tag:blogger.com,1999:blog-180967802024-03-07T06:13:12.006-08:00The Kiva Chroniclessocial edgehttp://www.blogger.com/profile/05685464929390855316noreply@blogger.comBlogger64125tag:blogger.com,1999:blog-18096780.post-43921012683694910732007-02-06T13:15:00.000-08:002007-02-06T13:17:41.266-08:00We have moved!This blog is now on <a href="http://www.socialedge.org/blogs/kiva-chronicles">Social Edge</a>. Please update your browser and RSS feeds.social edgehttp://www.blogger.com/profile/05685464929390855316noreply@blogger.com4tag:blogger.com,1999:blog-18096780.post-1170180423681795532007-01-30T10:06:00.000-08:002007-01-30T10:16:48.113-08:00Tax Status RevisitedA big theme of the journey through Kiva has centered around the decision of organizational type. Jess and I started out right away thinking it would be formed as a nonprofit. One of the first things she did was to look for an attorney to incorporate us as a 501c3. It took over a year from start to finish to get 501c3 status and it was a serious pain. <br /><br />This summer was kind of rough in this regard. It was taking forever to hear back from the IRS. We sent a letter to them to expedite the process but didn't hear back for months. Kiva was crawling along at $1-$2K in loans and 25 new users a day. We weren't making traction very fast.<br /><br />There are a lot of debates in social entrepreneurship around the topic of whether to become a 501c3 or become a for-profit. It's my impression that prevailing winds within the field suggest the for-profit model whenever possible. "It's hard to scale a non-profit" , I would hear a lot. Or, "you can access so much more capital" if you convert to a for-profit model.<br /><br />That was just my experience with people in the social sector. However, It contrasts sharply with what I heard from the financiers of the tech world, Premal and I spent a fair amount of time in the offices of Sand Hill Road...especially last summer. In general, the VCs we talked to wanted to consider ideas that had a decent shot at a 10x return on their investment. When we ran models of trying to eke a 10x return out of Kiva's model, it never felt quite right. <br /><br />We also briefly looked for "patient capital" investors but turned up very little. There just not a lot of that patient capital out there knocking down doors. This new, but limited, class of investment is arguably harder to access than donations. <br /><br />I've had the luxury of working closely with three experienced angel investors on the board. This fall I was at a breaking point. At our October board meeting, we were down to $15K in cash reserves with a monthly burn rate of about $15K. Fundraising was getting pretty urgent and wasn't sure if we could hit payroll. I ran the for-profit idea past the investors . Unanimously, the board shot down the for-profit idea. One board member asked us to call him if we were about to hit zero so he could liquidate some of his assets. <br /><br />Right after that, the Frontline PBS show happened. Combined with a new model around optional lender fees, we became cash-flow positive the next month. We now have much more predictable income and are financially stable. We never had to call for a liquidity event. <br /><br />I'm not religiously tied to the nonprofit structure. It's working for us now, and has several advantages. Prominent among these is user good will and branding. I consider Kiva to be a public property owned by it's users. This feel would be harder, but not impossible, to pull off if we were a for-profit. There is a level of trust we gain as a nonprofit that would be harder to gain as a for-profit. Equally important are variable cost savings because of donated services. Right now, PayPal has donated free transaction processing to us, which means we aren't charged the usual 3% off of every transaction. Our model would be much more difficult to pull off without PayPal's partnership. <br /><br />For anyone deciding between the two, my main thought is to be fiercely practical -- not religious -- about the org type you choose. These are tax-structures, not religions, you are choosing between. Each can be maximized in it's own way if you just focus on getting work done.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com10tag:blogger.com,1999:blog-18096780.post-1168969305533502132007-01-16T09:34:00.000-08:002007-01-16T10:08:43.986-08:00Scarcity MentalityI'm having a slight identity crisis and it involves scarcity. <br /><br />For the past two years I've operated in an environment where scarcity was the rule. We had a really small budget and stretched it so wide. We used open source methodologies, we had no IT person, no travel budget, no QA testing, no paid accountant, used furniture, little insurance, no computer budget, no server administrator, low budget hosting, a CEO who writes code, etc, etc. Most of all, we had no free time and all became workaholics. I'd venture to say I saw the sunrise 100 times last year.<br /><br />Scarcity, while we might complain about it, can become a badge of honor as well. In the nonprofit world, I see that all the time. Nonprofits often compete in terms of their overhead ratios. Most every nonprofit out there advertises to it's funders how it likes to keep overhead low so that the majority of funds it raises goes to constituents. Kiva is not all that different. Last year we raised $2M in loans through our website and spent about $200K on our own staff (aka overhead). Thus, we can advertise that our overhead was no more than 10% of the total funds sent to our consituents. That's golden in the fundraising world.<br /><br />This kind of competition, while it seems logical to the public, can also be destructive. For instance, is it a good thing that Kiva had no QA testing process last year? Sure, we spent less on dreadful *overhead*, but at what cost? A buggier website? <br /><br />I've definitely thrived on the narrative that Kiva, despite a lack of resources, has overcome enormous challenges and made a positive impact on the lives of thousands. That's a very motivating story. The question is, how will things change once we have more resources? Is there a way to maintain a similar motivation in an adequately- funded organization? Also, can we break the destructive scarcity mentality?<br /><br />In the last post, I asked everyone how much loan volume they would predict for Kiva in 2007. THANK YOU for all of the comments. Since I spend all my time building an organization, I don't have time to blog a ton right now or respond to all the comments. I read them all and they guide my thinking. I really appreciate the sense of community that is evolving on this blog. <br /><br />Olana, Premal and I have put together a budget to present to the board. We set the big goal next year at $10M in loans, but have contingincies in place for smaller and larger amounts. This means our overhead budget will go to about $1M for the year. IMHO, this is enough to adequately staff and resource our org for a $10M year. We need to get approval from the board. Pending that, we will be hiring soon....Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com9tag:blogger.com,1999:blog-18096780.post-1167733987698926442007-01-02T02:10:00.000-08:002007-01-02T02:35:28.780-08:00Seasonal?Our site has been branded around small loans, with a primarily African focus. We started in Uganda with $300 - $500 loans which seemed large at the time. In that part of the world, a $500 loan is a usually a second stage loan given to somebody that has already proven some ability to repay a micro-loan in the past. When the first round of Ugandan loans was posted up, we wondered how users would react.<br /><br />If you look at our site at this very moment, for the most part, you will see a pretty different story. Most of the loans currently listed are $1000 and up....with a heavy focus on Eastern Europe. Why is this? You ask. It's not because our partners in Africa, South America and elsewhere aren't posting up smaller loans.<br /><br />Instead, what is happening is that our partners in these parts of the world are posting quite a few smaller loans every day. It's just that these loans are the first to be funded and moved to the "raised" section of the site. Thus, what you see on the site usually are the loans that take the longest to be funded. <br /><br />This points to an interesting phenomenon: users prefer small loans. Also, users seem to prefer African loans above all. Thus, when a partner posts up a an African, female, agricultural entrepreneur, this entrepreneur gets funded sometimes in minutes. On the contrary, an Eastern European retail store or taxi driver will sometimes take weeks to be funded. Every loan is getting funded, just a drastically different rates. <br /><br />Another, more important phenomenon, has happened to us: a pretty drastic surge in business. I wrote that, while in <a href='http://kivachronicles.blogspot.com/2006/11/toronto.html'>Toronto</a>, I watched our user base and our loan volume double. We crossed the $1 million mark in November. The trend has only accelerated: we crossed $2 million last week. We have amazing lenders. This has caused growing pains for those of us writing software, for our partners posting loan opportunities, and for the rest of our staff which has been tirelessly working to sign up more partners and conduct due diligence. It's a cliche around here: these are all good problems to have.