Monday, November 9, 2009

Today's New York Times Article

Hello Everyone,

This is Matt Flannery, Co-Founder and CEO of

I'm now writing my second message as a part of the ongoing online discussion on the topic of person-to-person connections and transparency as it relates to Kiva and online philanthropy. For anyone that hasn't been following along, here are some links to get you caught up:

The original post by David Roodman

My reply

And then today's article in the NYT by Stephanie Strom

To recap our history, we started in a village in Uganda in 2005, working with a local pastor to disburse loans. The villagers had no other sources of capital, and thus had to wait for the Kiva loans.

In the ensuing four years Kiva has grown by several orders of magnitude. In order to accommodate this growth, we began to work in over 50 countries with banks for the poor -- or microfinance institutions (MFIs).

As I originally posted a month ago, I believe that 1) pre-disbursal, our policy to allow MFIs to disburse loans to entrepreneurs before they are fully funded on the site, is necessary for the success of this model, and 2) that we can do better at educating our users about how and why this is the case.

On point number one, MFIs cannot make their clients wait over thirty days for their Kiva loans, for reasons of efficiency and social impact. This is well-explained in my original response.

To address number two, in the past month Kiva has updated the “About” section on the Kiva website to be clearer about the process. Please see the changes here.

Moving on, it would be a shame if, as a result of all this talk of transparency, that we create an even more confused public. So, with the intention of providing more clarity, let me add a few things.

People on truly do receive the loans that are shown on the website. Readers confused by the article wrote in today unsure of this fact.

It's safe to assume, for instance, that if a farmer on applies for a $500 loan, that he actually does receive that loan. However, what is different from a casual user's impression is that the loan is administered by a local microfinance institution (MFI) and is often disbursed to him before the funds are raised on the website. A curious user can see the "Date Listed" and "Date Disbursed" on the website next to each entrepreneur.

Person-to-person lending (or donating for that matter) on the Internet is a young space with incredible promise, and Kiva has created an entirely new dynamic in the space.

Online philanthropy is already much more real-time, connected, transparent and data-rich than philanthropy 10 years ago, but there's still a long way to go. At Kiva, you see an entrepreneur profile for every dollar raised on the site. In addition, you see repayment data and can get your money back. As a small nonprofit, we continually seek to increase the quantity and quality of this data.

We are living in a world where information technology is just now penetrating the developing world. We are seeing people who, before Kiva, had never seen or heard of a computer. Now, they are learning about a community of lenders from over 100 countries who are actually making it possible for them to get credit and be ushered into the formal financial system. At the same time, we are seeing classes of fifth graders learning about International Development in the context of business, rather than starvation.

Kiva has helped facilitate over $100 million in loans to entrepreneurs in need. Without this platform, that would not have been possible.

This all, to me, represents a good start. In the future, we hope to see a closer connection between the repayment of an entrepreneur in local currency and the repayments that a lender receives. We also hope to increase the frequency and richness of the updates that lenders receive. We will pursue these strategies and more as technology allows. Most of all, we hope to increase the sheer number of loans funded through Kiva and to track the social impact of those loans along the way.

We will continue to strengthen the feedback loop between our users and our staff so that we can address confusion and criticism, and continue to focus on our mission to connect people through lending for the sake of alleviating poverty.

If you have further questions, feel free to email us here.

Or join the discussion on the KivaFriends message board here.

Thank you,