Kiva Chronicles

Blogging --> Tweeting

Matt Flannery — Sun, 21 Jun 2009 12:16:30 -0400

I blogged for 4 years, now I'm gonna try twitter. For the next six weeks, I'm going learn to live the life of a tweeter. If it goes well, maybe it will stick. Wish me luck and follow me here:

https://twitter.com/mattflannery

US Launch, and an end to this blog?

Matt Flannery — Wed, 10 Jun 2009 07:20:00 -0400

Hi Friends,

It's 5 AM, I showed up at the office today to watch Good Morning America with some Kiva engineers. I showed up with a sleepy head, only to find an ABC news truck outside. We are the lead story in SF! (and I was doing an interview in my sweats with 2 hours sleep). So much for all that media training....

We are hoping to keep the site up throughout this press blast. We'll see...

We are launching loans in the USA thanks to help from Maria Shriver, Accion USA and Opportunity Fund. It has been over a year since the First Lady showed up at the office and inspired us to think about turning our gaze inward toward low-income entrepreneurs in our own backyard. After a ton of legal research and business development, we are finally here. I am immensely proud. So, I'm going to watch the day unfold and take a bit of a break. It's been a big few weeks!

You may notice that this blog has become quite stale. it became like that for a few reasons. First, for much of the time I was writing a paper "Kiva at Four", which you can find here:

http://media.kiva.org/INNOV-SKOLL-2009_flannery.pdf

It's a brief recap of the past 2 years since I published another paper here:

http://media.kiva.org/INNOV0201_flannery_kiva.pdf

Lastly, I've just been taking life a little slower and focusing internally on Kiva operations. it's been fruitful!

I don't know when and where I might blog again, but it won't be for a while. In the meantime, the Kiva blog has become much more interesting: http://www.kiva.org/about/inside

Thanks, I'm gonna go watch TV now....

Matt

Contours of a Crisis (III)

Matt Flannery — Wed, 28 Jan 2009 22:55:00 -0500

Powerpoint presentations put up by VCs and CEO bloggers were being hurled around the net. The outlook for the economy looked dire. The digerati were giving strong advice, but it was double-minded. One one hand, the smart CEO takes a sober look at the economic situation and reacts with fiscal *conservatism.* On the other hand, the smart CEO takes a bold look at the competitive situation and reacts with tactical *aggression.*

Holding these opposing mentalities in your head at one moment is difficult enough. Holding these opposing mentalities in the collective consciousness of an organization seemed even harder. I had just got back from Japan. Certainly I was Buddhist enough for the challenge.

But the data was mixed. The holidays were looking pretty good. In fact, loan volume was actually *up*. It was just deposits -- or new money -- that were down 25% since October. In terms of total loan volume, however, were were on track to have a record December.

This speaks a bit to the uniqueness of our business model. There are not many models which *necessarily* grow year over year, even if new customers drop off. This is because, simply put, most lenders never withdraw their money. Most lend and re-lend into apparent perpetuity. The re-lending effect creates an amount of resilience not shared by many businesses.

So, despite the financial hurricane, Kiva was growing. However, our network of 100+ MFI Field Partners were being buffetted. MFIs are being affected in a few different ways.

First, there is a decline in remittances across the globe. Declining remittances translates to a decline in consumer spending.   A keeper of a small store in Bolivia can no longer ignore what is happening in the economies of North America and Europe. Remittances coming from the global North are in sharp decline. Customers to that store who depend on family members abroad have seen their incomes plunge. The result is a decrease in the purchasing power of local consumers that trickles down to the poorest families. As a result, MFIs are concerned with their portfolio quality and the ability of their clients to run businesses dependent on the health of remittance dependent economies.

Second is a decline in exports. I recently experienced the joy of visiting a handful of clients outside of Phnom Penh. Most of them were silk weavers or tied to the modern silk trade in some way. Their future is uncertain. A silk weaver in a remote province of Cambodia usually sells her product -- elaborately woven rolls of silk -- to a middleman who in turn sells to exporters. Exports of silk took a sharp fall in 2008, thanks to softening international demand for garments. When international demand for silk slows, so do the looms of weavers of Cambodia. If you are an MFI lending to those weavers, you will probably think twice before extending another loan to another weaver.