<br /><br />Check out this chart of our traffic and loan volume. If you have a sec, let me know what you think. How much of this growth is seasonal? If you were me, how much loan volume would you predict for '07?<br /><br><br><br /><a href="http://photos1.blogger.com/x/blogger/6281/1784/1600/793371/charts.gif"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="http://photos1.blogger.com/x/blogger/6281/1784/320/822589/charts.png" border="0" alt="" /></a>Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com19tag:blogger.com,1999:blog-18096780.post-1166527635994583852006-12-19T03:08:00.000-08:002006-12-19T03:36:07.253-08:00Carl's Big Adventure: The Next EpisodeBack in January, I told <a href='http://kivachronicles.blogspot.com/2006/01/outsourced.html'>the story</a> of how my TiVo colleague Carl Haynes packed up for Uganda to start the Kiva Africa software dev operation. Carl's a prolific engineer and a pioneer in the Java language. <br /><br />"Tune in", I said, "this should be fascinating".<br /><br />Tuning in has been hard to do. He arrived in March and spent two months or so really revving on the Kiva partner interface -- making it much easier for our partner MFIs to post businesses from the field. We had a loose agreement about what he would do and it was going great.<br /><br />At about June, his work really dropped off. Silly visions of Kurtz ran through my head. I remember a series of late night calls trying to ascertain what he was up to.<br /><br />There are a lot of challenges to coding from Uganda. 1) It's literally impossible to get anything better than dial up speeds from that country. 2) You have electricity only every other day given the power crisis in Uganda which shows no sign of letting up. Fuel is expensive and often generators are all you've got. <br /><br />Less predictible, however, are the social distractions. Following his <a href='http://www.carlsbigadventure.com'>blog </a> this whole time, it's pretty obvious what really happened here. Carl fell in love. With Moses' sister in law no less!<br /><br />Last thursday night, I got a surprise call. Carl was in San Francisco outside of our office. He entered the office with a simple announcement: He and Susan got married. <br /><br />Congratulations my friend. Will you move your budding family back to the Bay Area?<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/x/blogger/6281/1784/1600/778950/IMG_7440-1.jpg"><img style="cursor:pointer; cursor:hand;" src="http://photos1.blogger.com/x/blogger/6281/1784/320/338949/IMG_7440-1.jpg" border="0" alt="" /></a><br /><br /><a href='http://www.carlandsusangetmarried.com/'>http://www.carlandsusangetmarried.com/</a>Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com0tag:blogger.com,1999:blog-18096780.post-1165314603930776322006-12-05T02:28:00.000-08:002006-12-05T23:28:36.943-08:00I'm convincedIf you're an entrepreneur, you should sound more confident than you are. If you're a social entrepreneur, you should be more inspirational than you feel. If you are an introverted social entrepreneur, you will face even more problems.<br /><br />I struggled with depression for much of my young adult life. Sitting close behind a great optimism for other people lied a cloud of pessimism directed inward. In my short career in the corporate world, this pessimism would hang over me for weeks at a time. I would come home from work just wondering how I was going to escape the meaningless cycle I seemed to have fallen into. <br /><br />There's a big difference between ideas and beliefs. The last two years we've been battling in the world of ideas and slowly changing minds. Lately I've suprised myself. I've actually started to believe these ideas. Last week I was speaking and I noticed the tenor of my voice modulating between dispassionate and passionate, intellectual and emotional, bound and released. I stopped thinking for a while and just let myself go. The time flew by. <br /><br />At the moment, Kiva is financially self sufficient. We are doing about $20K in loans each day, and getting just under 10 percent in optional lender fees. Our users are proving that personal lending can be carried out in a financially sustainable way. Because we have an amazing group of lenders, the urgency of daily fundraising has been alleviated. This means that we are free to carve out our own destiny and build the product that we all desire. Together, we can assemble a resource that will be a public good for generations to come. I can't tell you how excited that makes me feel.<br /><br />Again, we owe this all to our users. Thanks to you as I leave work tonight and head home for a rare and wonderful sleep.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com14tag:blogger.com,1999:blog-18096780.post-1164795561502387442006-11-29T02:17:00.000-08:002006-11-29T02:19:21.506-08:00A letter from KenyaWe get amazing emails all the time, but this one stood out. <br /><br /><i><br />Hi KIVA.<br /><br />My name is _____ from Canada. My sister told me about KIVA<br />and the good work you are doing. She lives in _____ and she is a new<br />lender to KIVA.<br />I am a Veterinary Doctor and I have always desired to make a<br />contribution in improving dairy farming in developing Countries.<br />I am currently on Holiday in Kenya. I visited the Masaai Mara games<br />reserve that has just been declared the new 7th Wonder of the World.<br />It's an amazing experience.<br />I then visited Lake Nakuru National Park that is reputed to be the<br />World largest birds' sanctuary. Its while in Nakuru that my sister<br />alerted me about a Nakuru based KIVA partner called Ebony. I visited<br />your Website and I was able to get Ebony's contact details. I asked<br />the Management of the hotel where I am staying to help me contact<br />Ebony. Surprisingly they knew Ebony very well. They contacted the<br />organization, which immediately dispatched a vehicle to pick me up<br />from the hotel. I wanted to visit small-scale dairy farmers and I<br />suspended my Holiday.<br />I was taken to their offices where I met Irene, Marion, William and<br />other staff. They were amazed that I came to know them through KIVA<br />and that I suspended my holiday to visit them. Irene took me through<br />what Ebony does. She then took me to a group of young people affected<br />by HIV/AIDS. They were making some beautiful necklaces made from beads<br />and timber waste. I was shocked by the poverty around them. I met<br />people who had not had a meal for two days and people who cannot<br />afford to take their children to school. These things sound<br />unbelievable to us in Canada but I came face to face with real poverty<br />and the effects of HIV to children in Africa.<br />However I was moved by the determination and creativity of these poor<br />people to overcome poverty. I realised just how my US $ 25 can make a<br />difference between life and death to so many people in Africa!<br />I learnt that Ebony has assisted the youths to secure contracts to<br />supply their beautiful products to tourist hotels and that their<br />request for funding would soon be posted on KIVA's site. (I could not<br />wait. I made a donation of US $ 2000 to help the group buy more<br />supplies).<br />I was then handed over to James who drove me to my dream destination.<br />I was taken to Donduri an agricultural area where I met peasant dairy<br />farmers. Here I came face to face with rural poverty in Africa.<br />Dilapidated schools with no classrooms, inadequate resources with one<br />teacher handling over 100 pupils, impassable roads, pregnant women<br />walking for miles to the nearest health clinic, lack of crucial drugs<br />at the clinics and massive unemployment among youths.<br />These problems co-exist side by side with rich but unexploited<br />agricultural potentiality.<br />The place is fertile, dairy farming does extremely well and the market<br />for milk is very huge here. I was surprised by the amount of technical<br />knowledge on animal husbandly these rural people posses. They have<br />looked after their dairy cows very well.<br />The biggest problem I noted was the quality of the cows. They are not<br />able to access quality artificial insemination and good animal breeds<br />are expensive here. Again they don't earn full value of their produce<br />because they sell all their milk in raw form.<br />No processing is done at all. The farm sizes are very small and many<br />are forced to practice what is called zero grazing.<br />I was excited to learn that Ebony has begun addressing the problem of<br />quality breeds and that a number of these farmers are already posted<br />on KIVA's site wanting to purchase quality dairy cows. It was<br />wonderful to meet some of the farmers currently featured on KIVA's<br />site.<br />I am resuming my holiday and I am headed to the coastal city of<br />Mombassa before flying back to Canada.