NEWSMICROFINANCE

Kiva, the best known online platform for microlending, has just announced that lenders on their site will now be able to fund loans to students in the developing world, starting with a handful of students in Paraguay, Bolivia, and Lebanon. It's a significant move, both for the company and for the growing education crowdfunding space.

The Kiva Student Microloans program is a natural follow-on to the business microloans that Kiva lenders have been funding for the last five years. The format of the loans is quite similar to their existing loan portfolio, with small amounts requested and a pre-determined repayment timeline.

The move into student microloans is one of, if not the most significant updates to their model since their launch a half-decade ago. While their last big shift -- beginning to include loans to US micro-businesses -- was somewhat controversial, this growth will more likely resonate with Kiva's existing passionate lender base.

By moving into education loans, Kiva is entering a space inhabited by a number of startups, including groups like Enzi who are experimenting with fundamentally different forms of loan repayment (in their case, it is pegged to a percentage of student earning when they leave school). More notable, perhaps, is Vittana, who have been developing a robust pipeline of partners and students on a very similar model.

Already the internet is full of comments asking whether a) Kiva should have just worked with Vittana (or, "merge" with them), b) whether it creates competition with Vittana. Here are my thoughts on that:

1. Kiva has ridiculously powerful assets to move into this space. Kiva has a base of 750,000+ lenders, a huge percentage of which give regularly and continuously. They have a network of more than 100 finance partners around the world who they know and trust. They have (for good and ill) the eye and attention of the media. They can operate, instantly, at a much, much bigger scale than anyone in the space.

2. That's good news if you care about education access. The point is that, forget all the conversations of "competition." If you care about education access, you gotta be pretty excited about the attention and resources that this move brings to the space.

3. The idea that this is bad for the actors already in the space is probably pretty dubious. First, no matter what scale Kiva are playing at, the demand for education loans is going to dramatically outstrip the supply of lenders, which makes the value of consolidating actors in the space pretty low in my book. Second, dedicated services always have benefits over larger platforms. Larger platforms have scale and distribution, but also expectations and a certain lack of mobility. Groups like Vittana and Enzi are far more likely to be able to experiment with key pieces of the model. Third, there is a good argument that having a field leader enter the space actually "raises all boats" by bringing more attention and new money.

I think it's an awesome move, and ultimately will be good not just for Kiva but for the education funding space as a whole.

Read the press release here.

Photo credit: Emily Carlin

The Omidyar Network has just announced $5m in new funding for microlending site Kiva. The money will be distributed over the next three years, and will help Kiva grow its already impressive organization.

Kiva has a pretty unique place in the social entrepreneurship space. Its model of peer-to-peer loans for microventures around the world put the idea of business for good in from of many people for the first time. Its success -- more than $150 million in loans made through Kiva -- seems to validate the potential for big ideas to grow into disruptive organizations in just a few years. For those who think that online giving is the next big thing, it suggests that the connective power of the internet does, in fact, open up the possibility of fundamentally different giving relationships.

Indeed, it has been so influential and such an aspirational model that many young social enterprises have tried, unsuccessfully, to adapt pieces of its model to become the "Kiva for (insert something here)." Kiva, meanwhile, has had the difficult task of transitioning from media darling to a company sustainable outside the buzz of hum of accolades and even under the pressure of criticism.

This funding from Omidyar is at least one testament to their success in that process. $2 million will be used to match loans in the first two years, and the rest will be distributed over three years to help Kiva improve its technology, expand microfinance partners, and improve quality vetting mechanisms.

This is a good thing for the field. As much as I write about the challenge of seed funding, organizations that have achieved success also face the problem of being able to find money to improve and scale their work. The goal is a complete, healthy funding food chain.

Read more about the announcement here.

Photo credit: Rachel Strohm

Stuck in London for most of last week, I missed a number of good articles in both the social enterprise space and the tech startup scene. Here's a selection of the most interesting and relevant.

