KivaFriends Liaison: call write-up (most recent: 10 JANUARY 2011)

[Guest]

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[KFLiaison]

Here are the notes I took and wrote up for the first KivaFriends Liaison call with Liz Harmon, Thurs. 26 Feb 2009.

I spent an hour Thurs. 26 Feb 2009 on the phone with Liz Harmon, Kiva Customer Service Manager, in our first scheduled KF-KFLiaison call.  It went very well, and although we're still trying to work out processes and schedules, and how to make this on-going partnership work well for both KivaFriends and for Kiva.

Here is the list of questions I sent Liz for discussion at this call:

*   A generalized concern was expressed about the overall financial health of Kiva as an organization with questions about their future plans for financial stability.  Is it possible to get a snapshot of the current state so we know how dire things are?
 *   An update is needed on whether Kiva has a final stance on the subject of "what happens to abandoned Kiva account funds".
 *   The wording on the "0% donation" line on the newly modified donation page presented during check-out seemed harsh. "No support for Kiva" ??  The older "No thanks" seemed less troubling, perhaps the new phrase could be modified.
 *   Many suggestions were offered about how Kiva might generate monthly revenue from lenders and philanthropic organizations.  I will point Liz at the details in the conference call thread and ask for their list of what they'll be addressing first.  (As a side note, a couple KFs offered their thoughts about why their donations had dried up, which included references to paused MFIs and to how the MIFEX situation was handled last year, which translated into, "Why should I give them donations when they are not good stewards of my money?"  Addressing these situations head-on and promptly may be good for the financial stability of Kiva overall.)


First we spoke about Kiva's financial health overall.  Liz had written up some responses based on internal documents and we agreed that the following was a good summary of the issue:

• "Kiva staff will provide a more detailed financial summary in a couple months, but for now, we can note that Kiva has developed two key formulas to measure its sustainability and impact:  Operational Self-Sufficiency (OSS) and Leverage Ratio.
         --OSS is the percentage of Kiva's total costs covered by operational revenue:  We'll continue our pursuit for greater operational revenue in 2009 through optional transaction fees, the float (revenue from interest accruing in our bank account, as we send/receive funds from partners/lenders on a daily basis), gift certificate expiration, and additional sources yet to come.  Kiva has also benefitted from several very generous grants, and we'll continue to explore the level of grant funding we wish to solicit in the coming years.
         --Leverage Ratio:  Measures the amount of money we sent to low-income entrepreneurs as a factor of our costs.  As you've heard us note, for every $1 we spent on expenses in 2008, we sent $9 to end recipients.  In the coming years, we'll try to expand this.
  We'll provide more information about our numbers in these areas for 2008  in the coming months."

What I took from this part of our conversation was that the financial situation at Kiva is not dire nor dramatic, and that as Liz noted above, one question they're dealing with is how much grant funding they want to accept as part of their operational income.  They're seeing some effects on new deposits from the state of the economy, but the site is also running out of loans so there's not any clear corellation.

In terms of the suggestions offered on KF to encourage donations or supplement funding, Kiva is currently in a brainstorming phase about what they might change or supplement. They don't have anything spec'd out yet, so nothing has been costed for possible implementation, but they appreciate all the ideas and energy.  They'll look into a simple change to the "No support for Kiva" wording, since they did not want to project any sense of put-down or rudeness, and she said they like the idea of including something simple like the Top Five elements of what the operational fund would support, and that might not be a very difficult change.  All website changes do have to be put on the engineering team's roadmap, though, so things may not get changed quite as fast as we'd like.  But we should keep the input coming.

We next discussed the important question of "what happens to abandoned Kiva account funds".  Austin Choi, General Counsel (attorney), is working on a variety of policy issues and one of them is this issue of abandoned account funds.  The plan had been to make the announced change (reabsorbing them as Kiva donations after one year), but after hearing from KF, this policy is being rethought.  My sense is that if some such policy is implemented, it may be with more options for lenders (e.g. how long until your idle account should be considered abandoned, do you want your funds rolled into a perpetual lending account after that point or used as a donation, etc.).  This is being discussed internally along with a suggestion for a "matching spec" where lenders might be offered opportunities for matching new funds.  I was concerned that if there grew a large "perpetual lending" pool, the need to re-loan such funds might overwhelm the loan volume and leave less for the individuals who were looking to select loans manually, but she stated that they want to never take away the ability of lenders to choose among many loans, so they'd be looking at the mechanics of any perpetual fund in that context.