<br />The visit to Ebony was an eye opener to my sister and me. I came face<br />to face with the poverty problem KIVA is addressing and I saw the<br />practical impact of a KIVA loan to the poor rural households in<br />developing countries. I am now a KIVA devotee and<br />I will mobilize my friends to help fund more Kenya people through<br />KIVA. Thank you very much for what you are doing. I will share some<br />Ebony photos when I am back. KIVA YOU ARE ON A MISSION FROM GOD!<br /><br />_______<br /></i>Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com2tag:blogger.com,1999:blog-18096780.post-1164795001197832322006-11-29T02:09:00.000-08:002006-11-29T02:26:46.210-08:00Something out of NothingIf they made baseball cards for social entrepreneurs, I'd want a Jordan rookie.<br /><br />I haven't really written much about our trip to East Africa in October for the <a href="http://media.pbs.org/asxgen/general/windows/media4/frontline/frow57/windows/uganda-601_xl.wmv.asx"> Frontline taping</a>. That's probably because it's pretty difficult to describe what the time meant for me and impo'ssible to capture the vibrancy of the people I met. This post will probably suffer because of that, but I'm giving it a shot anyway.<br /><br />Something I have loved since starting this job is being connected to a greater community of entrepreneurs. Christina Jordan, who runs <a href="http://www.blogger.com/%27http://lifeinafrica.com">Life in Africa</a> (LiA) , made a lasting impression on me and what I'm trying to accomplish with Kiva.<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/x/blogger/6281/1784/1600/885376/P1010097.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="http://photos1.blogger.com/x/blogger/6281/1784/320/58235/P1010097.jpg" alt="" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/x/blogger/6281/1784/1600/847868/P9270134.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="http://photos1.blogger.com/x/blogger/6281/1784/320/956575/P9270134.jpg" alt="" border="0" /></a><br /><br /><br />As I mentioned before, LiA is a cooperative owned by mostly women who produce crafts and run small businesses -- like Grace's Peanut Butter Factory. They make business decisions by consensus and loan applications are approved by the community at large. This leads to lively town meetings where applicants are evaluated in front of everyone and dirty laundry is often aired. Because of the community feel, stepping into LiA grounds is somewhat utopian. You can viscerally feel the energy when walking in -- both our entrance and departure were accompanied with Acholi song and dance. I became a stiff drummer in a circle of not so stiff women.<br /><br />There was a lot of down time during the taping, so were able to catch up with Christina. One thing I detected from her is a maverick, anti-establishment, yet capitalist attitude. As far as I can tell, LiA has received little or no funding from foundations. Instead, they have built a self-sustaining community and turned a profit from selling crafts made from paper, plastic bags and drinking straws. In some of the most desolate areas on earth LiA has started to build something permanent..."out of nothing" she pointed out. Hearing her say that in a prideful way was a call to action for me.<br /><br />Many of us, when starting an organization, can fall into the permission trap. There are a series of steps you can traditionally take to get a social enterprise, or any venture, off the ground. There are seminars, conferences, incubators, fellowships and foundations. This leads to trap that is easy to fall into: the process of asking for permission to be an entrepreneur can be inherently anti-entrepreneurial.<br /><br />At the dawn of Kiva, most of this process didn't work for me. Instead, choosing to build every day has been my saving grace. The road has been bumpy, but it's much more rewarding to focus on building than to worry what various committees of people are thinking of your business at any given time. I have tried to focus every day on what we can control and double down on that -- and let the rest play out with the passage of time.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com5tag:blogger.com,1999:blog-18096780.post-1163569306805260342006-11-14T21:34:00.000-08:002006-11-15T19:10:36.046-08:00TorontoI was in Toronto last weekend at my friend Andy Federle's wedding. It was an Anglican ceremony and I sang counter-tenor in latin with a small choir made of mostly Mennonites.<br /><br />It's been a long time since I sang for anyone other than myself. I showed up on Thursday, went to the bachelor Party that night, woke up the next day and practiced my part the whole afternoon. All the while I was running to the Internet cafe on Yonge street in order to make some sanity out of the activity on Kiva.org. My head was constantly running through the numbers.<br /><br />While I was practicing, praying, partying and freezing in Toronto, everything nearly doubled. We had 6,000 users before Toronto. Now, we have we have about 12,000. We had done $500K in loans before Toronto. We'll soon be at $1 million. It took us two weeks to almost double the progress we had made in one year. So it goes life on the Internet...<br /><br />I was battling through sheet music and Canadian micro-brews; everyone at the office was battling our server woes. I returned to a group of people who had given it their all and gotten us back online.<br /><br />Everything looked beautiful from Toronto. Few there could sympathize with my story and it wasn't worth it to try and explain. So I quit talking about it and just enjoyed the moment. I went to bed in a bunk at a Bible College downtown...knowing this for sure: Kiva had hit a new plateau.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com2tag:blogger.com,1999:blog-18096780.post-1162474228096656362006-11-02T05:04:00.000-08:002006-11-02T05:34:11.250-08:00Frontline FalloutThe last day has been the best and worst of times for us at Kiva. We have experienced an outpouring of support from the American public an order of magnitude greater than ever before....and we couldn't handle it. I'll never forget Halloween 2006. <br /><br />The day began with a furious push to get more businesses on our site. Our partners all over the world worked overtime to fill our site with loan applications from hundreds of entrepreneurs. We weren't going to run out of businesses this time. Premal and Chelsa did an incredible job at mobilizing our partners to get their businesses posted. Our partners proved that quick scale was possible.<br /><br />6:00 PM<br /><br />The show was beginning to air in NYC and all over the East Coast. Many of us were in costumes -- Premal as Chilly Willy and Jeremy as a Greg Bradyish seventies swinger. We projected the site on a huge whiteboard in our office along with the accompanying server statistics that were being updated realtime. Jeremy, in his curly afro and unbuttoned shirt, dictated to the staff on how our server was responding. All was going well at first. The site was getting increased traffic but was working well.<br /><br />6:35 PM<br /><br />Suddenly, everything stopped. The site froze and even the server statistics stopped being reported. The NYC viewers decided to hit the site all at once. Our little server didn't stand a chance. It wasn't even close. It's been down ever since. We uploaded a static HTML page asking for patience and offering an email address. Serving up this one static page is maxing out the CPU on the server. This really took the fun out of an otherwise joyous evening.<br /><br />This is obvious. Kiva failed to take advantage of an incredible opportunity for us and more importantly for the entrepreneurs we serve. <br /><br />We are now working with a new company who are experts in scaling web applications fast. They are advising us on how to handle high transaction volume and site traffic. If all goes well, we'll be back online tomorrow.<br /><br />To everyone involved: Kiva Staff, Board, Partners, Entrepreneurs and Lenders. Please accept my apology. Looking back, I didn't do everything I could to prepare Kiva for this event. We couldn't handle the <i>tidal wave</i> of support, but we will.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com24tag:blogger.com,1999:blog-18096780.post-1162270940952805352006-10-30T20:59:00.000-08:002006-10-30T21:31:08.860-08:00The stupidest thing I ever said<i>'I sit in front of a tidal wave of money,' said Flannery.</i><br /><br />That was me, in <a href='http://money.cnn.com/2006/01/17/pf/kiva_microfinance/index.htm'>a January 17 quote on CNN</a> showing the naivete of a first-time entrepreneur. I still get made fun of for saying that. I can hear Premal laughing right now.<br /><br />Usually I complain that life goes by too fast. This year might have been the longest of my life. It feels like its been a decade since I was talking to that CNN reporter -- pretending to know what I was saying. Since then I've continuously see-sawed between overestimating and underestimating this business. I've counted every minute of every day and I've slept half as much. (maybe that's why it seems so much longer).