 are probably already familiar with Kiva. I am not sure if this is really attributing to the new user growth.
|
Site Visits from SF & SJ |
Daily Visits |
|
|
May 26 - Jun 2 |
|
299 |
|
Jun 3 - Jun 10 |
|
423 |
-- Chirag
2008-06-04
Two pictures
Filed Under:
I've waited so long to blog and I'm feeling the pressure. Stress...that's usually the reason I will stop blogging for a period of time. When going through a lot of stress, everything non-essential drops off in my life. This blog has looked bad for the past two months, for sure. But you should see my apartment.
I'm gonna start blogging again, and take the pressure off myself, so hopefully I can start to write more often with short, possibly mediocre entries instead of infrequent attempts at saying something really coherent. So, to get me going again, I'm just gonna post two pictures:
#1: Word Power. Premal's brother, Chirag put this together. It shows the impact of certain words, found in Kiva loan descriptions, on the funding rate of the loan. As you will see, there is one word which doubles the speed with which your loan gets funded: hospital. I'll leave that to you to try and explain....
#2: Billboard on 101. Most of you all are probably familiar with Bay Area highways. 101 is the thoroughfare through Silicon Valley...In the coming weeks, the below billboard will go up. It's a gigantic advertisement for Kiva. Wow. I hope this isn't too controversial. Is Kiva using donor dollars to pay for billboards? Luckily, no. PayPal is donating the space to Kiva, in addition to free transactions. Thank you PayPal! it will be interesting to track the impact of a physical sign on our website. I have no idea of the conversion rate from someone driving to someone lending on a website.
You'll notice, oh you observant reader, that this billboard is in Las Vegas in front of a Playboy logo. That's because the above photo is just a photoshop'd simulation of the real thing, to go up soon in Redwood City.
Hopefully, it won't be 2 months before I write again. If it is, it'll be because of....stress.
I'm gonna start blogging again, and take the pressure off myself, so hopefully I can start to write more often with short, possibly mediocre entries instead of infrequent attempts at saying something really coherent. So, to get me going again, I'm just gonna post two pictures:
#1: Word Power. Premal's brother, Chirag put this together. It shows the impact of certain words, found in Kiva loan descriptions, on the funding rate of the loan. As you will see, there is one word which doubles the speed with which your loan gets funded: hospital. I'll leave that to you to try and explain....
#2: Billboard on 101. Most of you all are probably familiar with Bay Area highways. 101 is the thoroughfare through Silicon Valley...In the coming weeks, the below billboard will go up. It's a gigantic advertisement for Kiva. Wow. I hope this isn't too controversial. Is Kiva using donor dollars to pay for billboards? Luckily, no. PayPal is donating the space to Kiva, in addition to free transactions. Thank you PayPal! it will be interesting to track the impact of a physical sign on our website. I have no idea of the conversion rate from someone driving to someone lending on a website.
You'll notice, oh you observant reader, that this billboard is in Las Vegas in front of a Playboy logo. That's because the above photo is just a photoshop'd simulation of the real thing, to go up soon in Redwood City.
Hopefully, it won't be 2 months before I write again. If it is, it'll be because of....stress.
2008-03-29
Cockfighting
Filed Under:
Are you promoting or financing a cockfight? If so, you should really be aware of a few legal issues you might face along the way. I recently ran into them head on.
A while ago, our Peruvian partner posted this cockfighting loan on our site. Immediately, two things happened. 1) a swathe of lenders rushed to finance the cockfighter and 2) some very angry people wrote in to protest. Later, our sad weekly newspaper wrote about it.
Occasionally, I do customer service. I was doing it much more over the holidays. Things have slowed down a little bit since February so I only take the most controversial issues. I'm also an armchair attorney. The cockfighting loan has raised some interesting legal questions that our real attorneys helped answer.
First of all, is cockfighting legal in California? No sir. In addition to the state law, it's banned at a federal level. The (federal) Animal Welfare Act of 2007 came in part as a response to the Michael Vick case. In layman's terms, it holds that we must not (1) advertise or promote an animal fighting venture in interstate or foreign commerce (2) sponsor or exhibit an animal in a fighting venture in interstate or foreign commerce (3) buy, sell or transport an animal for fighting in interstate or foreign commerce (4) buy, sell or transport a weapon designed to be used by an animal in interstate or foreign commerce. This part of The Act specifically refers to any sharp instrument attached to the leg of a bird.
