My Q&A with Matt Flannery of Kiva from today’s online discussion on the Chronicle of Philanthropy website:
Question from Sean Stannard-Stockton, Tactical Philanthropy Blog:
As I think you know, I’ve been blogging about the implications of your “excess” supply of lenders at Kiva. You have chosen to tell would be lenders that you there are no current funding opportunities. I’m intrigued by the notion that another way to balance supply and demand would be to reduce the lending terms (for instance lenders only get 90% payback of their loan back with the other portion being a gift to Kiva or to someone else in your financial chain). I’m not suggesting you take this action because I do not know your business well enough. But I do believe that you are facing an issue that many other social capital “exchanges” will be facing in the future and that your actions on this issue will set a precedent. I’d love to hear your thoughts.
Thanks for your suggestion. Currently, here is our strategy in times of excess lenders:
— Softly cap individual donations at $25, and ask users to reduce individual spending so that others can participate.
— When the site runs out completely, ask for donations to Kiva so that we can hire more people, sign up more partners and get more entrepreneurs posted on the site.
Your idea of only sending 90% of lender money to entrepreneurs would save us 10%, which wouldn’t get us that far. Our supply/demand disequilibrium is much greater than that. Secondly, it breaks the purity of our p2p (peer-to-peer) intentions. It’s really powerful to say “100% of your loan goes to the entrepreneur” and that’s something we are not going to back away from as long as I’m here.
It must come across as kind of obnoxious to have someone (me) who is no expert in microfinance suggest a change to Kiva’s business model. I don’t think I know any better than Matt does on this issue. But the long history of markets shows that supply and demand is best reconciled through changes in price rather than through artificial caps. My idea of changing the terms of the loan would in effect be a pricing change. But Matt makes a very important point when he talks about the “100% of your loan goes to the entrepreneur” image of the organization.
Here’s my take. These social capital markets belong to the public. As we shift towards a social capital market, it is important that those people with a vested interest in the outcome speak up and make their voice heard. As a member of the public, we are all “shareholders” in the social capital markets and the organizations that are creating them. I look forward to following Kiva’s progress.