<br /><br />All bets are off tomorrow. We'll be on Frontline PBS at 9 PM in most locations. You will probably be out trick or treating. That sounds more fun than watching TV -- although Frontline is an amazing show.<br /><br />Children in East Africa will be eating pumpkins. Children in the USA will be smashing them. Hopefully every child here gets a chance at one. We wouldn't want them to go to waste going into peoples' stomachs...<br /><br />Gnite.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com14tag:blogger.com,1999:blog-18096780.post-1161227142957272952006-10-18T20:01:00.000-07:002006-10-18T20:59:29.730-07:00Kenya's BushI love East Africa. I can't tell you how many nice people I met during my time there. It's been almost two weeks since I've been back. At first, it was quite deflating (both digestively and emotionally) to be home. I'm recovered now.<br /><br />Kenya is alive with heated politics -- almost always tribal.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/blogger/6281/1784/1600/PA050356.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://photos1.blogger.com/blogger/6281/1784/320/PA050356.jpg" alt="" border="0" /></a>I spent my fair share of time there arbitrating friendly arguments -- like this one pictured here between Jedidah, Collins and Rowland. Collins was my host in Nairobi and runs <a href="http://www.epsprogram.org">EPS Progam.</a> Rowland is my long time friend and a staff member of <a href="http://www.villageef.org">Village Enterprise Fund</a>. Between them, they represent 3 tribes: Kikuyu, Luo and Luyha. What were they arguing about? Bush.<br /><br />A week before I arrived, there was a discussion between Bush and President Kikwete of Tanzania where Bush reportedly referred to Kenya as "unstable". Later, it came out that Bush had simply lumped Kenya in with general <a href="http://allafrica.com/stories/200609220144.html">political instability</a> on the Horn of Africa. This kind of thing, as you can imagine, was not received so well. In no way do Kenyan's think of themselves in the same political category as Sudan and Somalia. Bush was asked to apologize but never did.<br /><br />A casual mention in a diplomatic setting can have huge ramifications in a place like Kenya. Instantly, the mention was injected into local tribal politics. The Kikuyu, who are largely held to be the ruling class of Kenya, were highly offended. Since Kikuyu basically run Kenya, they took this as a slap in the face. Other tribes of less political clout manipulated the Bush remark to their own polical gain -- using it against the Kikuyu leadership. Some believe Bush knows more than they do and that Kenya is just one big assassination from complete unrest. Who knows? One thing is for sure, there is a heck of a lot of resentment in that country between those tribes in power and those cast aside.<br /><br />Meanwhile, our government has been funding a <a href="http://observer.guardian.co.uk/world/story/0,,1868920,00.html">privatized anti-warlord military campaign</a> using American corporate solidiers. This is an interesting way of circumventing UN agreements. I wonder what it is like to work for a company like that...Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com4tag:blogger.com,1999:blog-18096780.post-1160204931864109732006-10-06T23:58:00.000-07:002006-10-09T08:28:32.306-07:00Quick from WEECI'm still here in Nairobi, writing from an airport as usual.<br /><br />On Thursday I visited WEEC (Women's Economic Empowerment Consort). WEEC (pronounced "wick") is a small/medium sized MFI working just outside of Nairobi near the town of Kiserian. Interestingly, they are positioned just in between the wealthy estates of Nairobi's elite and the plains of the hunter-gathering Masai tribespeople. WEEC employs group-lending methodology to finance businesses started by groups of <a href='http://www.kiva.org/app.php?page=businesses&action=about&id=285'>Masai Women</a>. The groups are usually around 5 women. Some interesting factoids below:<br /><br />The WEEC office serves as a gathering/training ground for these groups of Masai women. The Masai live in small clusters separated by great distances. They travel to the WEEC office which can be about 25K away from their homes. WEEC asks the women to self-select into a group and then develop a revolving credit scheme. Revolving credit schemes entail that one member deposits cash into the group so that another can borrow. This creates cohesiveness. Groups successful at revolving then go on to become borrowers from WEEC itself.<br /><br />WEEC has been posting each group member as an individual business on Kiva.org. This is slightly misleading because, in truth, the group is responsible to repay -- not the individual. In the future, hopefully Kiva can better support group lending though our software.<br /><br />I sat for tea with WEEC management. We had a wonderful and lengthy discussion. WEEC is run by Jedidah Waigwa who is incredibly sharp. Jedidah is a Kikuyu women who gave up a lucrative job many years ago to start WEEC about 4 years ago (?). Since that time WEEC has receivecd several intl awards including one from CGAP. She has taken WEEC a long way fast.<br /><br />I asked an open-ended question. "What is the effect of Kiva on WEEC?" Here is what I heard in no particular order:<br /><br />1) Kiva has caused them to emphasize the internet much more in their daily lives. They only have one computer which has poor connectivity. The kiva site is easy to use, but they struggle with keeping a consistent connection. The internet doesn't work well in Kenya!<br /><br />2) Because of Kiva they have served significantly more clients. Their portfolio has grown significantly. This was a wonderful validation for us at Kiva!<br /><br />3) Outside of Kiva, they borrow at 18% in commercial loans fromthe local bank (standard chartered). Kiva capital is coming in at 0% currently from our lender base which consists of people. The effect of this is cost savings which has gone into hiring a new staff member. <br /><br />We reflected that people have different cost structures than banks and can loan on different terms. Look for nonzero rates on Kiva hopefully later this year.<br /><br />4) A surprise: The credit officers at WEEC find their jobs more enjoyable with Kiva because the personal side of our site gives them a reason to be more involved in the lives of the masai women. The officers feel sort of like journalists or social workers. Kiva has caused them to be closer to their clients and they feel like this will eventually result in higher repayment rates. Let's wait and see...<br /><br />Got to go get on a flight soon.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com1tag:blogger.com,1999:blog-18096780.post-1159636876236813102006-09-30T10:12:00.000-07:002006-09-30T10:21:16.253-07:00Some pictures<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/blogger/6281/1784/1600/Image008.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://photos1.blogger.com/blogger/6281/1784/320/Image008.jpg" alt="" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/blogger/6281/1784/1600/Image007.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://photos1.blogger.com/blogger/6281/1784/320/Image007.jpg" alt="" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/blogger/6281/1784/1600/Image003.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://photos1.blogger.com/blogger/6281/1784/320/Image003.jpg" alt="" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/blogger/6281/1784/1600/Image010.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://photos1.blogger.com/blogger/6281/1784/320/Image010.jpg" alt="" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://photos1.blogger.com/blogger/6281/1784/1600/Image013.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://photos1.blogger.com/blogger/6281/1784/320/Image013.jpg" alt="" border="0" /></a><br />I'm writing from a Kampala internet cafe. It get's dark around 7 PM and the only lights are from those businesses with generators. Creates a noisy and rather eary feel to the city. It's a great, bustling place.<br /><br />I've been taking pictures all day from my phone and sending them to myself from MMS. Most of these are from our Kampala partner -- "Life in Africa"-- which is run by Christina Jordan. They are a cooperative of mostly women who make all the loan decisions as a community. They also create crafts from recycled material (bracelets, baskets and such). The day ended with a traditional Acholi dance and I got to be the drummer. This made it on the Frontline tape to my potential embarrassment.<br /><br />I'm now ending my week with Clark and Josia from Frontline World. We had a real fun time travelling around Uganda and stepping into the lives of several business people along the way. Jess left too, so now I'm on my own for a week and will be going to Kenya tomorrow.<br /><br />Here's a bunch of cell photos:Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com2tag:blogger.com,1999:blog-18096780.post-1159370133324794372006-09-27T08:10:00.000-07:002006-09-27T08:15:33.343-07:00KampalaI'm 24 hours into my stay in Uganda. Jess is asleep at the "Life in Africa" offices and I'm blogging from an internet Cafe just outside of the Acholi Quarter.