Friday, September 26, 2008

Kiva should co-brand with microfranchises

I have been a fan of Kiva from their early days. They had another recent surge of success when they introduced Group Lending and Partial Loan Repayments, both brilliant moves in my opinion on multiple fronts: driving consistent traffic to their site, engaging their citizen base in a frequent and meaningful way, and leveraging natural networks.

However, I am still anxiously awaiting the day when Kiva moves into the next realm of innovation, when they are using their platform to strategically inspire change in the market. Right now they are focused exclusively on microcredit and simply support the normal activities of their partners and the microcredit borrowers. It could be argued that that is their expertise and value-add, however, I do not see the innovation nor the value of Kiva as a funder of microcredit, which is partly why I agree with people who say that Kiva should not be focused on providing a financial ROI for lenders. Even if Kiva continues on their projected growth their financing of microcredit will be minuscule compared to the capital being raised for microcredit through integration in the financial markets and through microcredit accelerator's such as Unitus.

The innovation of Kiva is that they have created a platform that allows a broad base of average citizens to become miniature philanthropists. Kiva has never had to spend a dollar on marketing, people find Kiva and become inspired: bloggers picked it up early, when people find Kiva they blog about it, they showcase their loans, Kiva even had to create an entire site, KivaFriends, to handle all the interest of their constituents to discuss the issues.

Therefore, as a platform and in the position of inspiring and shaping grassroot philanthropy I think Kiva is extremely well-positioned to strategically shape the local marketplace of their borrowers. One way they could shape the marketplace would be to partner with microfranchise operations. Kiva could be the platform, the broker, that connects microcredit organizations with the best microfranchise solutions, and then together they offer a financing mechanism for the expansion of new business and innovatin in the marketplace.

This would provide value to the microcredit borrower, providing them a new business model, a great potential source of income as opposed to simply increasing their inventory in the same business as their neighbor. It would provide value to the community in which the microcredit borrower lives, bringing a service such as VisionSpring eyeglasses or HealthKeepers pharmaceutical products or a technological product such as Kickstart's waterpump. It could probably be structured so that the MFI gets a cut as a distributor of products. Kiva could provide value to these fantastic innovations by being a catalyst for the best models. It would provide value to the Kiva Lender because they would feel they are being innovative in their lending and philanthropy.

Kiva needs to think beyond scaling up microcredit and more about being a platform for change.


Leslie Forman said...

I think this is a great idea, Dave! I've read that Kiva's lender base has grown much more quickly than its network of MFIs and borrowers, and this could be an excellent way to diversify. This could also be quite effective in China, where microfinance is much less developed than in other places. I think that biomass cookstoves could be an excellent microfranchise.

AJ Nathen said...

A quick question on Kiva tying up with microfranchises - One of the key components of Kiva's model has been the Microfinance institution used for loan disbursal and recovery. In a kiva- microfranchising model, whom do you think would play that role? Wish the franchiser (say VisionSpring or Drishtee) could do it, but is it possible? Do they have enough resources/bandwidth to monitor the loan disbursal and recovery?


David Stoker said...

AJ- I think you're right, the model could not require VisionSpring or Dishtree to become bankers. So I see it as MFI's still playing the role of loan disbursal and recovery but with Kiva as a broker, i.e. Kiva partners with a VisionSpring or KickStart in places where they operate and/or are expanding and connects VisionSpring to the MFI partner to reach their clients. VisionSpring or Kickstart uses the client base of the MFI as either sources of potential microfranchisees or as a consumer base. The clients of the MFI use their loan to either buy the franchise startup kits or ongoing supplies or buy the products as customers and there is co-branding all over it. It would both bring diversity to the local marketplaces and to the Kiva marketplace,it would capitalize on Kiva's face time- being the portal through which Kiva users are exposed to the happenings and business practices of local families- empowering Kiva to highlight and inspire new innovations. I think it would take Kiva to the next level in terms of being a platform to drive innovation, idea spread, etc. and not just an enabler of the basic product of microfinance-microcredit. There is just so much exciting potential there.