Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-

[Guest]

.

[rashah]

This just got announced...we at Ernst & Young are providing up to $1m of resources to assist in Kiva's borrower verification program.  We're really excited about it and I just wanted to share it with you...


Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-Loans to Entrepreneurs in the Developing World

Last update: 2:55 p.m. EDT Sept. 24, 2008
NEW YORK, Sept 24, 2008 /PRNewswire via COMTEX/ -- Commitment announced today at the Clinton Global Initiative Annual Meeting
NEW YORK, Sept. 24 /PRNewswire/ -- Kiva.org, the world's first person-to-person micro-lending website, has received a donation of in-kind resources from Ernst & Young, the global professional services organization. As part of its commitment to entrepreneurship and corporate responsibility, Ernst & Young will mobilize its skilled professionals around the world to assist Kiva.org in increasing the transparency of its micro-lending process. This new partnership was announced and highlighted today at the Clinton Global Initiative Annual Meeting.

Kiva.org partners with micro-finance institutions around the world, connecting developing world entrepreneurs in need of a loan with individuals who want to contribute loan funds via the internet. To date, Kiva.org has facilitated over $43 million in loans from over 337,000 Kiva.org users, to 60,000 developing world entrepreneurs, including carpet weavers in Afghanistan, goat herders in Uganda, and farmers in Ecuador.

Ernst & Young and Kiva.org will now work together to perform procedures related to the borrowers from the micro-finance institutions. These procedures include checking a borrower's identity, the loan amount and term of the loan, and the amount of the investment. This activity is central to Kiva.org's model and its ability to attract lenders, provide transparent and accurate data, partner with Micro-Finance Institutions, and ultimately deliver loans to individual borrowers.

"Kiva.org's model relies on the accuracy of information provided about the entrepreneurs receiving loan funds through the Kiva.org website," noted Premal Shah, president of Kiva.org. "We are constantly working to make the lending process more transparent, to show what effect it has on the people and institutions lending to it, borrowing it, and managing it along the way. Our new relationship with Ernst & Young is designed to continue to improve the oversight and accountability in this process. "

Ernst & Young will provide up to US$1 million of in-kind resources over the next three years to assist Kiva.org in instituting these new controls.

"The work we will be conducting with Kiva.org is well-aligned with what we see as Ernst & Young's broader corporate responsibility, which is to put our people's workplace skills toward making a difference in our communities around the world," noted Jim Turley, Ernst & Young's Global Chairman and CEO. "We recognize the power of entrepreneurship for job creation and poverty alleviation and we are pleased to be able to use our experience to help Kiva.org assist these unique and innovative entrepreneurs in developing countries."
Ernst & Young's commitment to action with Kiva.org significantly expands the reach of its work in the area of entrepreneurship and corporate responsibility. In addition to the Kiva.org partnership, Ernst & Young provides pro-bono technical assistance to a select group of high potential entrepreneurs through the Ernst & Young Corporate Responsibility Fellows Program. In addition, through a global "Entrepreneur of the Year(R)" (EOY) awards program, Ernst & Young provides broad-based recognition for the accomplishments of entrepreneurs around the world. As part of the EOY program, Ernst & Young collaborates with the Schwab Foundation for Social Entrepreneurship on a Social Entrepreneur of the Year Award.

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 130,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve potential.

For more information, please visit www.ey.com

[AccountAbility]

I think this is at least 90% positive, especially as Kiva has needed resources of this nature in various settings.  So I am sure it will be put to good use.

The 10% caution would be if the "suits" arrive and attempt to superimpose standards on an area of commerce which has historically been outside the realm that "normal" bankers felt they could participate in.  Grameen Bank essentially had to defy GAAP (the Generally Accepted Accounting Practices) in order to figure out a way to help the poorest of the poor in this manner.  If the result is to exclude that segment of borrower who can't meet these "standards", we may have moved backward.  (That caution expressed, I reiterate that it is only a 10% concern. )

Dan

[rashah]

I think this is at least 90% positive, especially as Kiva has needed resources of this nature in various settings.  So I am sure it will be put to good use.

