Impact investors are finding new ways to deepen their impact, and offering capacity building support is a key strategy. Reports from organizations like the GIIN, Grameen Foundation, and CDC show a clear connection between capacity building and better outcomes in financial inclusion.
At Kiva, we believe that helping our investees — both microfinance institutions (MFIs) and social enterprises —become stronger organizations doesn't just benefit them — it also leads to better results for the individuals they serve. Over the past eight years, we’ve seen firsthand how providing capacity building support can make a real difference.
What is capacity building?
In impact investing, capacity building means providing extra support beyond loans or equity investments to help organizations perform better. According to the GIIN 2015 Impact survey, about 73% of impact investors offer this kind of support, either directly or through third parties.
Common areas of capacity building include:
Staff training and employee engagement
Impact measurement and management
Governance
Growth planning
Product development
Improving business processes
Specialized technical support for specific industries
Why capacity building matters in financial inclusion
Capacity building is especially important in financial inclusion. It helps impact investors stand out: while 73% of impact investors offer capacity building support, in financial inclusion, only 44% of equity investments and 12% of debt investments include this type of support.
It also strengthens the financial health and operations of organizations, reducing risk for investors. A GIIN study found that MFIs receiving capacity building support grew their client base faster than those that didn’t.
Beyond financial gains, capacity building builds trust and strengthens relationships for long-term collaboration between investors and investees.
The benefits of capacity building support
Offering capacity building benefits investors, investees, and clients alike. It can:
Allow social enterprises and financial institutions to deepen their impact through more efficient processes and sector insights.
Unlock operational efficiencies that enable organizations to scale and reach marginalized customers more quickly.
Remove barriers to institutional or community-level change through non-financial support such as staff training or market assessments.
Encourage responsible business practices early in the investment process, such as client protection standards and social performance management.
Improve impact measurement to allow the investor and the investee to assess the impact they are creating at different levels.
Kiva’s capacity building programs
Kiva partners with MFIs and social enterprises around the world to fund loans for underserved communities. But funding is only part of the story. We also offer capacity-building programs that help maximize the impact of our partners and ultimately allow more individuals to build businesses, meet their needs sustainably, and create a better future.
We track our success by measuring outcomes like:
Changes in business income
Financial management skills
Achievement of financial goals
Quality of life improvements
Ability to handle financial shocks
Job creation for new employees
Growth in savings
Increases in confidence
Our programs especially focus on reaching women, refugees, and people affected by climate change.
Why Kiva is well-positioned to offer capacity building
Kiva’s capacity building initiatives help investees grow while reinforcing our impact-first approach. Our ability to provide effective capacity building stems from three key factors:
Three things make Kiva’s capacity-building work especially effective:
Long-term relationships: Many of our partners have worked with us for over a decade. Our regionally-based investment managers maintain strong relationships, visiting partners regularly and helping them raise capital through Kiva. Our close relationships help us understand the challenges these investees face and make it easier to design appropriate, tailored support for these institutions.
Expertise in technology and data: Kiva’s crowdfunding platform has strong technical infrastructure, enabling us to support investees with digital transformation projects. For example, by integrating with our API, partners can streamline loan applications, reduce errors, and serve more clients efficiently. With support from Kiva’s engineering team, we are also able to assist some partners in automating more of their loan process. This helps them to not only grow their business, but also reach more marginalized clients who might be more costly to serve without these efficiencies.
Impact-first focus: Every capacity building project we design puts borrower outcomes first. Our deep experience with impact data and connection with so many organizations worldwide helps us determine organizational practices that will provide better results for the people they serve.
Kiva’s investment in capacity building
Since 2016, Kiva has secured grants from four foundations to fund capacity building projects. We’ve allocated $848,000 to initiatives in East and West Africa, Southeast Asia, Central Asia, and Latin America.
Our focus areas include:
Digital transformation
Operational efficiency
Impact measurement
Client protection
Disaster preparedness and risk mitigation (including COVID-19 response)
Market assessments
Innovation in lending products and processes
Our investment managers and impact goals guide our focus areas.