We also talked about some items which were not on the presented list.

(1)  I've already reported on their investigation into the facts of loan volume in late Jan. vs late Feb., you can see the post  here.

(2)  I asked whether there were any changes to the Terms of Use, which AccountAbility (Dan) checks for us regularly.  She said they didn't want to overburden Kiva members with too many independent changes to that document (and the required "I understand" confirmations for each change), so they're planning one larger change in conjunction with any unused credit changes and the "matching" feature.  This will be sometime in 2009 but no projected date yet.

(3)  I brought up the painful dichotomy between masses of loans becoming available based on the monthly resetting of quotas on the 1st of the month, compared with credits appearing only once monthly on the 15th.  She immediately agreed, and said the so-called "lumpy funding pattern" is "not fun for anyone" and they are "very aware" of the problems.  The staff is frustrated about the way it's worked out, too, and they've filed a number of bug reports internally to suggest solutions.  They are looking now and how to assign priorities to these and when to work on them.  The expectation is that it will not always be like this, but there's not a commitment as to when it will change yet.  They want to be thoughtful about how to fix it, since PA2 introduced a lot of changes to the routine of their field partners.  Any changes will also try to incorporate new features to prevent some of the human errors we've seen (such as 6- or 12-month loans being marked Refunded or Paid Back within the first month).  I am sure this will not be the last time we talk about the "lumpy funding pattern".

It was a productive call and I'm looking forward to doing it again in just a few more days.  

--Diane.

[Unilove]

Thank you, Diane. 

[TheTatiana]

That sounds great.  Thank you, Diane!  You're so good to volunteer your time to do this.  We really appreciate it.

[Mona]

Thank you, Diane! 

[KFLiaison]

Here are the notes I took and wrote up for the second KivaFriends Liaison call with Liz Harmon, Thurs. 05 Mar 2009.

Here are the points I sent to Liz to address, each followed by a brief summary of our discussion.

[1]  A concern has surfaced regarding the fact that actual loan payments from borrowers to their MFIs may not be on the monthly schedule assumed by Kiva’s software, and hence are inaccurately reported (and not transparent).  What we understand is that there are two repayment schedules: the actual "repayment" schedule that the borrower has with the MFI field partner and the "redeposit" schedule that Kiva lenders have with Kiva.  While these two likely won't ever be the same, are there plans for the Kiva engineering team to reveal both those schedules to the lenders?  One lender's comments may be helpful here:

I for one really want to know what the borrower is doing -- at least as importantly as how the credits are flowing. When as a lender I don't get a credit when I expected it, the first question which comes to mind is "is the borrower delinquent?" or is this just a cash flow issue with the PA2 billing system.  PA2 eliminated some fictitious assumptions in the repayment process, but did little to enlighten lenders about what the borrower's terms really were.  This still needs some work.

DISCUSSION:
Roma has been working on this concern for some time, as it was never Kiva’s intention NOT to provide actual information regarding repayments “on the ground”.  She has created a spec and designed a new way to display borrower repayments on their loan pages.  Liz has seen it and really (REALLY) likes it, she believes lenders will really like it also.  It has a HIGH priority on the list for Engineering team implementation, so stay tuned…


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[2] There have been repeated discussions about the actual interest rates paid to field partners by borrowers, and how those compare with the reported interest rates for those MFIs.  In particular this thread (Estimating entrepreneur interest rates from repayment term details) has a discussion on that topic, including a quote by Matt Flannery from the Nov. 26th “MattChat” seeming to support the approach of MFTransparency:

[RichardF] 8:20 pm: What about MFTransparency and Kiva Field Partners reporting to meet their goal of global transparency?
[flann] 8:20 pm: Chuck Waterfield is our colleague
[flann] 8:21 pm: He is the founder of MFTransparency
[flann] 8:21 pm: We support his efforts here

A good example of the mismatch between reported and actual interest rates can be examined here.  Could someone comment on whether, and when, the interest rates paid by individual borrowers will reflect their situations and not a misleading MFI average?

(I can provide a bunch more links if this would be helpful)

DISCUSSION:
It turns out that MFIs don’t just charge a single interest rate to all their clients.  They charge different interest rates depending on the particular “loan product” the individual has qualified for (business loan, housing loan, school fees loan…).  Kiva takes the average of all these interest rates and publishes that figure on the partner page.  The majority of MFIs post loans for only one type of loan product through Kiva, but some mix them up, so the rate is often artificial.  For now, the best we’ll be able to get is that average.  The next two steps for Kiva in this regard will be first to provide better average interest rates in some way, and later on to consider a feature that would show the actual rate for each borrower.  This is not in their Engineering roadmap now, but it fits with their goals for the site and would provide an interesting addition for individual lenders and for classrooms using Kiva in their curriculum, so at some future time we may see this appearing on the horizon.  But not right away, since other things take priority.

