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.