<br /><br />The Acholi Quarter is a settlement of Acholi tribe people -- most of whom have been displaced by the LRA war in the north. Supposedly, the war is now ending and people are hoping the peace will hold.<br /><br />Next to me is Grace Ayaa who runs a peanut butter factory in the settlement. She's blogging right now on our site about her factory and writing back in forth with Kiva lenders. All of this is being filmed by the "frontline" crew. Its a pretty disruptive scene.<br /><br />It's been a great day. I love it here! People are so fun to be around. They are also very free about talking about their problems -- of which there are many. It can be overwhelming to listen to the stories and not internalize everything. <br /><br />Today we visited a film house which will be the first movie cinema posted on Kiva.org ...Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com1tag:blogger.com,1999:blog-18096780.post-1158658309227331032006-09-19T02:16:00.000-07:002006-09-19T02:31:49.246-07:00Going to AfricaNow I'm the last one in the office. We need to close the windows after dark in a neighborhood like this. Of course, I'm tired, but there is some cool stuff to write about:<br /><br />We've been tailed by a camera crew for the last week -- Frontline PBS reporters, producers, editors and such. If you care, they will be airing a segment on us on Halloween. While your kids are trick or treating, if you have some time, watch Kiva at work.<br /><br />The most pertinent part of this latest development is an impending trip to Uganda. We are leaving on Sunday and I'll be gone two weeks. Jess will be home after one week and I'm staying two so I can make a trip to Kenya.<br /><br />So we will be in Africa soon. This will be my first time in 2 years. Africa, during this time, has been connected to me through a series of late night phone calls, text and photographs on our website. It has all seemed a little surreal. Hopefully I can recapture a little bit of the reality behind it all.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com0tag:blogger.com,1999:blog-18096780.post-1157434482841831462006-09-04T21:54:00.000-07:002006-09-04T22:34:43.050-07:00501(c)3A couple weeks ago, Kiva received word from the IRS that we are a 501(c)3. This gesture came via a form letter from their branch offices in Cincinnati. A simple letter capped off a journey started by Jessica two years ago. Congratulations Jess.<br /><br />Flash back to the summer of 2004. Jessica and I, fresh back from Uganda, would walk the streets of Noe Valley every night talking about our dream for Kiva. Jess, the first leader of Kiva, was spending every day writing and calling law firms in the Bay Area looking for support. We realized that building Kiva was, in many ways, a legal effort. We knew how to build software; we knew people that needed loans. However, there was a cloud of legal uncertainty hovering over this idea. The outstanding questions threatened to be a nonstarter for our project. We needed lawyers to take up our case. A picture of an entrepreneurial legal team formed in my mind, and we prayed for that eventuality.<br /><br />Jess went into the bar association, setting up meetings with anyone that would talk to her. She called over 30 firms in San Francisco. We got a lot of feedback: "You can just lend money on the internet to people overseas" , "Why don't you go work for Grameen bank, aren't they already doing this?" and "The SEC will shut you down!" Visions of men in suits at the door colored my dreams.<br /><br />At the end of our rope, the phone rang. It was a lawyer about our age, Kiran Jain, at Bingham McCutcheon who said she would help. She, along with a team of attorneys, became the missing piece we imagined. We embarked upon the process of filling out forms, and waiting. Two years later, her work has born fruit in a stamp of approval from the government.<br /><br />As we found out, it takes a long time to hear back from the IRS. Hurricane Katrina caused a rush of applications for charities in the US and the IRS motioned to prioritize these over other applications. For nearly a year, our app was stuck in a pile of papers somewhere in Cincinnati. Kiva's offline fundraising efforts were handcuffed. We discovered that no foundation will talk to a "prospective 501(c)3 ". In August, the IRS sent us a list of questions. By that time, we were ready with a list of succinct answers. The legal uncertainties of p2p lending of this sort had been lessened and the IRS sealed us with approval.<br /><br />This story follows a familiar theme in this blog: dreaming, waiting and overcoming. Overcoming only happens when people mobilize around a dream and go out of their way to help in a big way. The waiting can be agonizing. <br /><br />Now, we are starting a new process, maybe even more difficult -- institutional fundraising. Last week we made our first big foundation pitch to the Hewlett Foundation. Like everything else in building an organization, this will take time, determination, and the ability to dream. Will keep you posted.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com4tag:blogger.com,1999:blog-18096780.post-1156320769176917212006-08-23T01:10:00.000-07:002006-08-23T01:12:49.210-07:00Where am I?Where am I?<br /><br />Global X put it well to me today -- the clock is ticking. It's been almost a month since my last post on this blog. SocialEdge is one of the most dynamic sources of changing content about the field of Social Entrepreneurship on the web. For over 30 days, my blog has been an eyesore on a great site. My apologies to SocialEdge.<br /><br />Right now I'm back to my hilltop cabin retreat outside of Palo Alto. For the last two weeks, I've been hammering away on the underbelly of Kiva.org...sleeping in SF. The site is going through some major changes, but only about 50 people can see them. Where have I been?<br /><br />LAST TWO WEEKS<br />A major percentage of the web development of Kiva goes towards the partner interface. This is the site that our partner microfinance institutions see when they login. They see tools that allow them to upload businesses, record payment information, and journal entries. It's a goal of our staff to make this interface as easy to use as possible. One day, we hope that it can seemlessly blend with MFI accounting systems. This is a lofty goal and we are drafting the great work of Grameen and the <a href='https://www.dev.java.net/files/documents/5045/36409/ch00_mifos_02_0614.pdf'>MiFos project </a>for inspiration.<br /><br />EARLY AUGUST<br />I spent two weeks at Santa Clara's "Global Social Business Incubator". This was essentially Social Entrepreneurship boot camp. I was grouped with Entrepreneurs from Kenya, Ghana, Phillipines, Nepal, Canada, Madagascar, India and more. For the first time since we started, I felt part of a community of Social Entrepreneurs. Maybe that chip on my shoulder has faded completely....<br /><br />I can't say enough about Santa Clara and the GSBI. Wow. For two weeks I received constant personalized mentorship from great minds and was inspired by the examples shared by my colleagues. What a gift. We really answered some fundamental questions about our business and I have a growing sense of inspiration about how these 'blended value' businesses can really scale. We live in an exciting time. <br /><br />LATER THIS WEEK<br />I'm going to Seattle to be with my lovely wife Jessica. Jessica is finishing her internship at Amazon and we are then driving back home to CA. Thursday we are going to the esteemed Unitus to share our experiences with them. Unitus was one of the first places we visited after we received inspiration for Kiva in Africa. Geoff Davis and his team provided excellent feedback that has informed our first two years. Our Thursday meeting will be a landmark reunion of that early meeting.<br /><br />OH YEAH<br />We are 501c3 now. It's been a 9 month journey. Much thanks to Kiran and Ben at Bingham McCutcheon for taking us this far.