What Is Kiva’s Approach to Microfinancing?

Microfinancing offers a financial pathway for individuals and groups often excluded from traditional banking services. Kiva, a 501(c)(3) non-profit organization, operates as a global platform connecting aspiring entrepreneurs with lenders worldwide. It facilitates microloans to foster economic opportunity and financial inclusion.

Kiva’s Unique Lending Model

Kiva employs a peer-to-peer (P2P) lending model, allowing individuals to contribute directly to specific loan requests. Kiva partners with local organizations, called “Field Partners,” which are typically microfinance institutions or social enterprises. These Field Partners play a central role, handling the on-the-ground work of vetting borrowers, disbursing funds, and managing repayment collections.

When a lender contributes funds on Kiva, the capital is aggregated and then transferred to the appropriate Field Partner. While lenders provide funds for specific borrower profiles, the actual disbursement to the borrower and subsequent repayment collection are managed by the Field Partner. Kiva itself does not charge interest to lenders, making the lending experience a philanthropic endeavor for the individual. However, Field Partners may charge interest to borrowers. This interest helps cover the significant operational costs associated with providing small loans in challenging, often remote, environments and can also fund additional support services like training.

Loan capital is pooled from multiple lenders, with contributions starting at $25. Kiva supports a diverse range of loan purposes, including agriculture, education, small businesses, and initiatives for green energy or healthcare. As borrowers make repayments to their local Field Partner, these funds are then remitted back to Kiva and subsequently deposited into the respective lenders’ Kiva accounts. This process has historically maintained a high repayment rate, often exceeding 96%.

How Kiva Sustains Its Operations

Kiva’s operational sustainability is maintained through funding sources distinct from the loan capital provided by lenders. As a non-profit entity, Kiva primarily relies on voluntary contributions to cover its day-to-day expenses. Lenders have the option to provide an additional “tip” or donation during the lending process, which directly supports Kiva’s operational budget.

Further financial support comes from grants provided by foundations, strategic corporate partnerships, and direct donations from individuals and organizations. These combined revenue streams fund Kiva’s global operations, including technology development, staff salaries, and overhead costs. While the loaned capital flows entirely to the Field Partners to reach borrowers, these donations ensure Kiva can continue connecting lenders and borrowers worldwide. Some Field Partners also pay small service fees to Kiva for utilizing its platform to raise funds. This diversified funding model allows Kiva to operate without charging interest to lenders or directly to borrowers.

The Lender’s Journey on Kiva

The process for becoming a lender on Kiva begins with creating an account on the platform. Once registered, individuals can browse through a wide array of borrower profiles, each detailing the borrower’s location, the purpose of the loan, and the associated Field Partner. This transparency allows lenders to choose projects that align with their interests and values.

Lenders then select a loan to fund and contribute a minimum of $25 towards the borrower’s goal. After a loan is fully funded, lenders can track its progress through their Kiva account, receiving updates on repayment schedules and amounts. This ongoing engagement provides insight into the impact of their contribution. Upon repayment, lenders have the flexibility to either withdraw their funds or, more commonly, re-lend the money to support new entrepreneurs. This re-lending feature allows the initial capital to create a continuous cycle of impact.

Borrower Access and Support

Individuals seeking Kiva loans typically access capital through Kiva’s established network of local Field Partners, rather than directly interacting with Kiva itself. These Field Partners are responsible for identifying eligible borrowers within their communities and conducting thorough due diligence to assess their needs and repayment capacity. This localized approach ensures that loans reach those who lack access to conventional financing.

Once a loan is approved and posted on Kiva’s platform, the Field Partner is responsible for disbursing the funds to the borrower. Beyond financial disbursement, Field Partners often provide supplementary services such as business training, mentorship, and financial literacy education. They also manage the collection of repayments from borrowers, which are then remitted to Kiva. In the United States, Kiva operates a direct lending program where US-based entrepreneurs can apply for loans ranging from $1,000 to $15,000, often featuring 0% interest and no fees. For these US loans, borrowers demonstrate creditworthiness through a “social underwriting” process, involving an initial period where friends and family contribute to their loan.