Kiva’s Micro-financing Model Comes To Little Rock

Little Rock resident June Hardin, 54, is a motivational speaker, speechwriter and author who credits her business’s creation to a couple of very small loans that she received from a nonprofit best known for connecting average American donors with Third World entrepreneurs.

“Kiva has been my angel,” she said. “They have believed in me when no one else would.”

Kiva’s co-founder and current CEO, Matt Flannery, spoke at the Clinton School of Public Service Tuesday as part of a conference on social entrepreneurship hosted by the Winthrop Rockefeller Institute.

Flannery and his then-wife, Jessica Jackley, conceived of their microfinancing nonprofit in 2004 and then launched it in 2005. Under their original model, partner organizations in Third World countries loaned money – often just a few hundred dollars – to local entrepreneurs who otherwise did not have access to credit. The recipients’ stories were posted on Kiva’s website. American donors could then fund these loans with small donations, and once the loan was paid back, recirculate the money to another entrepreneur.

The concept connected entrepreneurs who needed a very small amount of capital with Americans who had a small amount of money to loan, and it’s grown exponentially. From seven original loan recipients in 2005, more than one million lenders have made $480 million in loans with a 99 percent loan repayment rate.

During an interview at the Clinton School prior to his talk, Flannery said Kiva is “trying to shift from an international giving site to a fundraising tool for the world for loans.” As part of that shift, the company now provides loans to American recipients – long a desire of Kiva’s donor base, he said. Since March, the nonprofit has loaned $200,000 to 40 Arkansans, with a 95 percent repayment rate.

Hardin has received two loans – one for $500 that she’s already paid off, and another for $1,000 – for her business, Word Well Spoken. The loans paid for office supplies and other expenses, but they also lent her something more important: hope.

“Five hundred dollars to somebody else might not be a lot, but to me it was a vote of confidence, and it was a major jumpstart,” she said.

Flannery credited Kiva’s international success to its ability to connect lenders and recipients. Also, good timing. The concept of microfinancing – loans too small for a bank to provide that help entrepreneurs get over the hump – was gathering steam in the mid-2000s. Meanwhile, the development of the Internet made it easy for Flannery to design his own website so people from very different walks of life could connect.

“Allowing millions of people to tell their own story on the website in a truthful way was much better than any marketing department could ever script,” he said.

Flannery recently visited some of his recipients in Kenya. A man named Wilson had been lent $500 to buy a wheelbarrow to deliver goods in a slum and was paying back his loan $25 at a time. A female borrower was running a pay toilet in that same slum for three cents per customer.

“The cliche is, talent is equally distributed around the world, but opportunity is not, and that is just so glaringly true,” he said.

Kiva has expanded its giving opportunities so that donors can fund schools and other worthy causes. In the future, Flannery hopes to provide donors an opportunity to loan money with interest to less-poor recipients. Loaning money with interest was the original idea, but the organization ran into too many problems with federal regulations. He thinks Kiva will have that opportunity in the next five to 10 years.

Kiva has been lauded by President Bill Clinton and listed by Oprah Winfrey as one of her “Favorite Things.” From seven recipients in 2005, it now has a $5 million budget and lends about $120 million annually. Looking back, Flannery said he learned as he went along, and while there were discouraging moments, he loved what he was doing.

“There’s a period of time, I think, whenever people are starting a business, usually when it’s not working well or no one cares about it or you’re not getting any positive response,” he said. “And so, the thing that really helps me is just liking it in and of itself, so that even if people dislike it, even if it’s unpopular, let’s still do it, you know? Not liking it for the success. Liking it for the thing. That’s been really nice.”