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com1tag:blogger.com,1999:blog-18096780.post-1153820976909711592006-07-25T02:47:00.000-07:002006-07-25T02:56:27.930-07:00IntoContext IIThis week was an acceleration of everything Kiva. <br /><br />It started with a mention in the WSJ (thanks to GOOD Magazine) and hastened with a <a href="http://www.businessweek.com/magazine/content/06_31/b3995088.htm?chan=tc&chan=technology_technology+index+page_more+of+today's+top+stories">feature story in BusinessWeek</a>. The BW article created a new level of public interest in Kiva from finance-oriented peoples. A brickload of emails were sent, and Fiona is catching up with those as I write this. Meanwhile, record loan dollars are flying through Kiva to working entrepreneurs in the developing world. <br /><br />These articles, and the ensuing reaction, proved that the path is not too great between paper and web. These articles were read in living rooms, airplanes and bathrooms. Apparently, a great number actually got up from their seat, went to a computer and made a loan. It is turning out to be a record setting week and it's great to be all together in one place to watch it happen. <br /><br />Perhaps a more amazing thing happened, however. Cale and Jon presented <a href='http://www.intocontext.org'>their findings </a>to Kiva and Microsoft. For those of you who don't remember everything ever written in this blog, Cale and Jon, funded by Microsoft, spent June in East Africa studying the microfinance institutions (MFIs) there who work with Kiva. They came back with tons of <a href='http://www.kiva.org/masai.wmv'>video</a>, pictures and observations. The focus of their research was MFIs and how they work with Kiva. In what ways does working with Kiva help them? In what ways is it hard? <br /><br />One large point is that they are generally enthusiastic about what Kiva is doing for them, and see Kiva as having the potential to really helping them grow. Kiva, as compared to other sources of capital, is very attractive financially. Kiva provides debt at much better rates than are available for most MFIs in that part of the world. <br /><br />A more subtle point centers around the characters and personalities that work for MFIs like those they visited. In their findings, there are 3 main characters in an MFI in relation to Kiva: The Director, the Credit Officer and the Techie. The Director of an MFI is in charge of operations, is very connected to the outside world, and is looking out for the health of the organization. The Credit Officer (CO) is the person who actually visits the loan recipients every day and is extremely connected to the community. Thus, the CO spends less time in the office and more time in the field. The Techie is the computer expert of the organization and often plays a consulting role. For Kiva to succeed in truly helping grow MFIs, it must be intimately familiar with these personalities. <br /><br />One role that particularly fascinated Cale and Jon was that of the CO. The CO spends most of her time traveling back and forth between three places: Home, the Field, and the Office. Often times these places are separated by marathon lengths, and often the only mode of transport is bicycle. One cycle of work involves a trajectory from home to client to office and back home. This commute can take days. Kiva introduces more work because all data needs to be recorded on a computer, which is only found at the office. Once at the office, getting online is a chore that can take hours and hours. Interestingly enough, the COs almost always had cellphones that worked in the most remote areas.<br /><br><br><br /><a href="http://photos1.blogger.com/blogger/6281/1784/1600/field.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="http://photos1.blogger.com/blogger/6281/1784/320/field.jpg" border="0" alt="" /></a><br /><br><br><br />The big idea here is to use cellphones to record journal and payment data straight to the Kiva website. This has the potential to cut out one leg of the the marathon cycle. The technology already exists and is in use. Cale and Jon are headed back in August for the final leg of their research. The plan is to outfit them with camera phones so COs can make the first Kiva updates from the field. Jeremy had already put the code in place so that the Kiva website can receive text messages and update the site instantaneously. It's an idea that could greatly ease the workload of our partners. There are a bunch of difficulties to overcome, but it's definitely worth trying. <br /><br />If you are interested in helping Cale and Jon, we are looking for phones. You know anyone that works for a cell phone company? Are you able to donate to this next leg of their project so that they can bring more phones with them? If so, let me know, or write to contactus@kiva.org .Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com6tag:blogger.com,1999:blog-18096780.post-1153178032247783642006-07-17T16:08:00.000-07:002006-07-17T16:17:03.370-07:00NPR IIA couple highlights from today:<br /><br /><br /><br />1) <a href='http://www.kuow.org/programs/weekday.asp'> Kiva was on NPR in Seattle </a><br />2) The website crashed. <br /><br />We are very psyched about (1) although (2) had somewhat of a negating effect on (1). We get huge spikes in traffic when we get press like that and sometimes our web hosting company is not ready for it.<br /><br />Despite that, this was a thoroughly eventful morning. I am up in Seattle with Jessica -- who is an MBA intern with Amazon for much of the summer. We are staying right near Pike Place Market. Last Thursday I got the call from NPR up here. It just so happened I was in town. <br /><br />It was quite humbling when I learned that I was sharing air time with Alex Counts (Head of Grameen Foundation USA) and Dr. Raj Shah (Director of Financial Services and Agriculture for the Gates Foundation). Dr. Shah was in studio and Alex was calling in. <br /><br />Compared with my last experience on NPR, this was a much longer discussion. In addition, the conversation was live and the subject wasn't simply Kiva -- it was microfinance in general. I did my best to contribute when I felt I had something unique to add while deferring often to Alex and Raj on most points. <br /><br />Some high level themes of the call:<br /><br />-- The American public and press is skeptical about the high interest rates of microfinance<br />-- Microfinance practictioners at all levels have to constantly justify these rates<br />-- One problem Grameen and Gates are addressing is the high cost of capital to an MFIs<br />-- The commercialization of MF is a primary topic everywhere you go these days<br /><br />One thing I'd like to note is that Kiva is contributing to lowering the cost of capital faced by MFIs. Our lenders loan at 0% today. In the future, we may offer slightly higher interest rates to our lenders. Still, we have the opportunity to seriously reduce the rates that MFIs get money -- which hovers around 10%. Some of our partners currently borrow at 18%! (outside of Kiva)<br /><br />Here's a more detailed paraphrase of the call:<br /><br />1) There are pitfalls to credit. Is it always a good thing for poor people?<br /><br />Alex Counts:<br />-- The only alternatives are to starve or to work for yourself. Most businesses<br />are very undercapitalized. Many are extremely happy to take $60-$70 and expand.<br /><br />2) How can $60 - $70 make a big difference?<br /><br />Alex Counts:<br />-- Chicken business example : a loan helps a small chicken farmer scale up. Many women end up having a poultry farm years later with hundreds of chickens.<br />-- Scaling up can help a woman send her child to school<br /><br /><br />3) How in the past would a poor woman in <br />-- Manila money lender example: Loan sharks often charge 20% interest per day<br /><br />4) How has the work of Dr. Yunus led to the Grameen Foundation USA?<br /><br />Alex Counts:<br />-- About 10 years ago there was a Microcredit Summit. Alex was living in Bangladesh and was tasked with founding the GFUSA in the USA. GFUSA is tasked with taking the Bangladesh experience to other places in the world.<br /><br /><br />5) Is it right that the Gates Foundation is looking into supporting microfinance?<br /><br />Raj Shah:<br />-- We realized that traditional MFIs are very important but not alone. Commercial and public banks are getting involved as well. These provide credit, savings and insurance products as well. <br />-- Over time we will need a broad range of distribution channels.<br /><br />6) Tell us about some of the successes of MF over the world?<br /><br />Raj Shah:<br />-- Impressed by the stories in Bangladesh.<br />-- Data shows that almost 5% of clients every year move out of poverty. <br />-- In Malawi, OI Malawi offers finger print smart cards for safe savings plans. Alternatives are predatory and way too expensive.<br /><br /><br />7) Are they really paying 20%-30% interest rates? That sounds like a lot?<br /><br />Raj Shah:<br />-- The alternative is informal lending which is several hundred percent annualized. 20% might seem high but it is much better than the alternatives.<br /><br />8) Are these the interest rates that Grameen Foundation USA is charging?<br /><br />Alex Counts:<br />-- When organizations scale, the rates come down significantly <br />-- Hopefully rates for rural MF can be as good or better than the rates commercial businessmen get in cities. <br />-- Technology can help reduce rates. Grameen has a tech center in Seattle which can help reduce the rates.<br /><br />9) Kiva actually connects people in this country <br /><br />Matt Flannery:<br />-- Kiva is the first website that allows a first world lender to loan to an entrepreneur in an impoverished region.<br /><br /><br />10) I'm doing this to help someone?<br /><br />Matt Flannery:<br />-- Most users do it for charitable reasons, but we would love to allow lenders to make a return eventually. <br />-- Kiva Beta started in Uganda, all of our family and friends got repaid. Kiva chose 0% interest rates because of potential regulation. <br /><br /><br />11) People don't do it to make a return?