New EU rules could kill off European VC and screw startups - Let's stop them: Just as the European startup scene begins to really get it's groove on, a sledgehammer of new financial regulations could dramatically undercut the venture and angel investment market. The new regulations package shows the same problem we're experiencing in the US, in which regulators think in broad brushstrokes and group venture capital -- the very essence of which is to be risky -- with other sorts of financial activity that should by definition be more conservative.

Deval Patrick's commitment to advancing social innovation in Massachusetts: Root Cause founder Andrew Wolk writes up the growing commitment at the Massachusetts state level to see social enterprise become a part of the civic and policy conversation. Although the language is textbook government -- e.g. "commitments" to "explore" new ways that social entrepreneurship "might" be part of the conversation -- I share Andrew's enthusiasm that the conversation is taking hold.

No interest rate is too high: GiveWell offers a very sensible addition to the ongoing conversation about microfinance interest rates. The title more or less sums up their position, but basically they're arguing here that what matters is whether the money actually enables the impact it is supposed to, and is transparent and clear about the real costs involved.

CrowdFlower CEO Helped in Haitian Relief: CrowdFlower is a San Francisco startup backed by some of the best known venture investors in the world. It also happens to be Samasource's main technology partner in delivering microtasks to vulnerable populations around the world. They were an integral part of the effort to help translate emergency messages in Haiti. This peHUB piece shares that story with a more techy, business audience.

Photo credit: rockcohen

For a few months, I've thought that microfinance was going to be in for a bit of rough patch when it comes to brand. With a new, front-page story in the New York Times yesterday talking about abuses in the field, it appears the time may have come. Unfortunately for all of us, I believe the growing media critique to be often as much about what makes for a compelling narrative as it is about improving the fight to end poverty.

Microfinance has played a tremendously important role in the social change space over the past few decades, culminating in the last half decade or so since Muhammad Yunus won the Nobel Peace Prize. Kiva is one of the best demonstrations we have of the power of the web to build connections between people who never would have been connected before.

But microfinance is not a panacea. Indeed, no microfinance expert would say it is. Even within microfinance, there are a myriad of approaches -- from nonprofit distributed funds that focus on the capacity side of the equation to local financial institutions to now, bigger banks getting in on the game. What's more, there are many who would argue that microfinance aimed at entrepreneurial business just isn't for everyone.

The indignation of yesterday's Times article was about extreme interest rates. That is a fair thing to be nervous about, and combative towards. Of course any time you're dealing with credit for the poor -- whether in the developed or developing world -- there are going to be financial incentives for exploitation. On our shores, Payday Loans keep millions on the dole of creditors, and are increasingly the subject of legislation.

There is a troubling trend among social enterprises to romanticize the poor as entrepreneurs. Call it the entrepreneur myth. While it's an attractive one, this kind of doublespeak not only masks the reality of the social constraints and challenges the poor face -- it also hampers our ability to innovate high-impact poverty interventions.

The unifying trait of the poor is not entrepreneurial spirit. It is the absence of wealth and opportunity. Some people are entrepreneurial -- poor or otherwise -- but most people are not. Our obsession with the poor as entrepreneurs has less to do with a poverty alleviation model that works than it does with a Western idealization of entrepreneurialism. We celebrate the entrepreneur as a vicarious escape from the cubicle confines of a steady paycheck. But what the poor desire isn't the risk and excitement of entrepreneurship --it's the economic security of stable employment.

The goal of social enterprises that aim to reduce poverty must be results- oriented and method-agnostic. They should be based on strategies that meet target demographics' needs -- whether those persons exhibit entrepreneurial potential or not. While market solutions to poverty are indeed an important component of sustainable poverty reduction, there's a marked difference between enabling entrepreneurs who create jobs, and the falsehood that everyone is an entrepreneur.

Imagine that if you wanted to make a payment, you didn't need to hand someone a government-sanctioned piece of paper or coin. Instead, you could just transfer money: virtually.

