More on the “guy behind the guy”

By David Connelly, KF10 Peru

I have a hunch that most lenders on Kiva don’t pay to much attention to field partner profiles. It isn’t hard to understand why: they’re long on text and short on story. Folks looking for a nice, “soft-touch” way of putting their money to good use are happy to trust that Kiva only posts worthy profiles from worthy places. And that’s OK. Kiva does carefully vet its field partners. Skip out on those details, though, and you lose a bit of your voice. From Accion USA to Zene za Zene, each field partner has their own approach to microfinance and their own specific role in their community.

Take my MFI: Caja Rural “Señor de Luren.” It’s a bit bigger than a lot of the field partners Kiva works with (32 offices and 45,000 borrowers*) and it has a range of microfinance services. Clients can, for example, open microsavings accounts with as little as $10 and then access their money at ATMs around the city. There’s also microinsurance (particularly valuable in this disaster prone region), money-transfer services, and a variety of loan products geared toward microenterprises, farmworkers, and family consumption. And because Ica is still recovering from a large earthquake in 2007, there are additional services and loans for people working to rebuild lost and damaged homes.

And then things get even more interesting. Caja Rural has a special loan for Kiva borrowers, different from all its other products and funded entirely by Kiva lenders. It has a significantly lower interest rate (3% vs 4% monthly for non-kiva loans)** and is targeted at rural microentrepreneurs and people hit particularly hard by the 2007 earthquake.

To my mind there’s something particularly compelling about special “Kiva” loan products. Remember, Kiva lends money to its field partners at 0% interest, so creating special loans with lower rates is a great way to pass the savings on to borrowers. It may not always be feasible; newer and smaller field partners, for example, may be better off working towards sustainability and increasing their reach. But for financially viable field partners, lowering interest rates for Kiva loans really demonstrates a commitment to assisting borrowers and, more grandly, to the social mission underlying microfinance. It’s also a great way to strengthen the connection between lenders and borrowers since it imbues the loan with special features that it wouldn’t otherwise have.

I reached out to Kiva fellows around the world and found a few more MFIs that have followed a similar track:

Emprender (Bolivia) certain branches have discount interest rates on Kiva loans, though they’re only available to groups that haven’t had any late payments

Ameen s.a.l. (Lebanon) has a lower interest rate for Kiva loans (a flat interest rate of 11% whereas other micro-products range between 13.5% – 15.81%). Ameen also disburses Kiva loans faster than normal loans

Fundacion Mujer (Costa Rica) has a lower interest rate for Kiva loans (20% vs 26-28% for other loans)

Fundación Mario Santo Domingo (Colombia) Kiva clients get lower than normal interest rates on a progressive scale (i.e. the more loans they have on Kiva, the lower the interest rate goes with a floor of 18%)

When making loans, we’d all do well to remember that Kiva isn’t monolithic. In fact, the variety of options and the ability to exercise choice is one of Kiva’s most exciting features. For those who want to look a little below the surface before investing in a client, I urge you to click through and learn a bit more about the organizations standing behind and supporting Kiva borrowers.

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*Kiva has only been implemented in 4 offices at the moment, though the good people at Caja hope to expand participation once they become a full-on field partner.

** I’m bracketing the interest rate discussion. Suffice it to say I’ve spoken to numerous clients who say this is the best rate in a town loaded with microfinance banks. For a fuller treatment, see recent blog posts by Peter, Eva, and Meg.