What will a self-sustainable Kiva look like?

[Guest]

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[AccountAbility]

We think of the MFIs as the main Kiva beneficiaries.  IF this is so, then we need to focus on the MFIs for ways to gain self sustainability.

One of the unanswered questions for me is whether Kiva monies are economical to the MFIs on a net basis.  We as lenders regularly toot the horn of this "free" money, but the requirements from Kiva have a cost.  It costs them to write up each loan with pictures, reporting on individual loan repayments, posting journals, being subjected to audits and spot reviews by Kiva and its representatives and so forth.

Can Kiva deliver efficient ways to comply with all this and also charge either interest or a fee to the MFI for use of the "free" money?  Or is one of the reasons that it has been hard to sign up MFIs due to the costs being perceived as equal or outweighing the benefits?

Dan

[Dottie b]

I suspect Premal could tell us the answer to that.

Dottie B

[dh]

Premal indicated (Silicon Valley Microfinance Network Sept 2007) that the cost to the MFI for posting and maintaining client profiles for Kiva was 0.2-2% depending, among other things, on the size of the loan. Roughly 1.3% was offset by the lenders absorbing loan losses, for a net cost of 0-1%. "For most MFIs, Kiva represents the cheapest U.S. dollar debt capital source available." (These figures do not consider currency risk or hedging costs.)

[AccountAbility]

Thanks for reminding me of that presentation.  I wonder how that scales since some of Kiva's requirements are essentially fixed costs while others are variable?  For the smaller, emerging MFIs (smaller in terms of Kiva portfolios) that seems a bit low.

Dan

[Dagfinn]

I have just read the blog on social edge about the 40% of funds not being put to use.  I was of the impression that if I let my Kiva credit stay unused and used fresh money Kiva itself got the interest accrued- am totally mistaken?

Dagfinn A.

[cpbailey]

Dagfinn,

You are correct that Kiva does get interest on the unused Kiva credit.  They put it at the overnight rate, which presumably is low.  They must be able to transfer this to the rightful owner upon request, so there is no locking the funds for rolling 6 month terms.  I would encourage you to loan the credits for a couple reasons.  First, you must pay to convert to dollars from Euros.  Secondly, it is a currency risk to just leave the funds in dollars.  Lately, your dollars are worth less and less if you were to convert them.  Finally, it is just easier to relend!  You can always add more if you see a lot of loans you MUST have.

Unless you feel the dollar is about to surge in value...   

Colette

[wind5001]

In a way, Colette, that is what I am doing right now: I have feeble resources (which I must have mentionned countless times by now!), but the $ is so weak, I only pay about 16 euros for the $25. I invest money now, because later, when the $ resurges, I might be thinking about withdrawing some of the resources invested now...well, and maybe I am not. But then I can still be happy that I invested in Kiva when it was comparably cheap for me...

[RichardF]

This is my reply to Ronan's suggestion to have Kiva's main revenue stream come from advertising on the site.

In a nutshell, Ronan suggested Kiva model its site after Facebook or LinkedIn to generate revenue from advertising, and then listed a number of benefits to that approach.  First off, I'll say Kiva generating some form of revenue stream from Internet advertising is a great concept!    Of course, exactly how that might get implemented is the rub.

When I read Ronan's suggestion, another style of nonprofit/for profit arrangement came to mind - the Wikimedia Foundation, Wikipedia and Wikia.  Essentially all the brainchild of one brain, these three organizations weave a tangled web, but simplistically and loosely can be thought of for this suggestion as an overarching parent foundation, a nonprofit arm and a for profit arm.

When I went to a Wikia site I've highlighted elsewhere to find an example of the style of advertising they use, this is what I found!



Now, I'm not saying Kiva should get MicroPlace as an advertiser, but hey, don't some interesting possibilities come to mind?! 

To get a little closer back to the point, here's an approach that seems to have some long-term potential to me.  The parent organization, Kiva Microfunds, runs the show and operates the nonprofit, zero interest and advertising-free "Kiva.org".  It develops another spin-off or simply uses the one it already has for managing its overnight float account to operate "KivaToo.com"!  KivaToo accepts advertising and regularly sends checks back home to help support the more asthetically-minded family members.  And this for-profit sibling looks into the possibility of setting up some sort of broker/dealer arrangement with selected partners to offer modest levels of income to lenders, while still offering below market rates for loans to its partners.  One way to help offset other costs to these partners might be to eliminate journal requirements and simplify listings.

[AccountAbility]

This is my reply to Ronan's suggestion to have Kiva's main revenue stream come from advertising on the site.

One way to help offset other costs to these partners might be to eliminate journal requirements and simplify listings.

Of course, some MFI Field Partners are already availing themselves of the cost savings of journal elimination. 

Dan

[JonC]

I'd love to read Mr Yunus' book. MFIs can be very profitable which why I proposed that KIVA look into taking a stake in the MFI's it partners with or at least some of them. I see that as a sustainable approach, as far as development of microfinace is concerned. I dont think that KIVA and similar organizations should look to stay exclusivley in microfinace. I MUST read the book but it seems to me that Mr Yunus could be refering to mechanisms of social investing other microfiannce. If that is indeed the case, then that's tremendously exciting! The main goal for me should be to create assets which will foster development for years to come.