Um, yeah, okay, that's not exactly new or exciting to the millions of people who have access to credit cards and online banking. But for the millions of people around the world who don't have bank accounts, it is.

What those millions of people often do have, though, is mobile phones. In Pakistan, for example, the number of people who have mobile phones is ten times that of those who have bank accounts. And for such folks, the promise of mobile money means they can empty out their mattress stash and stop worrying about someone dipping into their cash. That's the magic of mobile money.

How does it work? Basically, mobile money is a method of storing cash -- like you would prepaid cell phone minutes -- on your phone's SIM card, with the ability to convert it back to cash in another location. It works pretty much like any virtual financial service, replacing an ATM or credit card with a cell phone as the middle man (or middle machine, I suppose). Amaana, an innovator for the unbanked in Pakistan has a good video that illustrates how their mobile money services are used.

I run across creative social ventures all the time. Usually, I try to find ways to integrate them into larger pieces as I introduce them to this blog community. Lately though, things have been so hectic that a few great ones have passed under the radar. Here are four new companies you should keep an eye on:

1. Vittana. For shorthand, think Kiva.org for education. In some ways I'm a little late to the party on this one, as Vittana has been recently recognized as a Pop!Tech Social Innovation Fellow and HuffingtonPost #1 Game Changer in Philanthropy, still this organization which allows you to make loans to students in the developing world is the leader of what I believe will be a growing field for user supported education investments.

2.MoxyVote. When you own a share of a publicly traded company, you technically have a vote on key issues impacting the company (depending on the nature of the stock you have). This year, the Securities and Exchange Commission required that publicly traded companies allow shareholders to vote online (instead of having to attend annual meetings), but in practice, this is still complicated. MoxyVote aims to simplify that process, simplifying the process of voting for shareholders while allowing them to see the issues that are up for debate and the recommendations of various advocacy groups around those issues. This could significantly increase citizen participation in corporate governance.

...it would be the new Village Capital Fund.

Village Capital focuses on risky early stage social ventures like traditional angel investors, but is using a more cooperative, entrepreneur collaboration model borrowed from microfinance to make their investment decisions.

Village Capital is a part of the Grey Ghost/First Light family of investment companies. Grey Ghost has years of experience investing in microfinance, and as they started to identify the problem of deal flow (where good projects come from) and due diligence (how to vette unproven entrepreneurs), they saw an opportunity to borrow some of the microfinance model for US-based angel investing.

Just in time for their big 4th birthday celebration this week in Berkeley, Kiva announced yesterday that they had officially hit $100,000,000 in loans. In a blog post on the site, President Premal Shah said that the group had hit the milestone with donations from 584,189 lenders.

This is a huge accomplishment. The level of engagement that Kiva has engendered and the excitement around the model are a major force for good in the social entrepreneurship space. Despite recent questions about marketing practices, Kiva has helped average people participate in a newer model of international development that, if no panecea, has much to recommend it.

What's more, Kiva has helped make real the power of the internet for social engagement. While many in the nonprofit industry have understood for a while the significance of this technological innovation, Kiva has demonstrated the democratizing power of the internet to help people - not to supplant old actors, who remain important - but to participate in change in extremely compelling ways.

Social change is about community. For Bay Area social entrepreneurs, the place to be on November 3rd is at Kiva's fourth birthday celebration.

Co-hosted by The Hub, GOOD Magazine, and the David Brower Center, the event is a chance for the larger social enterprise community to come together and celebrate 4 years and almost $100 million in loans to developing world entrepreneurs.

Despite the ongoing conversation about Kiva's marketing, it remains one of the most spectacularly successful organizations in our space. It has created an incredible number of opportunities both for average citizens here and entrepreneurs there to work together to create a more just future.

It's also fun to see these groups working together to put on the event. It's an example of collaboration in action. After having just spent a couple weeks at conferences, I feel the need to invest in local community more than ever, so I'll be there.

Check out all the details here.