All of these points are bounded to the realm of "interstate or foreign commerce." Interstate commerce involves transport between two states. Foreign commerce involves transport between the USA and any foreign country. Thus, individual states may permit animal fighting, but federal government specifically prevents any animal fighting activity that crosses a state border.
In addition to Michael Vick, Amazon.com and the US Postal Service have recently been hit with animal fighting-related charges. Who would have thought? Amazon.com is accused of selling magazines that promote cockfighting. The USPS is accused of transporting them between states. The Humane Society leveled the charges and is seeking to forbid any periodicals which promote animal fighting.
So is it legal to send money abroad to further cockfighting in another country? I think so. Foreign commerce must involve the shipment of items to the USA or from the USA. In the Kiva cockfighting case, no such movement occurred. Sure, a Peruvian MFI staff member promoted a cockfighting venture on a website served up in the USA. Sure, funds flowed from PayPal accounts of lenders in the USA. However, no items were shipped. Thus, if we take the Animal Welfare Act as our guide, it seems pretty clear that Kiva did not run afoul of the law.
"Never lead with legal." That's a phrase I've heard a few times lately and I think it's right. Strategy should guide decisions with the law being a critical filter for approving such decisions. The fact that we can get away with cockfighting loans on our site shouldn't be the key driver of our decision whether to allow them in the future.
The real question is whether or not permitting these loans is a good strategic choice. In particular, does this somehow help Kiva achieve its mission of connecting people to alleviate poverty? It's debatable. I think that allowing our partner to decide which loans to post without much interference is a good thing. We can be paternalistic when we start imposing our moral framework upon societies half a world away. Cockfighting in Peru is legal and part of a rich cultural tradition. It may not be humane or palatable from a Western perspective, but that misses the point. Kiva, the organization, should not be making those decisions. Our lenders should be the ones voting with their dollars.
We've had tobacco farms, butchers, and taxi cab loans on the site. For these and more, our lenders have complained. I understand their disgust most of the time. Still, I also understand that Seitan is not such a hot commodity in Uganda and that the Prius is not the most practical option in Bulgaria.
A word of caution: Don't even consider promoting or sponsoring a cockfight in the USA. Especially don't try to transport anything related to the fight from a state to state or out of the country. Also, don't buy cockfighting magazines. Also, don't spend too much time thinking about cockfighting. To be honest, you are best to stay away from the subject entirely. I know it has wasted a lot of my time!
A while ago, our Peruvian partner posted this cockfighting loan on our site. Immediately, two things happened. 1) a swathe of lenders rushed to finance the cockfighter and 2) some very angry people wrote in to protest. Later, our sad weekly newspaper wrote about it.
Occasionally, I do customer service. I was doing it much more over the holidays. Things have slowed down a little bit since February so I only take the most controversial issues. I'm also an armchair attorney. The cockfighting loan has raised some interesting legal questions that our real attorneys helped answer.
First of all, is cockfighting legal in California? No sir. In addition to the state law, it's banned at a federal level. The (federal) Animal Welfare Act of 2007 came in part as a response to the Michael Vick case. In layman's terms, it holds that we must not (1) advertise or promote an animal fighting venture in interstate or foreign commerce (2) sponsor or exhibit an animal in a fighting venture in interstate or foreign commerce (3) buy, sell or transport an animal for fighting in interstate or foreign commerce (4) buy, sell or transport a weapon designed to be used by an animal in interstate or foreign commerce. This part of The Act specifically refers to any sharp instrument attached to the leg of a bird.
All of these points are bounded to the realm of "interstate or foreign commerce." Interstate commerce involves transport between two states. Foreign commerce involves transport between the USA and any foreign country. Thus, individual states may permit animal fighting, but federal government specifically prevents any animal fighting activity that crosses a state border.
In addition to Michael Vick, Amazon.com and the US Postal Service have recently been hit with animal fighting-related charges. Who would have thought? Amazon.com is accused of selling magazines that promote cockfighting. The USPS is accused of transporting them between states. The Humane Society leveled the charges and is seeking to forbid any periodicals which promote animal fighting.
