A lot of you have emailed asking what I think about Prosper.com. Before I cover them, I want to introduce you to my friend Premal Shah, who’s the president of Kiva, a website that lets you make microfinance loans to entrepreneurs in the developing world. He was one of the early guys at Paypal and has had some great experience with microfinance, and now he’s building a great way to help entrepreneurs around the world using microloans. This is a white-hot field in the world of social entrepreneurship.
As you read this one, notice a few things:
- Here is a smart guy with lots of education, experience, and opportunities. Yet instead of staying at a high-paying job, he’s taken the insecurity of working on something he’s really passionate about. “But Ramit,” you might say, “he can leave his job because he’s probably made lots of money in the past.” Maybe, maybe not. But do you get the risk-taking attitude once you’re rich? Or does it sometimes actually go the opposite direction? Maybe success comes after risk-taking, not the other way around.
- He talks about social return, something we’ve only skimmed on this site. But in my own work in microfinance and with the Omidyar Network, I’ve become a big adherent of the idea that there’s more to ROI than just money.
- The fancy, smart guys working on Kiva face the same challenges that you do with your blog, project, or whatever. They’re trying to figure out how to spread the word, build a better site, avoid the chicken-and-egg problem, and encourage their visitors to do something useful. Whether you’re a 1-man shop or a fancy-pants company, the problems are often eerily similar.
- I love, love, love his answers to my questions about barriers.
- He’s looking for volunteers. If you’re interested in getting involved in working with great people to help low-income entrepreneurs around the world, check out the site, send me an email, and I’ll introduce you to Premal.
What is Kiva?
Kiva.org is a new website that allows individuals to make small loans to low-income entrepreneurs in the developing world (microfinance). In this way, people like you can help provide affordable working capital for the world’s poor — money to buy a sewing machine, livestock, etc. — empowering them to start a business and earn their way out of poverty.
The usual loan terms are 12 months and over the course of your loan, you’ll receive periodic repayments which you can then re-invest in another entrepreneur or withdraw. In addition, you receive real business updates on the entrepreneur you’ve sponsored. So far, we’ve had a 100% repayment rate and we’re expecting at least a 96% repayment rate over time.
We think of Kiva as facilitating a kind of ‘grassroots capitalism’ — people here in the U.S. lending – not donating – a small amount to low income entrepreneurs in the developing world. For the low income entrepreneur, small amounts like $25 or $100 can provide the working capital needed to explode their small business growth, create a sustainable livelihood and enable them to repay you as an investment partner.
How is this different than Prosper.com?
Prosper.com lets you lend to people in the U.S., with the intention of making a financial return. Kiva.org lets you lend to people in the developing world, with no intention of making a financial return – just the return of your principal. It’s like spotting your friend $25 — there’s usually no expectation of interest.
However, there is a large *social* return with Kiva.org.
For example, if you help finance a $100 irrigation pump for a low income Ugandan farmer, this farmer could increase her annual income from $120 a year to $800 a year. This increase helps create a sustainable livelihood for her family — and allows her to repay your loan.
Later this year, we’ll allow you to earn interest like Prosper.com — it will likely be between 1% – 5% and will vary based on the entrepreneur on the site. We suspect that lenders will weigh interest rate, risk and social impact between different entrepreneurs on the site – and pick accordingly.
What’s your role at Kiva?
I serve as President of Kiva.org and together with the co-founder and CEO, Matt Flannery, we co-lead the organization.
What’s your background?
Here’s a snippet from my bio on the website:
“Prior to Kiva, Premal was a Principal Product Manager at PayPal, an eBay company. During his 6 year career at PayPal, Premal drove a number of key initiatives including a year long project defining eBay’s role in economically empowering the global working poor. A number of corporate initiatives have come out of this effort, including PayPal’s support of Kiva. Prior to PayPal, Premal was a strategy consultant at Mercer Management Consulting in New York. Premal has had a long standing interest in microfinance. In 1997, he was awarded a grant from Stanford University to research microfinance in Gujarat, India. More recently Premal co-founded the Silicon Valley Microfinance Network and spent 2 months in India working to refine / validate Kiva’s model. Premal graduated with a B.A. in Economics from Stanford University.”
Well, I guess I’m sort of impressed. How’d you get started doing this?
When I was in college, I learned about microfinance — the impact of small loans to the working poor — and I got pretty excited about it. But once I entered the world of work, I got really busy and just didn’t have time to do anything about it. After about 5 years at PayPal, I was given the chance to take a sabbatical. I decided to go to India for a few months and work in microfinance.
What bummed me out was that microfinance is such a great tool to alleviate poverty and that there is a shortage of capital — but that there is no way for the average guy in the U.S. to invest in microfinance.
So, while I was in India, I posted up a loan solicitation on eBay for a low income women doing small crafts in India. The eBay listing got taken down because it was a violation of eBay policy to solicit investments on eBay. At the same time, my friend Matt and his wife Jessica started Kiva.org and I eventually left PayPal to help them get it started.
What were the biggest barriers to getting it started?
1) Listening to too many people before we built the website — it’s better to just get started and push the idea as far as you can on your own — and then, once you hit real road blocks, seek the advice of others to solve real problems.
2) We were worried about the regulatory hurdles — is it ok to allow Americans to make loans to the working poor abroad. We spoke with the SEC and I think that after they saw the spirit behind what we were trying to do, they encouraged us to move forward.
What about now–what are the biggest barriers to success?
Getting the word out. Kiva is like an eBay for microfinance. We have to make sure the that the supply and demand on the platform are in balance. We launched 9 months ago.
In the beginning, we had too many lenders — because of early pick up in the press (BBC, CNN, Wall Street Journal) and not enough 3rd world businesses available to sponsor on the site. Our site consistently ran out of ‘inventory’ — it was embarrassing.
We solved this problem by inviting more non profit organizations internationally to post up local businesses — we’ve grown from 1 country to 13 countries in the last few months. Now we need to get more lenders to the site to absorb new waves of ‘inventory’ that’s being posted on the site. So we’re turning our attention again to getting the word out here in the U.S.
How big is Kiva?
We have 8 full time staff (all volunteers, but still full time) and at least a dozen part timers. Craigslist is less than 20 employees. We think that we should one day scale our volume and revenue stream to cover a full time paid staff of 10 in about 3 – 5 years.
How did you publicize it at the very beginning? What about now?
Kiva is alive because of the blogosphere — we didn’t have a big marketing budget so we put out a press release when we first launched publicly 10 months ago and 1 blog picked us up right away. Then 10, then 100, then 500 including the world’s top blog in terms of traffic — Daily Kos.
We think most of our early users have come to Kiva after reading about it in the blogosphere. These days, I think the blogosphere is still driving a lot of traffic to our site, and I think there’s a lot of word of mouth and mainstream press that’s picking up on Kiva.org. The biggest break recently was being selected by BusinessWeek as their “Innovation of the Week.”
“Ok, so I have this idea…”
If someone were interested in doing something entrepreneurial–maybe starting their own business–what lessons could they take away from (1) Kiva and (2) your own business experience?
1) Find a partner you trust and someone who complements you on things you are not necessarily good at.
2) Just get started — don’t keep researching endlessly. Test and learn.
3) One of my favorite quotes is “Nothing works unless you do” — there’s no substitute for just working hard on a sustained basis to will your idea to be.
Are you hiring?
We don’t have any money, but we’re hoping to raise about $1.5 million to build out a paid staff. If you’re interested in volunteering to help us get the word out about Kiva.org — we could use the help!