KIVA
CASE: E-288
DATE: 2/05/08 (REV’D 1/30/09)
KIVA
This is not charity. This is business: business with a social objective, which is to help people get out of poverty.
—Muhammad Yunus, Founder and CEO, Grameen Bank
INTRODUCTION
Jessica Jackley Flannery, the cofounder and chief marketing officer at Kiva.org (Kiva), an online microfinance nonprofit, stepped into her car after a long day of meetings and media appearances.
It was an exciting and busy time. Kiva was growing exponentially and receiving an unprecedented degree of positive press and user feedback. In the midst of the whirlwind,
Flannery appreciated having a few minutes of downtime to reflect on how far her organization had come, as well as how to best shape it for continued success and impact.
GLOBAL MICROFINANCE1
Microfinance is the supply of basic financial services to the poor, including loans, credit, savings, insurance and transfer services. The formal financial sector has not traditionally been accessible to the impoverished entrepreneurs who comprise most of the world’s working population. Instead, informal systems and relationships, including loans from neighbors or relatives, and rotating savings/ credit clubs, have filled this gap. While such solutions have worked for some and are often the only option available, they can be inconsistent and unreliable during times of tremendous need. In addition, poor entrepreneurs can become trapped in vicious cycles of borrowing from local moneylenders, who may demand exorbitant interest rates.
Traditionally, banks were unwilling to provide loans to poor entrepreneurs due to the perceived risk. Common concerns included the fact that the unbanked were often illiterate, had no collateral, no prior credit history, and were not employed by anyone other than themselves.
However, in 1976, Muhammad Yunus, seen by many as the visionary behind the microfinance movement, bucked conventional wisdom and loaned the
DATE: 2/05/08 (REV’D 1/30/09)
KIVA
This is not charity. This is business: business with a social objective, which is to help people get out of poverty.
—Muhammad Yunus, Founder and CEO, Grameen Bank
INTRODUCTION
Jessica Jackley Flannery, the cofounder and chief marketing officer at Kiva.org (Kiva), an online microfinance nonprofit, stepped into her car after a long day of meetings and media appearances.
It was an exciting and busy time. Kiva was growing exponentially and receiving an unprecedented degree of positive press and user feedback. In the midst of the whirlwind,
Flannery appreciated having a few minutes of downtime to reflect on how far her organization had come, as well as how to best shape it for continued success and impact.
GLOBAL MICROFINANCE1
Microfinance is the supply of basic financial services to the poor, including loans, credit, savings, insurance and transfer services. The formal financial sector has not traditionally been accessible to the impoverished entrepreneurs who comprise most of the world’s working population. Instead, informal systems and relationships, including loans from neighbors or relatives, and rotating savings/ credit clubs, have filled this gap. While such solutions have worked for some and are often the only option available, they can be inconsistent and unreliable during times of tremendous need. In addition, poor entrepreneurs can become trapped in vicious cycles of borrowing from local moneylenders, who may demand exorbitant interest rates.
Traditionally, banks were unwilling to provide loans to poor entrepreneurs due to the perceived risk. Common concerns included the fact that the unbanked were often illiterate, had no collateral, no prior credit history, and were not employed by anyone other than themselves.
However, in 1976, Muhammad Yunus, seen by many as the visionary behind the microfinance movement, bucked conventional wisdom and loaned the