Thursday, September 13, 2012

Introducing Kiva's Experimental Partnership Program

As Kiva expands beyond microfinance to work with a range of organizations, we’ve received an outpouring of interest from socially-driven companies, non-governmental organizations (NGOs), nonprofits and other groups across the globe.

We’ve heard from schools that want to offer tuition loans, solar companies that want to finance their retailers, fair trade companies that want to support their producers, and agricultural cooperatives that want to lend to their farmers.

And time and time again, we’ve heard how these types of organizations are constrained by limited access to capital -- how even a small amount of credit could jumpstart their work and help them reach more people.

We’re continually inspired by the sheer number of groups that exist to serve the needs of the poor, and humbled by the incredible work they’re doing to push the boundaries of social entrepreneurship and test new strategies to fight poverty.

Because many of these organizations don’t fit our standard criteria to become a Kiva Field Partner, we started brainstorming about what we could do to support the good they're doing in the world. Ultimately, we decided to shift our vetting process to accommodate smaller organizations and institutions that only need a small amount of capital to start or grow their lending programs.

This blog post is designed to explain this new tier of due diligence -- what we’re calling the Experimental Partnership Program -- which is intended to accommodate and support the world’s ever-growing network of social enterprises.

What is the Experimental Partnership Program?

In order to bring a wider range of Field Partners into the Kiva fold to reach more borrowers, and to give our lenders more choice in who they support, we’re offering a third tier of due diligence. These “experimental partners” are invited to access smaller amounts of credit through Kiva, with an initial maximum set at US$20,000.

Accordingly, these partners will receive lighter review from Kiva’s portfolio team. Instead, small lines of credit will help these partners pilot new lending programs and get comfortable with the Kiva model. After we have had a chance to test the relationship, Kiva and the partner can decide if it’s appropriate to move forward and scale the partnership.

How are experimental partners reviewed?

The Experimental Partnership Program is the lightest tier of due diligence that Kiva supports. Kiva analysts correspond with prospective partners to understand their intended client base, the problem they are trying to solve, and the role Kiva funds can play in the solution. While analysts focus on the social value of these partnerships, they don’t conduct a deep analysis of organizations’ financial health or operations.

For more information on Kiva’s role in vetting Field Partners, please visit our Risk and Due Diligence Center.

Why introduce experimental partners?

We’re thrilled to open up the Kiva platform to an increasingly diverse set of partner organizations that are applying new levels of innovation to address some of the biggest problems plaguing the poor. By lightening our due diligence process and lowering the barriers to entry for non-MFI partners, it’s our hope that we can work with a much wider range of innovative, socially-driven organizations that wouldn’t otherwise be able to work with Kiva or obtain affordable capital.

What happens when an experimental partner wants to access a higher line of credit with Kiva?

Experimental partners that are successful on the Kiva platform will be invited to undergo a more formal due diligence process (either basic or full due diligence, depending on their stage of development and credit needs). If a partner passes Kiva’s more thorough vetting process, it will graduate from the experimental partnership tier and will be able to access more Kiva funding to grow its lending programs.

Aren’t experimental partners more risky?

Yes. Experimental partners pose a higher level of risk than Kiva’s traditional partners. Many of them are early stage organizations, and/or they do not have a history of administering loans. Accordingly, lenders interested in minimizing losses should not lend to borrowers working with experimental partners.

Kiva manages the risk posed by experimental partners by capping their portion of Kiva’s outstanding portfolio at 2%.

The Experimental Partnership Program is a bold and exciting step into the future for Kiva. We look forward to introducing you, our lenders, to these new experimental partners and hope you'll be equally excited about the dramatic and tangible differences they're making in people’s lives.

Have questions? Concerns? Send them our way at