Over the last few months, some visitors to the Web site of Kiva, a nonprofit that lets users make interest-free “microloans” to entrepreneurs in low-development (that is, poor) countries all over the world, were greeted with a surprising message. “Thanks Kiva Lenders!” it began. “You’ve funded EVERY business on the site!!” Has a charity ever announced that it had enough money? Would-be lenders were dumbstruck, says Kiva’s public-relations director, Fiona Ramsey: “They’re stunned for a second — ‘Here I am, I have money, I want to help someone, and you’re telling me that I can’t?’ ” The note encouraged the visitor to check back soon, as a new batch of loan-seeking entrepreneurs will often appear mere minutes later. But still, Kiva is a philanthropic organization facing an extremely unusual challenge: maintaining adequate supply (people who need help) to meet demand (people who want to give it). “We don’t want people coming to the Web site who want to make a loan and there’s no one to loan to,” Ramsey says.
On Saturday, the newest edition of my column in the Financial Times comes out and in it, I feature Kiva.org, DonorsChoose.org, and GlobalGiving.org as examples of “websites have sprung up that seek to match donors with nonprofits and projects that match their unique outlook.” These sites are examples of the growing social capital market that I believe will make it easier for donor/investors to find projects to fund and projects to find funders.
I’m intrigued by the implications of Kiva’s problem (and yes, getting too much money is a problem for a nonprofit, especially if they are unable to put the money to an effective use). For instance:
- Kiva and the other sites I mention above have different missions. But would Kiva’s mission be better served by refusing donor money or by pointing donors to these other sites?
- Is Kiva’s mission better served by treating these other sites as competitors and not referring donors to them with the premise that Kiva can best further their own mission and therefore should hope the donors will come back later if they do not give the money first to another site?
- In the financial markets, there are rules that if a particular exchange is unable to execute an order, they must route that order to a competing exchange immediately. Does Kiva have a similar obligation to “re-route” their clients order to another “exchange”?
- While Kiva is different from most nonprofits, it is still striking to hear about a nonprofit organization turning donors away. Does this problem stem from Kiva’s failure to identify “demand” (people to lend the money to) or from Kiva’s success at attracting “supply” (the lenders)? If the issue is on the demand side, does this suggest that microfinance cannot address as large as a market as proponents believe? If the problem is on the supply side, does this mean that we can expect Americans to provide much higher levels of support to the social capital markets if we can find more effective ways to engage them (as Kiva has)?
- Rather than turning people away, Kiva could change the terms of their loans so that rather than getting full payback (Kiva loans do not carry interest), only 90% of the loan is paid back. This would then make the excess supply a benefit to the borrowers. Weaker terms for the lender would drive some lenders away and bring the market back into balance through reducing supply rather than increasing demand. Is this a better idea than refusing new money? If so, better for who?