So is it legal to send money abroad to further cockfighting in another country? I think so. Foreign commerce must involve the shipment of items to the USA or from the USA. In the Kiva cockfighting case, no such movement occurred. Sure, a Peruvian MFI staff member promoted a cockfighting venture on a website served up in the USA. Sure, funds flowed from PayPal accounts of lenders in the USA. However, no items were shipped. Thus, if we take the Animal Welfare Act as our guide, it seems pretty clear that Kiva did not run afoul of the law.
"Never lead with legal." That's a phrase I've heard a few times lately and I think it's right. Strategy should guide decisions with the law being a critical filter for approving such decisions. The fact that we can get away with cockfighting loans on our site shouldn't be the key driver of our decision whether to allow them in the future.
The real question is whether or not permitting these loans is a good strategic choice. In particular, does this somehow help Kiva achieve its mission of connecting people to alleviate poverty? It's debatable. I think that allowing our partner to decide which loans to post without much interference is a good thing. We can be paternalistic when we start imposing our moral framework upon societies half a world away. Cockfighting in Peru is legal and part of a rich cultural tradition. It may not be humane or palatable from a Western perspective, but that misses the point. Kiva, the organization, should not be making those decisions. Our lenders should be the ones voting with their dollars.
We've had tobacco farms, butchers, and taxi cab loans on the site. For these and more, our lenders have complained. I understand their disgust most of the time. Still, I also understand that Seitan is not such a hot commodity in Uganda and that the Prius is not the most practical option in Bulgaria.
A word of caution: Don't even consider promoting or sponsoring a cockfight in the USA. Especially don't try to transport anything related to the fight from a state to state or out of the country. Also, don't buy cockfighting magazines. Also, don't spend too much time thinking about cockfighting. To be honest, you are best to stay away from the subject entirely. I know it has wasted a lot of my time!
2008-03-01
Escheat me
Filed Under:
I'm on my way home from DC to SFO. The window seat right behind the exit row. You know the seat without any seat in front of it? Nice.
This blog entry is about stored value -- yours and ours. Kiva is an example of a "stored value system." By that, I mean that we are storing value on others' behalf. More specifically, we are holding funds for you. Other examples of stored value systems are Western Union, PayPal, Itunes, the New York Subway system and more. There are pluses and minuses involved in running such a system.
Just recently, Kiva formed an LLC subsidiary. A "for-profit", if you will. Let's let that sit in. Ahh.
I'm sure the euphemistically named KivaFriends community loves this idea. (I'm just playing around KF, you are not euphemistically named. You really are friends, right?)
The name of the LLC is "Kiva User Funds, LLC". It's a shell company that we now use to house every penny that belongs to our users. It has no employees and all revenue it generates is donated to the nonprofit "Kiva Microfunds" which owns the LLC. It has one revenue stream, the interest accrued off the funds stored in the savings account used to house the user's money. (some people call this "float")
Why did we form this entity? Not for profit's sake. We will accrue no additional revenue, only additional cost, because of this move. Kiva Microfunds previously housed our users' funds in a savings account of its own. This posed a risk, our accountant advised. By housing user funds in the same entity, their fate was intimately tied to the fate of our nonprofit. If our nonprofit ever encountered financial difficulty, the funds would be less protected. For instance, if an angry ex-employee sued us (victoriously) for millions, the funds could be seized. Creating a separate LLC was a preventative move in case something crazy like this ever happened.
Why do we have user funds to be housed at all? First, there is an up-to-30-day lag between when a user makes a loan and the funds are sent overseas. Second, alhough our users don't get their money back until the end of a loan (usually 10-12 months), Kiva is collecting repayments from our Field Partners quarterly. Third, often users leave money in the still in the system after it is repaid. When this happens, the funds stay stagnant in the US savings account.
The first point is relatively non-controversial, so I'm not going to elaborate. Point two is possibly controversial though, so I'm going to elaborate. The system was designed this way to reduce the number of bank wires between Kiva and Field Partner. Bank wires often cost around $40. So we decided to bill quarterly. However, we wanted our users to hear about entrepreneur repayments in real time. Thus, we we let our Field Partners post repayments at any frequency they chose. However, we bill them quarterly. The lag between recorded entrepreneur repayments and the funds arriving in our USA account means that we can't pay our users back at the moment a repayment is recorded on the site. We could conceivably have designed it so we paid out quarterly, but that seemed overwhelmingly complex for my burdened 2005 brain. I'm feeling a little lighter lately and we have many more brains behind us. Thus, later this year we will release a system that pays out monthly to our users. This will unleash an exciting amount of liquidity to the marketplace.
