Case Study 3 – Kiva
Areas of impact: Finance
Social enterprise location: Originated in the US with entrepreneurs and partners are worldwide
Short description of activities:
Kiva is the world's first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs around the globe. It enables individuals to loan as little as $25 to emerging businesses.
Since October 2005, over 440,000 internet lenders have made $60 million in loans to 120,000 entrepreneurs in 40 developing countries with a repayment rate of 97 per cent. Kiva aims to scale to one million internet lenders and over $100 million in loans by 2010.
Why it's a social enterprise:
Kiva does not charge any interest or fees to their ‘Field Partners’ (ie lenders). However, their Field Partners are free to charge interest to the entrepreneurs, who repay the loan usually with 6 to12 months.
This programme benefits the entrepreneurs and the communities, within which they are located, and enables the ‘lenders’ to target their investment as they choose.
Kiva’s motivation is to catalyse enterprise via person-to-person financing. No profits are generated by the transactions, which Kiva facilitates and any funds which are donated by lenders are used to cover operational expenses.
What is its design aspect?
Kiva is an example of social enterprise delivered by service design. The creators have designed a system for matching lenders with entrepreneurs and brokering their financial transactions. There is also a design element in the creation of the website that facilitates these transactions.
- Lenders browse profiles of entrepreneurs in need and make their selection
- Kiva collects the funds and passes these to one of their microfinance partners worldwide
- The partners distribute the loan funds to the selected entrepreneur
- The entrepreneur repays the loan over a given time
- When the money is returned to lenders, they have the option of re-lending the money, donating it to Kiva (to cover operational expenses), or withdrawing the funds
Main actors and interactions (including stakeholders, networks, services and revenue streams):
- Entrepreneurs who require funds to start their enterprises
- People with funds to lend
- Local fund distributors - the microfinance partners
- Kiva maintains the facilitating website and manages the transactions
- The revenue for the project comes from donations
Social Impact:
- Entrepreneurs from impoverished communities worldwide have the opportunity to develop their ideas and make a difference to their lives and those of their local communities
- It offers a unique way of connecting those in need with those that can offer help
- Kiva enables the microfinance partners to do more of what they do more efficiently
Economic Impact:
- By using the internet as the platform for this service, Kiva creates a cost effective interpersonal connection and facilitates ‘instant’ activity between entrepreneurs and lenders
- Over 440,000 internet lenders have made $60 million in loans to 120,000 entrepreneurs in 40 developing countries with a repayment rate of 97 per cent
- This activity builds economic independence for the entrepreneurs, their communities and nations
Environmental Impact:
- As Kiva delivers its service online, it allows the creation of business networks to be made without the need for travel having no or very low impact on the environment
- The environmental impact of the funded enterprises is not known. There is no requirement for the enterprises to be of environmental benefit, although one assumes lenders hold ethical values as a result of their involvement in the service.
Links:
www.kiva.org