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Background of Kiva

How it works

Kiva's entire working model employs its website in a truly innovate way. Through its website, potential lenders can find an entrepreneur and then donate loans of $25 or more through online payment, which Kiva then processes. To distribute these loans to the respective businesses, Kiva partners with the global Microfinance Institutions (MFI) that sponsor the recipient entrepreneurs.

The true beauty of Kiva's entrepreneurial model, however, is its ability to foster interpersonal connections between the lender and the borrower. Kiva's website allows users to log-in and view profiles and periodic journals of the respective business owners, which lenders can use to observe the progress of the entrepreneurs that they support. This in turn offers a level and dynamic of transparency and trust, not seen in any other microfinance organization or group.

To summarize, Kiva's business model works in 4 easy steps:

Choose a Business: Potential lenders, such as Gumball Capital, choose to fund an entrepreneur from an array posted on Kiva's website, www.kiva.org. The entrepreneurs on the website represent a diverse set of businesses from all over the world, and as soon as one is funded, their representative MFI provides another entrepreneur to fund.

Make a Loan: Once a lender has chosen a specific business, they pay Kiva by credit card or check/routing number of their bank account via Paypal. Payments can be made in amounts greater than or equal to $25. Kiva will then transfer the money over to the business's representative MFI in order for them to disburse the funds to the entrepreneur in need.

Receive Journal and Payments: In the year following the loan payment, donors receive periodic progress reports through the entrepreneur's representative MFI. These reports are published on the entrepreneur's profile page on Kiva, and can also be sent to the donor via email. The entrepreneur will also pay the donor's loan over periodic installments throughout the year, depending on the duration of the loan.

Withdraw or Re-Loan: Once the entrepreneur has fully repaid their loan, the lender has the option of either re-loaning to a new business or withdrawing their loan via Paypal.

www.kiva.org

History

Founded in March 2005, Kiva is the brainchild of Matthew and Jessica Flannery. Though it steadily gained momentum following its inception, it wasn't until Muhammad Yunus's acceptance of the 2006 Nobel Peace Prize did the organization truly gather speed.

In the months following, Kiva began to be featured on media specials on Frontline, NPR, and PBS; as well as many articles in publications such as TIME Magazine, New York Times, and The Wall Street Journal. Due to the increased media attention and interest in microfinance, the organization saw a rapid increase in site traffic, number of lenders registered, and loans made towards the end of 2006.

As of June 2006, Kiva had provided a total of roughly $250,000 in loans to its microfinance partners. That number jumped up to $500,000 in October 2006, $1.2 million in November 2006, and finally to $2 million by the end of December 2006.* As of April 2007, Kiva reported that it received an average of $25,000 daily from lenders and had provided $5.7 million total in loans**, with $2 million provided in April 2007 alone.*

* Kiva chronicles blog. Blog entry for 9 April 2007.

** Interview with Kiva official.

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