As an aside, Liz could not comment on the correctness of the examples shown in the KF thread, because the data is not Kiva’s data.


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[3] We’ve seen that in almost all cases, it is not an individual borrower who defaults, but that failures or defaults rather come as a result of MFI problems.  We’ve seen they are the weak link in the chain.  Of the MFIs who aren't paying any money back right now (EbF, and several others), should we expect defaults from them as well?  And if so, what would the total default percent be?  Some lenders are mentally writing them all off already in their portfolios since nothing good has ever come in the past once and MFI stopped paying for a while.  There’s a general desire to hear all the bad news now, rather than waiting to find out in slow small bits.  What can you say to lenders who have lost confidence in Kiva’s set of MFIs?  What would you tell lenders to help them feel better about the situation?

DISCUSSION:
As soon as Kiva can back up their belief that a partner is going to default, they will announce that immediately.  In the case of Ebony (EbF), it will be a few more weeks until an update is available but there is hope that Kiva will be able to recover funds.  They ask for a little more patience in this matter.  There are weekly meetings about each of the partners with repayment issues, and whenever there is an update it will be posted on the partner page. 

I asked Liz to consider making Tim’s “State of the Partners” a regular brief feature of the monthly Conference Calls, and to add a 10-second “… and since the last call we have made updates to the following partner pages” announcement.  She will consider this and ask Tim if he’s willing to make this a regular feature on the monthly call.  She said she will look into other ways to make known the fact that a partner update has been made, perhaps by committing to posting at KF with a brief mention whenever an update is made.


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[4] The 2008 KivaFriends Calendar featured photos of entrepreneurs around the world and was very popular as a fundraiser.  KF had intended to produce a similar calendar for 2009 but we were told that would not be allowed, since Kiva did not have photos they could permit us to use and did not have photo releases from entrepreneurs (so we scrambled last-minute and came up with the Kiva Quilt calendar for 2009).  We were told at the time that the KivaFellows classes would be taking more “official” photos which we could use and getting releases signed, but we heard nothing more after that.

How did KivaFellows Class 6 (KF6) fare with the photos and releases?  How many photos did they get and how can we share them?  Is there anything the following group of Fellows, KF7, are doing to improve?  In other words, what are the prospects for a Kiva Calendar 2010 which can incorporate borrower images?

DISCUSSION:
Fiona has been collecting photos with releases throughout the year and has a number now, and hopes to have a number more.  She would like one person from the KF community to be designated as the point person to work directly with her to receive these photos and be ready for the necessary dates for the 2010 calendar.  Would someone like to volunteer?   


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[5]  An older suggestion re-appeared and may have merit.  Could this go on the engineering list?

I'd like to see the Kiva shopping cart give you a choice whether or not to apply Kiva credit when you are making a donation. I donate 10% when I re-loan funds, and what I want to do is pay the full amount of that donation via PayPal. But the shopping cart requires that I use my Kiva credit balance to pay.

For example, today I had a balance of $105.13, I re-loaned $100 and wanted to donate $10. But since I can only lend in $25 increments, there was a balance of $5.13 in my account. Since the cart forces me to use that credit balance, what happens to my intended $10 donation is that I can only pay $4.87 of it using PayPal, while $5.13 of it is deducted from funds I really wanted to keep in my account to re-lend.

The end result is that Kiva gets less money in new donations, and the pool of available loan funds also gets reduced.

The only workaround I could figure is to then initiate a separate transaction to add the $5.13 back into my account as future credit, which I did. Unfortunately, the add credit option doesn't allow you to simply add it to your cart; it takes you straight to PayPal. So I had to do this in 2 separate transactions, which of course costs Kiva more money.

It seems like making "apply Kiva credit" an option instead of automatic would be an easy fix to make that could quickly increase the amount of new funds being donated by repeat lenders.

DISCUSSION:
The existing work-around is indeed klutzy (“not a great user experience” in Liz’s words).  Enabling a lender to choose to fund or contribute from Kiva Credit or Paypal is on their to-do list; Roma is aware of it and “a bug has been filed”, but “it might be a while” before this change is implemented since there are other things much higher on the priority list.  They’ve found that making changes to the checkout process causes confusion for many lenders, especially newer lenders who may not be familiar with “Kiva Credit” or who may be using a Gift Certificate for the first time, so when they enable this sort of choice, it will be in a way that will be understandable for new or occasional lenders as well as experienced lenders.