Third, MFIs are concerned with a tightening on the part of wholesale lenders. Wholesale lenders are banks and funds that lend to MFIs in order to help MFIs grow.    Kiva is a wholesale lender of a very unique breed. We started Kiva in a climate when commercial banks were beginning to invest in top-tier MFIs. If you weren't commercial, it was hard to get anyone in this field to listen. It seemed inefficient to raise $25 a time from millions of people when you could raise more money faster from a big bank or a hedge fund. Three years later, some of those banks exist no longer. Almost every commercial funder is reducing the scope of it's MFI lending practice.

Over the past three years, Kiva.org attracted hundreds of new lenders per day.   Today, we are closing in on the 500K lender mark. Half a million users sounds huge by non-profit standards. However, in the world of e-commerce or social networking, this is a drop in the bucket. What if we could extend that number to 10M or 100M users? It sounds far-fetched, yes. However, on the Internet, you only need to get a few things right -- really right -- to get that type of scale. We are still working on it.

I'm alluding here to the possibility that the actions of millions of people lending small sums may prove to be a dependable source of capital for the microfinance sector. It is a false competition to pit individual lenders against Wall Street or domestic banks.   However, our experience in just three years says something. If nothing else, it speaks to the power of individuals to make a difference and to create a dent in the biggest problem of all: inactivity.

Sorry, I guess I had a lot to write. This to be continued once more.....

Contours of a Crisis (II)

Matt Flannery — Wed, 07 Jan 2009 18:50:00 -0500

It's been about two months since I wrote my last real blog entry. I was in Japan. At that point, I was noticing the first winds of the financial hurricane land on the shores of Kiva. There was no better place to ponder these things than while Stormtrooping Akihabara. I've been mostly back in SF since that time. Here's what's happened since:

Pretty soon after returning, we started putting together a bunch of different budgets to deal with different scenarios. I was determined we would be ready for whatever hit us. As a young CEO, the last thing I was seem unprepared for a financial crisis and I already felt like I had a little catching up to do. I was not going to be caught dead looking stupid...

Our budget for 2008 arrived at about $4.7M when the year ended. By that, I mean that the total costs of running Kiva in 2008 totaled $4.7M. During this time, our user base released about $37M to the low-income entrepreneurs listed on our site. So, for every dollar spent on operations, our lenders sent about $8 for loans. I'm proud of this, but want to stretch it much farther in the future. I imagine this ratio can expand astronomically within the next decade.

Now, for a quick tangent:

Kiva, today, is a larger operation than you may think. We have about 35 staff members now -- almost 20 of which are focused on the microfinance-side of the business. The microfinance team is responsible for a number of activities with regard to our Field Partners. MFI due diligence, selection, training, monitoring, tech support and the Fellows program are among their primary activities. The other 15 of us are focused on making the website, building the community, administration and governance.

In the 90's, the idea of "percentage overhead" came into vogue as a key measurement of non-profit performance. Essentially, this percentage represents the percent of funds directed towards "overhead" as a percentage of the total funds spent by a non-profit. To calculate the ratio, the non-profit needs to decide what expenses are for "programs" and what expenses are not. Funders and various websites rate non-profits according to their "efficiency". The less you spend on overhead, the more efficient you can become. The logical conclusion of this line of thinking is that the ideal organization is one that barely exists. Thankfully, the percentage overhead concept has since been largely abandoned as an

The percentage overhead metric is especially useless when applied to Kiva. Kiva is a different beast, primarily because we do not take ownership of the funds that our users direct towards entrepreneurs on the site. To be more specific, *none* of our expenses go to the people on our website and *all* of our users loans go to the entrepreneurs. Therefore, our balance sheet reflects only organizational expenses. The $37M, for 2008, is nowhere to be found when we file our taxes to the IRS. This is because it was housed in a separate legal entity (Kiva User Funds, LLC) which is essentially a clearing house for funds which are owned by the lenders and borrowers on the site.