The third point is growing in importance. Our users are leaving their money in the system too much. Too much for what? Too much for the good of the entrepreneurs we are trying to serve. Last time I checked, approximately 40% of all repaid monies were unused and remained in our bank account -- in the form of "Kiva Credit". 50% has been relent and 10% withdrawn. That means that a sizeable amount of users have money that needs to be used. They could lend it to help someone who needs it, or they could at least withdraw it and buy a meal. Either would be better than the present reality of stagnant funds.
We have no expiration policy for this kind of stagnant Kiva Credit. In the last year, as an amateur lawyer, I've waded into the area of law we know as "escheatment" (pronounced uh-sheet-mint). escheatment has to do with what you do with other people's money when they don't claim it. For instance, what should a landlord do with a renters' deposit if the renter leaves without claiming it? In some cases, the landlord might need to "escheat" it to the government. It all depends and the laws vary state by state. Right now, we escheat your money to nowhere. It just sits there...for all eternity, and we remind you to use it. Once I get our General Counsel hired, we might fix this. We might figure out how to escheat it to someplace much more useful.
And now a final point. Hey you, reader of this blog. You have a lot of value -- stored value. And it doesn't accrue interest. So just do something with it. OK?
This blog entry is about stored value -- yours and ours. Kiva is an example of a "stored value system." By that, I mean that we are storing value on others' behalf. More specifically, we are holding funds for you. Other examples of stored value systems are Western Union, PayPal, Itunes, the New York Subway system and more. There are pluses and minuses involved in running such a system.
Just recently, Kiva formed an LLC subsidiary. A "for-profit", if you will. Let's let that sit in. Ahh.
I'm sure the euphemistically named KivaFriends community loves this idea. (I'm just playing around KF, you are not euphemistically named. You really are friends, right?)
The name of the LLC is "Kiva User Funds, LLC". It's a shell company that we now use to house every penny that belongs to our users. It has no employees and all revenue it generates is donated to the nonprofit "Kiva Microfunds" which owns the LLC. It has one revenue stream, the interest accrued off the funds stored in the savings account used to house the user's money. (some people call this "float")
Why did we form this entity? Not for profit's sake. We will accrue no additional revenue, only additional cost, because of this move. Kiva Microfunds previously housed our users' funds in a savings account of its own. This posed a risk, our accountant advised. By housing user funds in the same entity, their fate was intimately tied to the fate of our nonprofit. If our nonprofit ever encountered financial difficulty, the funds would be less protected. For instance, if an angry ex-employee sued us (victoriously) for millions, the funds could be seized. Creating a separate LLC was a preventative move in case something crazy like this ever happened.
Why do we have user funds to be housed at all? First, there is an up-to-30-day lag between when a user makes a loan and the funds are sent overseas. Second, alhough our users don't get their money back until the end of a loan (usually 10-12 months), Kiva is collecting repayments from our Field Partners quarterly. Third, often users leave money in the still in the system after it is repaid. When this happens, the funds stay stagnant in the US savings account.
The first point is relatively non-controversial, so I'm not going to elaborate. Point two is possibly controversial though, so I'm going to elaborate. The system was designed this way to reduce the number of bank wires between Kiva and Field Partner. Bank wires often cost around $40. So we decided to bill quarterly. However, we wanted our users to hear about entrepreneur repayments in real time. Thus, we we let our Field Partners post repayments at any frequency they chose. However, we bill them quarterly. The lag between recorded entrepreneur repayments and the funds arriving in our USA account means that we can't pay our users back at the moment a repayment is recorded on the site. We could conceivably have designed it so we paid out quarterly, but that seemed overwhelmingly complex for my burdened 2005 brain. I'm feeling a little lighter lately and we have many more brains behind us. Thus, later this year we will release a system that pays out monthly to our users. This will unleash an exciting amount of liquidity to the marketplace.