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[6]   Is it possible to get more information about the quotas Kiva applies with its field partners?  Is each MFI given a fixed quota of dollars which can be raised in each month? Does the quota go up after the MFI leaves pilot status, or after a year with a low delinquency rate, or under some other condition?  We understand that Kiva financing of loans cannot exceed 30% of the MFI’s total loan fundraising; is there an annual verification of this, and an adjustment of loan volumes if appropriate?  We’ve also noted that individual loans have started appearing with higher “pricetags” (as high as $5,000!) could someone comment on this change and any related changes we’ll be seeing?

DISCUSSION:
(There might be an error in what I sent Liz above: she told me the maximum individual loan size is now $3,000 so if someone has an email where it says $5,000, please let her know?)  In terms of the loan limits being increased, here’s what she sent me to post on that point: 

In 2009, Kiva made a change to its loan size limits. Previously, Kiva¹s field partners could not post individual loans greater than $1,200 to the website. This limit was in place to ensure that Kiva¹s field partners were posting loans to their poorest clients on our site. However, when doing a re-evaluation of the state of microfinance around the world, we realized that this limit was not appropriate everywhere. Due to the cost of living in some places, a $1,200 loan was too small to make a significant impact on a business, even for some of the poorest clients.

Because Kiva strives to be a truly global organization, with a goal that people from any part of the world can make loans to people in any other part of the world, we felt that it was important to have loan sizes that would give micro entrepreneurs around the world the possibility to raise funds on Kiva. Therefore, we gathered data on average loan sizes to micro entrepreneurs in countries around the world and determined that in certain regions, namely Europe (including Eastern Europe), Central Asia, and the Middle East, a loan limit of $3,000 was more reflective of the realities of low-income micro entrepreneurs in those countries. This higher loan limit will allow Kiva to expand its work to many other countries, impacting the lives of more entrepreneurs.

To answer the other sub-questions:
Is there a fixed quota for each MFI?  Yes.
Does the quota increase when an MFI leaves Pilot status?  Maybe, maybe not.  There is a consultation performed when an MFI is due to come out of Pilot status, to determine their comfort level with following the Kiva processes, staff confidence that they report repayments correctly, and their institutional and financial health, after which the limit might stay the same or might be increased.
Is there annual verification of the “30% funding limit”?  Yes, there is an annual review of each MFI’s financials and their quotas will be adjusted accordingly.  If there are issues with any MFI during the year, it will be watched more carefully, and the Mixmarket data will be reviewed, in case something needs to be changed mid-year.

Liz recommended that everyone go visit the “Risk and Due Diligence” center on the Kiva.org website, where I confess I had not spent much time, myself.  You may find it helps clear up some questions about the rating and quota process.

http://www.kiva.org/about/risk/overview
and in particular
http://www.kiva.org/about/risk/kivaRole/


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[7]  Are there any plans or is there any action underway to locate and vet another MFI in Ecuador?

DISCUSSION:
Good news!  Kiva is actively vetting TWO MFIs now in Ecuador.  They are open to working with both of them depending on the results of the vetting process.


At this point we signed off.  Thanks for reading, everyone, and keep those cards and letters coming!

--Diane.

[AccountAbility]

Good job, Diane! 

If we can keep up this rate of clearing things up, we might run out of things to suggest in a year (or so).

One question/suggestion still bangs around in my head --Hasn't Kiva heard of beta testers?  We keep hearing about such and such a change would be confusing to lenders or some such -- which might be true, but then again maybe not.  (And then of course we run into glitches like wrong names of donation records, which might or might not have been caught with a beta program.)

Dan

[Alaska Pack]

Dear Diane,
Bravo good job at reporting!  I found your report very informative.  I can see why you are the liaison person.

Thank you!  Muchas Gracias!  Arigato!  Xie Xie!  Danke Schon!  Merci beaucoup!  Mahalo!

Bernice      

[howard]

Great work, Diane.
I did put in a little note to suggest that, as with Ecuador, you might ask if there was a new MFI in prospect for Côte d'Ivoire. If that wasn't mentioned this time, could it go on the list for next week?

Howard

[Unilove]

Fantabulous reporting  

[QueenOfHearts]

As usual Diane...a job well done!!

Queen