Friday Night Lights

The high school football season is just kicking off.  Young ballers are getting the chance to prove themselves on the fields and under the lights of stadiums around the country.   Me, I'm hoping to finish the CY 07 season strong --  proving myself in the cubes and under the fluorescent lights of the office.  Last night, our team was put to the test.

We spent the night redesigning the repayments part of Kiva's website.  It's about the 5th time Premal, Ben and I have taken a crack at this.  This is one of several ways we are hoping to make life easier for our Field Partners by the end of the year.

A Field Partner is typically a small to medium size microfinance institution (MFI) who uses our site to raise money for their borrowers.  Our Field Partners are located in over 35 countries now.  Kiva can add a significant amount of overhead to the operations of a Field Partner.  Uploading loan applications isn't necessarily easy.  Everyday, loan officers and MFI administrators are uploading loan applications to the website.  They are often doing so from places where a page-load takes 20 seconds.  It takes about 10 page loads to upload a business, including an image upload, when things work out.  We are often talking about 4-5 minutes per business upload.  We have Field Partners that have over a thousand businesses funded.   

As a user, when you loan to a business on the site, you usually receive payment notices every month for every business you loan to.  The repayments are collected and registered on the site by our Field Partners.  For each of the thousand businesses that this Field Partner administers, the partner needs to register repayments once monthly. 

About a year ago, we realized that many of our Field Partners were having trouble doing so.  The sheer number of page loads was making it prohibitively difficult for a Field Partner to register repayments on time, even when the actual borrower collections in the field were happening like clockwork.  Thus, we introduced "exception-based" repayments.  The idea, used widely in MFI accounting systems already, is to have regularly scheduled payment registered automatically in a system unless the loan officer marks an exception -- an event signaling that something went wrong and the borrower did not pay the full amount.  Since borrowers typically repay 95% (or so) of the time, loan officers only need to register something 5% of the time. 

Kiva's first whack at exception based payments was very crude.  The feature was written by me in late '06 in between blog entries and trying to keep the site up.  Many of our Field Partners adopted the feature out of necessity and it saved them a lot of time.  However, it was very difficult to mark an exception, so most of them never did.  Thus, many of our Field Partners never mark exceptions and just repay all of their loans on time, even in the 5% case where the borrower defaults.  This creates misleadingly high repayment stats on the site and we are working to correct that. 

In addition to that, we are rolling out a number of features to further reduce the work required by our Field Partners and increase transparency.   Group Loans will go live on the site this week.  This will allow Field Partners to post up groups of up to 50 on the site as an individual loan application on the site.  Group-lending is common practice in microfinance, but was not well supported by Kiva until now.  In addition, we will be introducing local currency support for all of our Field Partners.  This will allow the disbursement and repayment amounts on the site more closely mirror the actual accounting books of each MFI.  This creates more transparency around financial flows.  It also paves the way for a future reality where our partners will not need to bear currency risk.   Hard currency lending has fallen out of favor in the microfinance world and we hope to soon be on the cutting edge of local currency lending. 

This blog became rather dense.  It started out talking about football and ended in currency risk.  Sorry about that.  I'm going out to shoot pool in the Mission with my friend Mathias Craig.  Have a great night.