The third point is growing in importance. Our users are leaving their money in the system too much. Too much for what? Too much for the good of the entrepreneurs we are trying to serve. Last time I checked, approximately 40% of all repaid monies were unused and remained in our bank account -- in the form of "Kiva Credit". 50% has been relent and 10% withdrawn. That means that a sizeable amount of users have money that needs to be used. They could lend it to help someone who needs it, or they could at least withdraw it and buy a meal. Either would be better than the present reality of stagnant funds.
We have no expiration policy for this kind of stagnant Kiva Credit. In the last year, as an amateur lawyer, I've waded into the area of law we know as "escheatment" (pronounced uh-sheet-mint). escheatment has to do with what you do with other people's money when they don't claim it. For instance, what should a landlord do with a renters' deposit if the renter leaves without claiming it? In some cases, the landlord might need to "escheat" it to the government. It all depends and the laws vary state by state. Right now, we escheat your money to nowhere. It just sits there...for all eternity, and we remind you to use it. Once I get our General Counsel hired, we might fix this. We might figure out how to escheat it to someplace much more useful.
And now a final point. Hey you, reader of this blog. You have a lot of value -- stored value. And it doesn't accrue interest. So just do something with it. OK?
2008-02-06
Gone again
I leave in 3 hours to go on another trip. This time to Brussels via Washington DC and Amsterdam. It seems the only time I think to write on this blog is when I step away from the daily reality of being in this mad office.
Last time I wrote, I promised from Vegas to elaborate on our company's strategy in the coming weeks. My Vegas promise fell empty, since it's been six. I've been falling short in so many ways.
Tomorrow, I'll be at the National Prayer breakfast in DC. That's where Jess and I met at the turn of the millennium. I was in my final months as a student in philosophy at Stanford. Jess was student body president at Bucknell. She was invited, I snuck in via my sister Brooke who was running the event. Tomorrow, things will come full circle as I sit in awe as I watch Jess address the Breakfast as speaker.
Then, I'm off to Europe...gonna visit Amsterdam and a cluster of foundations associated with the Dutch lottery. In Holland, the National Postcode Lottery gives half of its profits to charity. Kiva was a lucky beneficiary this spring of the DOEN Foundation, which is the fund of the Dutch Charity Lotteries. The DOEN foundation took a risk on Kiva at a time when we needed it most. I'll be forever grateful to DOEN for helping us grow into a more mature institution from the fledgling startup we were at the time. After that, I'm off to visit Laurent in Brussels, who single handedly has put computers and cameras in the hands of our partners in Africa. Equipment like this has been a big barrier standing between our lenders and borrowers. I'm excited to put a face behind that legend that has become Laurent.
My work has taken on a schizophrenic tone in the last few months. Fundraising requires big dreams and an ability to absorb tons of feedback. Running an organization is been an exercise in structure, saying no, and avoiding distractions. Balancing both mentalities within the confines of a single day has been challenging. I have no cause to complain. Most of all, life has been a surreal dream for the past few years.
I was right, in December 2005. This project has definitely taken on a life of its own.
Last time I wrote, I promised from Vegas to elaborate on our company's strategy in the coming weeks. My Vegas promise fell empty, since it's been six. I've been falling short in so many ways.
Tomorrow, I'll be at the National Prayer breakfast in DC. That's where Jess and I met at the turn of the millennium. I was in my final months as a student in philosophy at Stanford. Jess was student body president at Bucknell. She was invited, I snuck in via my sister Brooke who was running the event. Tomorrow, things will come full circle as I sit in awe as I watch Jess address the Breakfast as speaker.
Then, I'm off to Europe...gonna visit Amsterdam and a cluster of foundations associated with the Dutch lottery. In Holland, the National Postcode Lottery gives half of its profits to charity. Kiva was a lucky beneficiary this spring of the DOEN Foundation, which is the fund of the Dutch Charity Lotteries. The DOEN foundation took a risk on Kiva at a time when we needed it most. I'll be forever grateful to DOEN for helping us grow into a more mature institution from the fledgling startup we were at the time. After that, I'm off to visit Laurent in Brussels, who single handedly has put computers and cameras in the hands of our partners in Africa. Equipment like this has been a big barrier standing between our lenders and borrowers. I'm excited to put a face behind that legend that has become Laurent.
