Kiva Zip about:
What is Kiva Zip?
Kiva Zip is an innovation of Kiva that will test new
approaches in direct person-to-person microlending.
What is Kiva hoping to accomplish with Kiva Zip?
Kiva Zip (Zip.Kiva.org) shares the same mission as
Kiva.org - to connect people through lending to alleviate poverty. Kiva Zip is testing new ways of realizing this mission
with the goal of expanding our reach to underserved populations by using new
technologies that also drive down costs to the borrower.
How is Kiva Zip different from Kiva.org?
Since its launch in 2005, Kiva’s mission has been to
alleviate poverty by connecting people through microlending. By working with a
global network of microfinance institutions (MFIs), Kiva.org has enabled people
like you to make over $340 million in loans to over 850,000 borrowers around
the world, with a nearly 99% repayment rate, as of August 2012.
Kiva Zip is testing new ways of realizing this mission
with the goal of expanding our reach to underserved populations by using new
technologies that also drive down costs to the borrower. Here’s a little more
detail about each of these differences:
Underserved populations
The Kiva Zip alpha is intent on expanding financial
access to borrowers who cannot otherwise be served by a bank or microfinance
institution. This means Kiva Zip borrowers may have a different profile from
Kiva.org. For example, in the U.S. it is becoming apparent that a lot of
start-up businesses currently lack access to capital, and that these are prime
candidates for Kiva Zip loans; whereas most of the U.S. businesses on Kiva.org
are already established.
Use of new technologies
Through the use of technology, Kiva.org was the
first-ever microlending website to allow any individual, with a computer and a
credit card, to lend money to a low-income entrepreneur halfway around the
world.
Kiva Zip is attempting to take the use of technology
to the next level, such as mobile and electronic payments that enable the
direct transfer of funds between lenders and borrowers. In the Kiva.org model,
these payments are managed through Kiva’s microfinance partners. Kiva Zip still
partners with organizations and individuals that work closely with borrowers
(these are called “trustees” in the Kiva Zip model), but in Kiva Zip trustees
never handle the loan funds.
Low cost loans
Low cost loans to borrowers is one of the main benefit
of Kiva Zip being able to use new technologies to enable the direct transfer of
funds. For the Kiva Zip alpha phase, Borrowers will be paying 0% interest
rates. This differs from the Kiva.org model where borrowers do pay interest to
the microfinance institutions in exchange for their administration of the
loans, and a number of other important services that the MFI provides to
borrowers (technical assistance, financial advice and training, etc.).
Increased risk to lenders
Another important difference is that Kiva Zip loans
are expected to be even riskier than loans in the main Kiva model. Kiva.org has
been operating for over 6 years now, and many of the kinks have been worked out
over time. Because the Kiva Zip model is new, it is likely that there will be
many learnings and changes as the alpha is launched over the next few months. For
this reason, the repayment rate on Kiva Zip is expected to be significantly
lower than the nearly 99% seen on Kiva.org today (as of December 2011). As due
diligence methodologies are tested and fine-tuned, we are confident that
repayment rates will continue to improve.
Innovation
We are excited to experiment with Kiva Zip, and we
know that there will be a number of other smaller trials and experiments on the
Kiva Zip website. For example, borrowers on Kiva Zip are able to make
comments/updates and post images directly on their own loans via the website or
even SMS; Zip also offers grace periods for certain industries, different loan
sizes might be explored, or displaying loan amounts in Kenyan Shillings; and
the look and feel of borrower profiles will differ from those on Kiva.org. It
is our hope that many of these experiments will prove successful, and we will
be able to apply our learnings to Kiva.org to continue to deliver the best
experience and outcome for all lenders and borrowers.