You could argue that our entire $4.7M budget is *overhead*. Or, you might argue that some percentage of our 35 member staff actually carry out programs. For instance, is a staff member who trains MFIs how to use Kiva in Peru overhead, or are they programmatic? What about an engineer in SF that makes software that allows MFIs to upload entrepreneur profiles? Certainly, that staff member is serving the poor. The IRS, it turns out, would consider the engineer to be "overhead", and the trainer to be "programmatic". In fact, I think the IRS would imagine about 1/3 of our expenses ($1.5M) to be "overhead". The result is an org with 33% overhead. That sounds like a lot. But wait, what about that $37M we sent to the poor this year. If we include that in the equation, our "percentage overhead" tumbles to about 4% ($1.5M / $3M + $37M). So what are we, a 4% overhead organization or a 33% overhead organization? Who knows. I don't devote much to this semantic puzzle.

End of tangent:

Upon returning from Japan, it was our turn to recommend a spending plan that dealt responsibly with the uncertainty in the global economy. I worked closely with Premal and our CFO Jen Hamilton to put together various scenarios. First, we put together a "steady state" budget which prescribed normal growth similar to that we witnessed in 2007. Second, we assembled an "austere" budget, which involved a slight contraction in loan volume, a freeze in hiring and an end to any unnecessary spending. Third, we prepared for total disaster. A "crisis" budget was drawn up...which was characterized by a precipitous cliff in loan volume followed by a sharp rise in user withdrawals....a "run on the bank" if you will. It took a few weeks to put these together. Next, we had to decide which budget to recommend to the board....

(To be continued, this is getting too long)

Kiva Borrowers on Obama

Matt Flannery — Thu, 13 Nov 2008 01:27:59 -0800

This is so interesting, I had to post it

If you are serious, you can become somebody!

. Zack Turner, our newest Kiva staff member and friend, filmed this prior to the election out in Kenya.

http://www.youtube.com/watch?v=j8vf-yKwEAU

Contours of a Crisis

Matt Flannery — Sat, 08 Nov 2008 02:00:34 -0800

I'm still in Japan, this time on a bus passing by Yokohama right now. Headed home today.

I spent a large portion of this autumn in Asia. It helped me step out a bit from my situation and get some perspective. From over here, my life and my country look fractured, but full of promise.

Last night I was invited by a Tokyo entrepreneur friend to a small Kiva hang out. His bar has become kind of a cult locale for American entrepreneurs doing business in Tokyo. There are famous folks signatures all over the door, a couple DJ's spinning records and video on the wall. The place could hold about 30 people tops. Everything in Japan is *so hip*.

In addition to nightclubs, my friend has a "side business" on SecondLife.   He owns an avatar prostitute which operates automatically on a script 24/7. The avatar needs no maintenance and just goes about her business without manual operation. It charges actual money for the delivery of its virtual services and gets paid -- paid well. Apparently, the other avatars line up for this kind of thing.

Earlier this year, the business was bringing in thousands of actual dollars per month. Despite what you may think of the morality and decency of the business, its a pretty efficient money making scheme. That is, until recently, when the profits took a steep dive.

My friend mentioned business has almost completely dried up lately for the avatar. "Why do you think?" I prodded.   "Subprime", he said without hesitating. That ended the story.   He had to lay her off.

A Japanese robo-prostitute avatar, laid off because of american mortgage foreclosures and the ensuing fallout. If this doesn't prove we are all interconnected in this world, nothing will.

In Cambodia, there has been a slowdown in exports of textiles. The textile industry is one of the main sources of employment so this is having a big impact on the economy. Garment factories are in danger of shutting down -- possibly creating thousands of new textile entrepreneurs.

The existing set of independent silk weavers and seamstresses are making less. MFIs are reducing the maximum sizes of the loans they offer to individuals in order to reduce their exposure to the risk of falling exports.

In order to grow, MFIs access pools of debt and equity from a variety of sources. International MF funds help with this, so do local banks, so does Kiva and the hundreds of thousands of individual international lenders that make Kiva what it is.

My guess is that both domestic and international wholesale institutional lending to MFIs will significantly tighten up in the year to come, if not already.   This will happen despite the fact that MFIs across the world pay back very dependably -- because the poor pay back dependably.

Will Kiva tighten just the same? It's too early to tell. We seemed immune to the trend for most of 2008. Our loan volume is still growing steadily despite seasonal ups and downs. However, if you look a little closer, you can see a potentially alarming trend. *New money* has fallen lately.   Relending has taken over as the majority of lending. Check out this chart below, the blue area represents new cash deposits per month at Kiva. The green is total lending:

Is the economy the cause of this? Or is it something else?