My work has taken on a schizophrenic tone in the last few months. Fundraising requires big dreams and an ability to absorb tons of feedback. Running an organization is been an exercise in structure, saying no, and avoiding distractions. Balancing both mentalities within the confines of a single day has been challenging. I have no cause to complain. Most of all, life has been a surreal dream for the past few years.
I was right, in December 2005. This project has definitely taken on a life of its own.
2007-12-28
Las Vegas (airport)
I am now on a flight from Pittsburgh to Las Vegas and eventually back to SF. Jess and I spent the last week celebrating Christmas in Pittsburgh -- which was oddly warm this year.
I launched this blog a little over two years ago and did much of my first writing just after I quit my job. That was also the year I celebrated Kwanzaa for the first time; I never could find a black candle.
Oh man, so much has changed since then!
We had our annual board meeting in November. One thing we did was present a pretty aggressive budget. All in all, it adds up to about $4.7M in costs, up from just $1.7M in 2007 and $200K in 2006. The main drivers of the costs are training, relationship managers and audits. The staff costs associated with building an international partner base can be staggering.
That is some real growth and it was hard at first to swallow figures like that. Hey, but it's not us driving the growth. It's our lenders. They are demanding it. As I put it at a meeting with the Skoll Foundation a few weeks ago -- we feel like we are at a "go big, or go home" point in our history. Going small (or home) could be disastrous in a world as big as this one.
What did we learn this year? It boils down to three main lessons:
1) Lender enthusiasm is abundant
This is the biggest shock of the year -- the sheer enormity of enthusiasm and untapped demand in the space of online microfinance. In 2007, we went from $2M loaned to $18M in loans (cumulative). We went from 30K users to over 200K. We were on the Oprah Winfrey show, CNBC, the Today Show, ABC News, blah blah. Come on! That's crazy talk. Seriously, those numbers would have broken my brain a year ago. Scaling this model this year has felt like trying to fit the NBA finals into Stanford's Maples Pavillion -- not easy, but a lot of fun.
2) Scaling partnerships is difficult
We are reaching out to the long tail of MFIs. The microfinance world is colorful, scattered, bulging and full of promise. There are thousands of MFIs out there within our reach. That said, few of them are ready for truly commercial capital. Even more, those that are commercially viable are soaking in debt capital. Kiva is trying to change that game by creating a transparent, Internet based marketplace for MFIs of different shapes and sizes to reach out to the world of online lenders to raise capital for their borrowers. We are now helping around 80 of such organizations expand their reach...fast. Doing so can be a bumpy road. Many MFIs aren't equipped to handle rapid growth. We have found that out the hard way. The exuberance of this year has come back to haunt us at times. We've had a few MFIs flame out completely because of mismanagement and even fraud. Dealing with it has been heart-wrenching and has introduced a new pressure that sinks in as I sleep and jolts me awake in the morning.
3) Our users desire transparency above all
The Kiva community of lenders continues to amaze me. In effect, they are trading risk, and the hope of profits, for stories of impact and total transparency. The more transparent and site we can make this marketplace, the more our lenders respond. The site has gone through repeated, chronic and extended periods of inventory shortage. Instead of trying to artificially rush the marketplace and grow at an abnormal pace, we have learned to simply be OK with the fact that we can't grow the partner base as fast as the lender community demands. In doing so, we have built a level of trust and understanding with our users.
In addition, the site has seen MFIs with high delinquency rates and others that have collapsed all together. We currently have a 99% repayment rate, a 3% delinquency rate, and a refund rate of nearly 3%. The last statistic covers a number of loans that we refunded to users this summer because we learned that not all of the funds reached the intended recipients. We sent out a message to lenders indicating this fact and issuing the refund. The response was incredible and it turned out to be a teachable moment for both Kiva and it's lenders. Refunding loans is not something we intend to continue as a long term policy!
So those are the main lessons we learned this year. So what are we going to do? We reduced our high level strategic goals to four:
1. Double absorption capacity
2. Diminish fraud
3. Deepen lender engagement
4. Increase transparency
This blog is too long, and we are boarding now. I'll dive into these points in the weeks to come. Happy new year.
