Image credit: www.kiva.org
Kiva provides small business loans to financially vulnerable and excluded people in more than 80 countries around the world – including the US – through a crowdfunding model. Field partners and trustees are the financial and social institutions that do the work on the ground to facilitate the loans.
Most field partners are microfinance organizations, but schools, social enterprise organizations, and NGOs can perform the work of the field partners. Field partners enlist borrowers, screen for eligibility, post loan requests, and disburse money. They also collect repayments. Field partners are rated on Kiva’s website for social performance metrics, loan repayment and default rates, and risk ratings.
Trustees endorse loans and vouch for borrowers when there is no field partner in the local community to administer the loan and repayment program. The trustee system has been successful with the US-based Kiva lending program, and most of the US program loans are direct loans endorsed by a trustee.
The MFIs and community organizations that act as field partners need to qualify in several ways. As well as demonstrating a strong commitment to serving excluded and vulnerable populations, the organizations must operate an existing lending program of industry standards, or be legally able to set up such a program in the country of origin. They must have assets or operating revenue of at least $100,000 USD and be able to post at least $50,000 USD in the first twelve months on the Kiva website. They must be able to legally accept and repay USD debt and be registered and in good legal standing.
New field partners send a request to work with Kiva. They provide a strong social and environmental impact statement and describe how they work with excluded, poor, and vulnerable populations. The credit repayment program must detail pricing that is in line with industry standards.
Kiva performs due diligence and rates the field partner organizations into a system of credit tiers, from $50,000 USD to $4 million USD. Various legal and financial screening and onsite visits are part of the vetting process.
Trustees have no financial obligation or liability for the loans they publicly support. This form of support for the US loan program has been very successful, and has allowed communities and organizations to support local entrepreneurs.