The 10% caution would be if the "suits" arrive and attempt to superimpose standards on an area of commerce which has historically been outside the realm that "normal" bankers felt they could participate in.  Grameen Bank essentially had to defy GAAP (the Generally Accepted Accounting Practices) in order to figure out a way to help the poorest of the poor in this manner.  If the result is to exclude that segment of borrower who can't meet these "standards", we may have moved backward.  (That caution expressed, I reiterate that it is only a 10% concern. )

Dan

Dan, to be clear, we're not providing traditional accounting services.  We're helping Kiva in its borrower verification program by providing people from our offices in developing countries.  We probably won't wear suits when we do this work, so you can rest easy!   

The program simply takes a sample of borrowers per partner and checks that the borrower exists, the loan was used for the purpose advertised, repayments are actually being made, etc.  Pretty simple stuff, but very useful for Kiva as it doesn't have the resources to have so many people in so many developing countries.

[AccountAbility]

I hear ya -- and we appreciate the support E&Y is giving Kiva.  (So maybe my concern is just 5%.  )

Dan

[wind5001]

I see this as a great step forward. Let's face it: Kiva has had an issue with MFIs not performing well. Admitted, those were early MFIs mostly, but we also have recent cases like MIFEX and Wedco for a while. Instead of having to clean up a mess after things went wrong, this might assist in having a "neutral" person looking into the files and operations of the MFI to ascertain that things are going alright.

My first reaction was: Leave those MFIs alone, they know what they're doing. But thinking about it more, I really think this is a good way of verifying that things are going alright.

[sidetrips]

Nov. 2008.
There is an article on Kiva.org's continuing efforts at transparence and keeping the trust of its lenders.  http://www.atelier.fr/e-marketing/10/25092008/vers-une-certification-de-la-qualite-des-echanges-micro-financiers--37206-.html

An unofficial translation:

"Towards certifying the quality of micro-finance exchanges!"

Kiva.org will benefit from the expertise of Ernst & Young to make its control processes more trustworthy and efficient.  The goal:  to guarantee transparency in the activities of its Internet lenders.

To attest to the transparency of its transactions, the non-governmental organization Kiva.org is announcing that it has received the support of Ernst & Young.  The audit department is going to make available over the next three years the amount of $1 million to assist this specialist in intermediary micro-financing in order to improve its monitoring and control processes.  The attention will be especially important with regard to the solutions for verifying the borrower's identity, the limitations surrounding the loans, and the loan amount.  "This partnership shows that Kiva is in the midst of taking on a much more weighty dimension, which is a good sign.  For the website and for person-to-person micro-lending sites as a whole," comments Arnaud Poissonnier ,the president of the French micro-loan site Babyloan, for _L'Atelier_.  This leader at Babyloan thinks that Kiva, by acting in this way, shows that is really following up on itself with a process that uses collected data, investigations on the ground, audit controls, ....

Ensuring Its Credibility

"This type of approach is an essential marketing strategy for avoiding its lenders from only thinking that the site is a swindle," he adds.  A risk that this type of institution is vulnerable to.  It's difficult in reality for the lender to check that the money he entrusts to the Internet site is actually going to the junior entrepreneur residing in the developing country, to a person that he will never be able to meet.  "Micro-lending sites have a real need for credibility.  They must ensure Internet users that the flow is indeed going to micro-finance institutions (IMF) and especially to the final recipient and not used for, let us say a bit stereotypically, financing illicit drugs or, the true risk, for other IMF needs, like buying computers or employee salaries."

Separating Loans from Anonymous Aid

Actually, micro-finance institutions are not banks. And they often have fairly basic information systems.  This means that a certain number of them have trouble posting money and distributing a given amount to the person it is for.  Now, if they can't do so, the Internet user's money becomes anonymous aid, which is simply no longer the goal of micro-lending.  Going back, micro-lending sites must also show that the IMF is capable of repaying the lender on time.  Note:  to ensure transparency for French lenders, Babyloan, still just starting off, has a stake in agreements with reputable IMF's, like Entrepreneurs du Monde.  The company also has a stake in a very tight legal framework in order to limit any overstepping of bounds. 

[Henry]

This was popular today - all different IP addresses! 

Guest (IP)  02:35:04 PM Viewing the topic Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-.
Guest (IP)  02:34:46 PM Viewing the topic Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-.
Guest (IP)  02:34:45 PM Viewing the topic Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-.
Guest (IP)  02:34:44 PM Viewing the topic Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-.
Guest (IP)  02:34:24 PM Printing the topic "Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-".