I launched this blog a little over two years ago and did much of my first writing just after I quit my job. That was also the year I celebrated Kwanzaa for the first time; I never could find a black candle.
Oh man, so much has changed since then!
We had our annual board meeting in November. One thing we did was present a pretty aggressive budget. All in all, it adds up to about $4.7M in costs, up from just $1.7M in 2007 and $200K in 2006. The main drivers of the costs are training, relationship managers and audits. The staff costs associated with building an international partner base can be staggering.
That is some real growth and it was hard at first to swallow figures like that. Hey, but it's not us driving the growth. It's our lenders. They are demanding it. As I put it at a meeting with the Skoll Foundation a few weeks ago -- we feel like we are at a "go big, or go home" point in our history. Going small (or home) could be disastrous in a world as big as this one.
What did we learn this year? It boils down to three main lessons:
1) Lender enthusiasm is abundant
This is the biggest shock of the year -- the sheer enormity of enthusiasm and untapped demand in the space of online microfinance. In 2007, we went from $2M loaned to $18M in loans (cumulative). We went from 30K users to over 200K. We were on the Oprah Winfrey show, CNBC, the Today Show, ABC News, blah blah. Come on! That's crazy talk. Seriously, those numbers would have broken my brain a year ago. Scaling this model this year has felt like trying to fit the NBA finals into Stanford's Maples Pavillion -- not easy, but a lot of fun.
2) Scaling partnerships is difficult
We are reaching out to the long tail of MFIs. The microfinance world is colorful, scattered, bulging and full of promise. There are thousands of MFIs out there within our reach. That said, few of them are ready for truly commercial capital. Even more, those that are commercially viable are soaking in debt capital. Kiva is trying to change that game by creating a transparent, Internet based marketplace for MFIs of different shapes and sizes to reach out to the world of online lenders to raise capital for their borrowers. We are now helping around 80 of such organizations expand their reach...fast. Doing so can be a bumpy road. Many MFIs aren't equipped to handle rapid growth. We have found that out the hard way. The exuberance of this year has come back to haunt us at times. We've had a few MFIs flame out completely because of mismanagement and even fraud. Dealing with it has been heart-wrenching and has introduced a new pressure that sinks in as I sleep and jolts me awake in the morning.
3) Our users desire transparency above all
The Kiva community of lenders continues to amaze me. In effect, they are trading risk, and the hope of profits, for stories of impact and total transparency. The more transparent and site we can make this marketplace, the more our lenders respond. The site has gone through repeated, chronic and extended periods of inventory shortage. Instead of trying to artificially rush the marketplace and grow at an abnormal pace, we have learned to simply be OK with the fact that we can't grow the partner base as fast as the lender community demands. In doing so, we have built a level of trust and understanding with our users.
In addition, the site has seen MFIs with high delinquency rates and others that have collapsed all together. We currently have a 99% repayment rate, a 3% delinquency rate, and a refund rate of nearly 3%. The last statistic covers a number of loans that we refunded to users this summer because we learned that not all of the funds reached the intended recipients. We sent out a message to lenders indicating this fact and issuing the refund. The response was incredible and it turned out to be a teachable moment for both Kiva and it's lenders. Refunding loans is not something we intend to continue as a long term policy!
So those are the main lessons we learned this year. So what are we going to do? We reduced our high level strategic goals to four:
1. Double absorption capacity
2. Diminish fraud
3. Deepen lender engagement
4. Increase transparency
This blog is too long, and we are boarding now. I'll dive into these points in the weeks to come. Happy new year.
2007-11-26
An Azerbaijani Christmas
Kiva is once again taking on an Eastern European/Central Asian flavor. As you check the website from now until the end of the year, you should see a high concentration of Bulgarians, Azerbaijanis, Moldovans, Tajikistanis and the like.
There are two factors strongly at play here. 1) The presence of many highly-dependable and scaleable micro-finance institutions in that part of the world and 2) The fact that loans from these regions are the least desired on the site. Recently, it's been taking 1 day on average for a loan to become fully funded. The Azerbaijani loans take 3.7 days to be funded on average and are only 30% larger in dollar amount. Why is that? Who knows...