<br /><br />Matt Flannery:<br />-- Tells the story of posting businesses on the internet from Uganda<br />-- We chose 0% because of regulatory concerns<br />-- Kiva desires to offer a return on it's loans in the future. <br /><br />12) It's also commercial banks. Are they seeing this as a business opportunity?<br /><br />Raj Shah:<br />-- I think so. In some cases you can make enough money for this to be a <br />commercially viable business. In many cases the banks are partnering with MFIs.<br /><br />13) Does Grameen want to put themselves out of business?<br /><br />Alex Counts:<br />-- Vision is the poor woman has multiple options to get credit.<br />-- CitiBank is the largest bank in the world and is getting into this sector and <br />partnering with traditional MFIs. The banks have a lot of money and the MFIs have a rural network. These very sophisticated partnerships are not putting MFIs out of business but they are leveraging. <br /><br />14) Caller: Everywhere they tell us 20% loans are bad. I think these rates are outrageous?<br /><br />Alex Counts:<br />-- The rates are coming progressively down. <br />-- If you ask the poor, they prefer having this option. Having more options is better. <br /><br />15) Matt, it sounds like you at Kiva are experiencing high repayment rates too?<br /><br />Matt Flannery:<br />-- The high repayment rates are nothing new. Grameen has demonstrated high repayment rates for years. <br /><br />Alex Counts:<br />-- Grameen is trying to educate the wholesale lenders that the poor can repay,<br />-- Grameen wants to reduce the wholesale cost of capital. <br /><br />Raj Shah:<br />-- Cost of capital and cost of labor are two huge costs<br />-- Both of these are coming down. Citibank is lending to BRAC at 11%, <br />-- Equity Bank in Kenya uses mobile units to go to the poor and provide them <br />with banking by using jeeps.<br /><br />16) Is MF Central to alleviating poverty?<br /><br />Matt Flannery:<br />-- It is a key part of the toolbox to alleviating poverty, not the only piece.<br /><br />Alex Counts:<br />-- Cited Grameen Study which shows great hope for MF in reducing poverty. <br />-- Most clients in all studies showed huge improvements in escaping poverty. <br />-- The body of research is quite encouraging.<br /><br />17) Raj, how big a part does MF play?<br /><br />Raj Shah:<br />-- It clearly plays a big part. Moving someone from extreme poverty to moderate poverty is huge. <br />-- 9/10 times, clients pay school fees with the modest profits they make. It can make a huge impact for future generations. <br />-- It's an important too but it is not the only tool. <br /><br /><br />18) Is there a zero sum here. Does money to MF take away from money that goes as donations to other development programs?<br /><br />Matt Flannery:<br />-- MF is a sustainable form of helping. It is a contribution that is more leveraged and can help entrepreneurs into perpetuity.<br /><br />Alex Counts:<br />-- One of the big problems is the health situation in developing countries. Pure health projects will often get someone healthy. However, if they are still poor they will soon fall into sickness again. If they have a sustained income, they can lift their standard of living so they don't get unhealthy as often.<br /><br />19) Does MF just ease the pain, but not solve poverty?<br /><br />Raj Shah:<br />-- This is right. It helps about 1/3 of people move out of poverty. At the end of the day, we think about how you help the most people with a set of financial services.<br />-- We don't talk much about the precarious life of a poor household. Households might have to choose between saving a life, paying school fees or returning a loan.<br /><br />Alex Counts:<br />-- Listeners should remember that a shift from extreme poverty to moderate poverty is a huge life change. It means being able to not have to make choices about which 2 members of a family will eat. Or of which child of three can go to school.<br /><br /><br />20) Caller: How do I use my money to help MF? Kiva is 0% interest...<br /><br />Matt Flannery:<br />-- There was no easy way to invest. There are a couple options for larger amounts: Calvert and Accion. <br />-- Kiva is different because it is lower amounts<br />-- Kiva is working to provide a return soon. <br /><br />21) Is the GFUSA only offer donation options?<br /><br />Alex Counts:<br />-- Yes, currently that's the only instrument.<br />-- Last year, with Citibank, GFUSA started a pledge program for loan guarantees. They are turning $30 million in pledges to $180 in loans from Citibank. 6-1 leverage. <br /><br />22) The size of the Gates Foundation is huge. Will Gates be investing more in MF?<br /><br />Raj Shah:<br />-- Deutsche Bank and Blue Orchard offer debt instruments at lower interest rates. <br />-- There will be more organizations like this over time. <br />-- The Gates Foundation is looking at doing a range of things. Goal is to reach a high proportion of those households that make $2 or less per day. Gates has started to make a number of new grants and investments. We are fortunate to work with Accion , Grameen and Calvert<br /><br />23) How much will Gates spend on MF?<br /><br />Raj Shah:<br />-- We don't have that specified yet.<br /><br />24) What other services does MF provide to the poor?<br /><br />Raj Shah: <br />-- Savings products. Malawi smartcard example. Saving is important to build assets in a meaningful way. Clients value savings tremendously. <br />-- Insurance is very important. Much poverty is attributed to illness and health costs. <br /><br />25) Alex, what are some other products in MF that are not loans?<br /><br />Alex Counts:<br />-- Insurance is important to dealing with risks. Just an hour ago we evacuated an operation from Beirut. It's very difficult to hedge risks as a poor woman.<br />-- Life insurance is important. Death is a constant companion. People don't want to leave debt to the family, thus insurance helps them insure against that. <br />-- Businesses in a box. The cellphone business in Bangladesh is something we are trying to scale<br /><br />26) Matt, other examples?<br /><br />Matt Flannery:<br />-- MFIs can serve as trainers. They can provide information about how to run your business. For example, if you are fish seller you can get training on inventory management from the MFI on how to store fish so they don't perish.<br /><br />27) Caller: What are UNDP and World Bank doing for MF?<br /><br />Raj Shah:<br />-- They are doing two things. 1) Projects that provide technical assistance like CGAP 2) Investing in MF. Most development banks provide capital to places like Deutsche Bank and Blue Orchard. <br />-- World Bank has brought a lot of technical expertise on things like crop insurance and drought insurance. <br />-- Gates would like to see these orgs get much more involved in regulatory issues, <br /><br />Alex Counts:<br />-- It's mixed. We have tried to lobby the World Bank to allocate 2% of the budget to MF but it remains at 1%. <br />-- Often the government creates banks that give free loans and distort the markets. <br /><br />28) Matt, is competition good?<br /><br />Matt Flannery:<br />-- In general, it's a great thing.<br />-- There is a worry about distorting markets when donating to an MFI and is something to watch out for,Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com7tag:blogger.com,1999:blog-18096780.post-1152618720568694722006-07-11T04:45:00.000-07:002006-07-11T04:58:11.526-07:00First DayChelsa said it best. Today was like Christmas.<br /><br />We moved into our new office. For most, walking in was like walking into a livingroom on Christmas day with all the presents. For me, it was a little different, I woke up under the tree. <br /><br />I spent most of the night tagging and categorizing the businesses we have funded so that we can group them intelligently. That was one thing we forgot to do last winter -- have our partners categorize businesses as they post. Now, we have to go back and do it ourselves. Lot's of gruntwork. Kiva is on the verge of funding our 500th business; that's a Christmas in and of itself.<br /><br />One thing we are doing now is writing our job descriptions, purchasing health insurance, and becoming protected against workplace injury. I was doing research on the job description for CEOs. I looked up a bunch -- they were all very hands off and high level. I knew they didn't really apply.<br /><br />Then, I found one that said it right. "If you are in a startup , you do everything." That's just about right. We all do everything. Yesterday I assembled six desks. <br /><br />Good night.<br /><br />MattMatthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com3tag:blogger.com,1999:blog-18096780.post-1151553835993485752006-06-28T21:03:00.000-07:002006-06-28T21:11:29.980-07:00Temptation of an Entrepreneur-- The Temptation of an Entrepreneur (it's all about me)<br />-- The Salvation of an Entrepreneur (it's so much greater than me)<br /><br />Entrepreneurialism can be incredibly isolating. On my worst days, it is me against the world. It's Matt versus the naysayers. It's Kiva versus the competitors. It's me against anyone who doesn't see the world as I see it. It's the biggest trap.