Case study: Digital transformation with UGAFODE
Hamisi is a Burundian refugee in Uganda who took a Kiva loan through UGAFODE for his bakery
Kiva worked with UGAFODE, a Ugandan MFI specializing in refugee lending, to digitize their customer engagement and loan application process.
A new digital loan form cut down loan application time and helped reach more refugee clients by reducing congestion and queues at branches. It also enabled data analytics for UGAFODE to make more informed decisions about their business.
A newly established call center improved customer service, provided better access to services for clients that were more remote and difficult to reach, collected customer feedback, improved loan officer performance tracking, reduced customer complaints and improved marketing.
The results were powerful:
More refugees and remote smallholder farmers were able to access loans.
The call center enabled existing clients to better understand loan options and terms, which is critical for responsible and impactful financing in rural, underserved, or impoverished areas where there is risk of overindebtedness.
Since implementing these changes, UGAFODE has increased its loan portfolio and the percentage of loans going to refugee clients. In a 60 Decibels study conducted in 2023, 79% of UGAFODE clients were borrowers accessing a loan for the first time, compared with the global benchmark of just 56%. This means that UGAFODE serves more clients who are not able to get a loan elsewhere.
UGAFODE clients also reported improvements in their ability to manage finances, increases in income, increases in their ability to make financial decisions, and increases in their number of employees.
Case study: Digital growth with iDE Mozambique
Margarida received a loan through Kiva’s partnership with iDE Mozambique, which strives to support women farmers to start and scale their agricultural businesses.
Kiva also supported iDE Mozambique in digitalizing its loan process using Taroworks, which enabled more loans to be processed per loan officer each month. Introducing tablets and digital forms allowed them to upload loan application more quickly and go through the loan approvals process faster.
They also integratied with Kiva’s API to streamline loan applications, with these results:
Loan application time dropped from 1 hour to just 15 minutes.
Loan renewal cycles shortened by 30%, since documents could be stored digitally rather than needing to be processed again for a repeat loan.
Manual errors were reduced, particularly because repayment reporting was automated rather than manual .
Loan volume on Kiva nearly doubled within 12 months.
Loans to women grew significantly. Women’s participation in their loan portfolio increased from 54% to 62.4%, reaching 300 new women borrowers in just four months. Increased efficiency allowed loan offers to reach farther away women clients with the time gained, and women were more likely to apply for loans with a shorter application process. The efficiencies gained through digitization also made it less expensive for the organization to serve women clients.
Loans to smallholder farmers also increased, with iDE Mozambique able to reach out to more savings groups and providing Kiva loans to 14 new savings groups consisting of 450 smallholder farmers in just a few months.
Lessons learned
Capacity building isn’t one-size-fits-all. Every MFI and social enterprise has different and evolving needs. Addressing these needs effectively requires an evidence-based approach to decision-making.
Strong data collection—from both the institution and its clients—is essential to designing the right support. When data isn’t available, a needs assessment is the best first step. This identifies gaps and priorities directly from those being served. Moreover, conducting a needs assessment is a capacity-building effort in itself, as it demands resources and expertise that an MFI may lack internally. The findings should directly inform the design of any subsequent capacity-building initiatives.
From the design phase to implementation, various actions are necessary — such as consulting, training, co-financing salaries, and acquiring equipment, and each require additional investment. Proper investment in the design and setup of projects is key to long-term success.
Kiva’s commitment to capacity building
After eight years of providing tailored, effective support, Kiva remains deeply committed to capacity building. We know that by strengthening financial service providers and social enterprises, we can create even more meaningful change for underserved communities around the world.
Looking ahead, Kiva is focused on making our capacity-building efforts even more meaningful and transformative. To do that, we’re deepening our understanding of both borrower experiences and the challenges our Lending Partners face. Our investment managers are actively engaging partners in conversations to identify their most critical gaps and needs. This work will take time—several years, in fact—but it will allow us to target our support where it matters most. By being more responsive and better informed, we can continue to strengthen our partners and, ultimately, increase the impact we have on the lives of the people they serve.