Premal is in Kenya. Among other things, he is consulting with an ailing WEEC and helping kickstart our partnership with BRAC in East Africa. WEEC, as many here know, suffered a huge loss with the passage of Jedidah Waigwa last Spring. Ever since then, they have had trouble moving forward and are experiencing over 30% delinquency across their Kiva portfolio. This has raised an important question inside our organization: How much should we get involved in building the capacity of our partner base? How much should we intervene when a partner is in turmoil? In this case, we've pretty much made up our minds -- we are doing *alot*. More on that in the months to come...
BRAC -- the world's largest NGO(?) -- is a slightly sunnier development. BRAC is a modern marvel and has recently taken its recipe for microfinance into the eastern shores of Africa. As a Bangledeshi organization moving continents, one might perceive potential difficulties in setting up operations. None-so-far from everything we've heard. Interest rates: relatively low. Repayment rates: relatively high. Portfolio growth: extremely fast.
Premal had significant cargo to carry. The Kenyan and Ugandan border crossings can be intimidating. How would they react to a party with 25 cameras? Often, governments want to get into your goods. We haven't heard back, but I assume he arrived safe -- cameras and all. Often, cameras are a surprising last mile barrier between borrowers and thousands of dollars in low cost debt pouring through the Kiva website.
We have a donor -- Laurent Drion of Brussels -- who makes sure that lack of cameras are no excuse. Laurent, a venture capitalist, started one of the biggest Macintosh distribution businesses in Belgium. The man moves consumer electronics -- now to Africa. Thank you Laurent. Soon, cameras will be flashing for BRAC in Tanzania, Uganda and Southern Sudan. Sudan? You can do microfinance there? If anyone can, BRAC can.
2007-11-14
Spring 2000
When I was an undergrad at Stanford, I had trouble articulating what I wanted to do after school. The best I could say was that I wanted to be an "entrepreneur." That, however, is not very specific -- more of an adjective than an occupation. I racked my brain in my free time to try and figure out how everything would eventually materialize.
Graduation was a looming worry. School ended in June. By April, I had secured my first job....summer intern at a startup called "Pinacus." We were 11 guys and 1 girl, working out of an apartment in Menlo Park. I worked in the bedroom, programming in Java and doing random tasks around the apartment. We were trying to create the world's first "content marketplace." That might have been a good idea, except for what happened in the Spring of 2000.
I had no concept of how a stock market crash could effect our small angel-backed startup, but it didn't matter. By July, I was unemployed. We folded up shop, broke our lease, and returned half of the angel investment. Our model needed a significant round of Venture Capital. I watched the founders come home disappointed day after day from their meetings on Sand Hill road. It wasn't their fault -- most VCs were completely clamped shut.
Freedom was good. A week after the layoffs, I boarded the back of a U-haul truck on the way to New York. Garth was moving to Manhattan and I tagged along. He didn't let me drive because he didn't trust me behind the wheel. I spent the entire voyage in the cargo area in the back. We arrived in NYC in 3 days and only stopped once for any period of time. Omaha baby.
Graduation was a looming worry. School ended in June. By April, I had secured my first job....summer intern at a startup called "Pinacus." We were 11 guys and 1 girl, working out of an apartment in Menlo Park. I worked in the bedroom, programming in Java and doing random tasks around the apartment. We were trying to create the world's first "content marketplace." That might have been a good idea, except for what happened in the Spring of 2000.
I had no concept of how a stock market crash could effect our small angel-backed startup, but it didn't matter. By July, I was unemployed. We folded up shop, broke our lease, and returned half of the angel investment. Our model needed a significant round of Venture Capital. I watched the founders come home disappointed day after day from their meetings on Sand Hill road. It wasn't their fault -- most VCs were completely clamped shut.
Freedom was good. A week after the layoffs, I boarded the back of a U-haul truck on the way to New York. Garth was moving to Manhattan and I tagged along. He didn't let me drive because he didn't trust me behind the wheel. I spent the entire voyage in the cargo area in the back. We arrived in NYC in 3 days and only stopped once for any period of time. Omaha baby.
2007-10-26
Do me a favor?
Vote for Blue Energy as CNN Heroes
Blue Energy and Mathias Craig are in a last minute battle for the top spot in the CNN Heroes poll. At stake is a $25K grant. A grant like this would be a h