<br /><br />Your challenge as an Entrepreneur comes in tapping into that which is transcendent, that which is infinite about a particular enterprise you might be undertaking. At the end of a day, at the end of a particular lifetime, what can you take with you?<br /><br />Me, I'm trying to help get Kiva off the ground. Kiva is just an organization with a fixed set of employees, an office, customers and constituents. We have a business today, a plan to make revenue, existing operations, customer service and more. It's very measured and finite. <br /><br />The best organizations are ones that are able to convince the world that they tap into something lasting. The people that work for these organizations believe that they are working for a cause greater than themselves. They recognize that they merely act on behalf of a force that existed before them and will exist long after their particular organization operates no more. <br /><br />On the best days I feel I am participating in something so much larger than myself. The force behind it sustains me even when there is no tangible external positive feedback. This helps me progress past the daily set of disappointments we are all bound to face. <br /><br />When I am weak, when I get beat down, I can react out of defensiveness. I defend Kiva as if I were defending me. I feel personally at risk, and others can sense the precariousness of the situation. When I am strong, I lay the whole thing down at the feet of something greater. There is incredible rest, and power, in not defending. <br /><br />I'm not much for advice. The best advice I've ever gotten is vague at best. If you are trying to do something new, trying to be an entrepreneur, I'll offer one vague and simple idea:<br /><br />It's not about you. Access something greater and you may have a good business.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com6tag:blogger.com,1999:blog-18096780.post-1151339555674992312006-06-26T09:27:00.000-07:002006-06-26T09:32:35.700-07:00The End of the Beginning (nah, probably not)Next week, if all goes as planned, Kiva will be moving into our new office in the Mission. We're in a great big brick building across the street from the Atlas Cafe, which is my favorite cafe in SF. For a long time now, I've been going to bluegrass night there every Thursday. It's a great idea to have a standing appointment with good friends at a cafe with bluegrass playing in the background. I highly suggest it. If you want, stop by this week and check it out. <br /><br />It's probably not a coincidence that Kiva's office happens to be across the street from the CEO's favorite cafe. That said, off all the places we viewed, it's by far the best. Big open spaces, wood floors, big windows-- perfect for collaboration. One thing about this place inside -- it's all wood. The walls, ceilings, floors, doors and halls -- wood wood wood. It very much feels like a finnish sauna. <br /><br />Kiva is about two years old now. Is this the end of the beginning? I don't believe so. Beginnings can be long. Companies take a long time to build. What you see at Kiva today is just a small flavor of what is possible in an unfolding space of ideas. We had a vision a while ago for what it would look like, and have tried our hardest to catch up to that. However, the harder we try, the bigger the idea becomes and the further behind we get. For two years now, I have felt constantly, urgently, behind. <br /><br />There's a tendency to believe that, "If I only get this done, then we will have really accomplished something." Or "then I can rest easy." Nope, this has been pretty far from my experience. The truth is, work causes work. The more work I do, the more work I create for myself and this goes for everyone on our team. Now that we have had a small amount of success and made a small social impact in the areas we work, we are more motivated than ever. We also feel more behind than ever. <br /><br />This is a meandering blog. I'm in the Minneapolis airport right now, just returning from a Pittsburgh PA wedding with Jessica. <br /><br />Some great things are happening with Kiva in Africa this week. First, I believe the power outage situation in Uganda is improving. Carl, from (www.carlsbigadventure.com), has been working for quite sometime in a 50% power environment. What this means, essentially, is that he spends one day charging his laptop battery and writing code. The next day, there is no power, so he can only write code for a few hours. He has power only every other day. I notice this in his irregular checkin patterns. The other day, he checked in a few files with a note -- "Sorry for the typos, it's hard to see with no power." He spends the rest of the time working on a thatched roof house in his back yard.<br /><br />Also, Kiva is sending two interns to East Africa as well this week -- Katie Camillus and Nick Easley. Katie and Nick are college students who have each received fellowships to work with Kiva. This is very exciting stuff and they will be blogging about Kiva businesses on our site all over Africa. They will be writing journals right to the site. Also, they will have a blog of their own about their experience : http://kivareports.blogspot.com/ . <br /><br />Gotta go catch my flight now.Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com0tag:blogger.com,1999:blog-18096780.post-1150760029741968112006-06-19T16:27:00.000-07:002006-06-19T16:33:49.766-07:00Summer PlansWe've spent the spring in a scramble to make the Kiva organization more robust. People have joined on, offices have been rented, documents have been authored and processes created. Thousands of lines of code are checked in. Thankfully, some (private donor) funds have been raised to finance this whole thing. During this time, our business on the web has grown steadily since hitting an inflection point in the press last January. <br /><br />This brings me to a question: What is the next inflection point for Kiva? <br /><br />From November - March, we had a disequilibrium problem: too many lenders and not enough businesses on the site. Krista, who helped us with PR last fall, worked herself out of a job. Since getting in the WSJ in January, we haven't sought any attention in the press. Running out of businesses meant that getting press was a bad thing at the time. Since then, Krista has had her head down on PR projects for other firms while we took time to build an organization that can handle wide attention. Now, the the disequilibrium has been remedied. Our partnership relationships can produce much more business inventory. The staff of many of these partners are well acquainted with using our software: posting journals, payments and profiles to the site. For many of these MFIs (microfinance institutions), Kiva has become an important aspect of fundraising. Most of our partners are eager to post more profiles to the site. Thus, we have a new disequlibrium: more borrowers than lenders.<br /><br />I have had a few great mentors in this whole process -- one of them is Bob King. Bob is a veteran Silicon Valley venture capitalist who runs his own firm -- Peninsula Capital. Bob has invested in several startups. Jessica and I met Bob in Africa when he was visiting some projects he had helped fund through Village Enterprise Fund. Last summer we began meeting frequently to discuss how to grow Kiva to the next level. One piece of great advice he had: always be prepared for 10x growth. At any point in running a business, you should have a plan in place for that business growing to ten times its current size. You should be able enact the plan fast enough to accommodate a fast rate of growth as well. We experienced 10x growth last winter and we weren't really ready. I'm not saying it will happen again soon, but if it does, I want to be ready this time.<br /><br />So the summer plan is to be ready for growth, and see if we can make it happen. A few things are likely to happen this summer. I wonder if any of them will cause major growth? <br /><br />-- Interest rates on the site (lenders can make a small profit)<br />-- Feature story in a major magazine<br />-- Upgrades to the website ( social features , groups , referrals, search )<br /><br />Can Kiva have TWO major inflection points in one year?Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com3tag:blogger.com,1999:blog-18096780.post-1150260518689758132006-06-13T21:48:00.000-07:002006-06-14T12:24:36.330-07:00Kiva BannerI'm just testing the Kiva Banners (below) Jeremy made last week....Any suggestions?<br /><br /><SCRIPT type='text/javascript' src='http://www.kiva.org/banners/bannerBlock.php'></SCRIPT><br /><br /><br><br><br><br /><br /><SCRIPT type='text/javascript' src='http://www.kiva.org/banners/bannerTower.php'></SCRIPT><br /><br /><br><br><br><br /><br /><!-- Begin Kiva.org Coding --><br /><A HREF="http://www.kiva.org" TARGET="_top"><br /><IMG SRC="http://www.kiva.org/images/bannerbox.png" WIDTH="175" HEIGHT="200" ALT="Kiva - loans that change lives" BORDER="0" ALIGN="BOTTOM"></A><br /><!-- End Kiva.org Coding -->Matthew Flanneryhttp://www.blogger.com/profile/07300434787063720429noreply@blogger.com3