Stormtrooping Akihabra

Matt Flannery — Tue, 04 Nov 2008 17:36:39 -0800

I had a surreal nite in Tokyo last nite, thanks to Joi Ito and the people at Digital Garage here in Japan. These pictures really need no explanation...

For some context, check out Joi's photo-stream

Silk Island

Matt Flannery — Mon, 13 Oct 2008 05:57:42 -0700

I spent yesterday at the Russian Market with Sanjaya, Mark, John, Teresa, Brooke and Zvi. It's a mad, frenetic place full of textiles, gucci bags, furniture and fake software. At the end of the labrynth are the tailors. An enticing proposition for foreigners is the prospect of getting clothes made custom. I couldn't resist. For a hundred bucks, I got a suit and two shirts made to match every inch of my amazing body.

I spent today on an island right outside of Phnom Penh. Mark and the staff of Maxima Microfinance took us to see three Maxima-Kiva borrowers. It's an island famous for its weavers. There are about 3,000 families on the island, 80% of which make their living from weaving silk. We got the chance to visit 3.

Most always women manage the household. We found her at her house which sits on stilts above the rain soaked plain. Under the house, on the dry side, sit a series of massive silk looms operated by her and her daughters. Her sons are blacksmiths. The family operates as a financial unit, managed by Saret. We spent an hour there and attempted to break down exactly how her silk business works.

Saret received a loan from Maxima months ago. She used the loan to buy white silk from Vietnam. She can buy 1 bag of threaded white silk for about $60, from a middleman who comes across in a boat from the city. The first thing she does with the silk is to die it according to changing preferences of the middleman. After dying it, she spools the silk, and gets it ready to place on the loom. She then gets the loom configured match the complicated patterns we see on dresses and shirts. She pays $5 to the island expert to do so and to rent the suggested pattern.

Once the silk is died and the loom is configured, it's time to make the pattern. Saret's daughter spends 10 hours a day weaving the thread through the loom intricately. There's no room for error. Watching the minute pattern develop line by line is absolutely amazing.

From 1 silk bag, a weaver can produce 3 long rolls of finished material -- one roll per 7 days. She takes the rolls to the ferry dock where she can be assured a guaranteed $65/roll sale back to the middleman The $60 Vietnamese silk bag transforms into $200 in sales after three weeks, tons of labor and a number of extra costs.

Saret has 10 children; 6 daughters and 4 sons. Going to school in Phnom Penh is expensive because of the transport costs. One by one, her daughters have quit going to school and returned to be weavers on the island. Their silk business appears to be growing -- Saret has taken out larger and larger loans over the past few years to buy more and more silk. The fact that her daughters quit school is the main driver of growth. The loans enable the family to buy larger and larger amounts of silk every year. She's paid back each cycle on time. The Maxima loan officers meet her monthly at her home, saving the boat ride.

It's a story of incremental growth, stability, smoothing and financial literacy. Microfinance has been called overrated because it is often sold with a rags to riches narrative. It's a uniquely American narrative that makes it particularly appealing in the states. However, it rarely represents the reality in the field. Poverty alleviation -- when it happens -- is usually found in a series of small victories. It can seem to take forever.

I'm picking up my clothes tomorrow then heading home. I'll be looking good. Also, I'll be looking at the silk rack. Maybe I can spot that purple and gold diamond pattern from the island.

Moral Hazard with Ducks

Matt Flannery — Thu, 09 Oct 2008 05:13:38 -0700

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.

Now in Singapore

Matt Flannery — Sun, 05 Oct 2008 04:56:40 -0700

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...

Kiva, AMEX

Matt Flannery — Sat, 20 Sep 2008 17:25:54 -0700

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.

Mission Unrest

Matt Flannery — Sun, 14 Sep 2008 22:08:16 -0700

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.

What Happened

Matt Flannery — Mon, 08 Sep 2008 09:22:43 -0700

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.

Liquidity and Community

Matt Flannery — Tue, 26 Aug 2008 21:58:10 -0700

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.

Farewell Mr. Capstick

Matt Flannery — Wed, 16 Jul 2008 07:42:46 -0700

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!