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Kiva launches direct to social enterprise program

June 27, 2016

The direct to social enterprise program is a pilot program that aims to raise capital for social enterprises in a new and more efficient way. Social enterprises have the potential to strengthen their communities and reduce poverty by expanding formal employment, scaling innovative social solutions and driving sustainable economic growth. However, they often fall in the “missing middle,” meaning they are too small for traditional banks, but too big for microfinance.

In the past, Kiva has used 2 different models to support small social enterprises:

  • The social enterprise itself is set up as a Kiva Field Partner: Under this model, the social enterprise must have its own borrowers, whose profiles they post on Kiva. However, if an organization’s business model does not allow for an easy overlay of a credit program on top of their core operations, they tend to have difficulty implementing and scaling Kiva. In addition, if an organization needs to raise capital for itself (e.g., to obtain new machinery, buy more inventory, or run a pilot program), there is currently no way to accomplish that through Kiva, as the Kiva model does not allow Field Partners to raise capital for themselves, only for their borrowers.

  • The social enterprise is a borrower of a Kiva Field Partner: Under this model, the Field Partner is typically an impact investment fund, social enterprise accelerator or other organization whose primary clientele is social enterprises. When these types of Field Partners post larger loans for social enterprises on Kiva, they tend to be extremely popular (they have funded around 16x faster than other loans, and expire less often). However, growth through this model has been slow -- impact investment funds simply invest in too few social enterprises to be able to post loans to Kiva on a regular basis, and accelerators often turn away many applicants due to risk.

Based on the results of these previous 2 models, Kiva is embarking on its next iteration of crowdfunding capital for social enterprises: the direct to social enterprise program. Through this pilot, Kiva will explore whether it can reach more social enterprises and lower operational costs (for the social enterprise and for Kiva) by facilitating lending directly. This is how it’ll work:

  • Kiva will post a single loan for each social enterprise. This means there will be no Field Partner; rather, Kiva itself will post the loan.

  • To qualify for this program, a social enterprise must be a legally registered entity with clearly measurable social impact, sustainable business model (sensible unit economics) and an active stream of operating revenue. See FAQ below for additional qualifications.

  • Loan sizes will range from $10,000 to $50,000, with terms of 18 months or less.

By reducing the complexity of working with Kiva, we aim to more efficiently support the needs of social enterprises that do not have the resources to run a credit program and do not have access to an aggregator or investment fund that can act as an intermediary (i.e. Field Partner) for their Kiva loan.

We hope Kiva lenders will be excited for the potential to support a more diverse number of social enterprises through the direct to social enterprise program, and through that, help address the financing needs of the missing middle in a new way.



How will lenders know a loan is part of the direct to social enterprise program?

The description for these loans will clearly reference the direct to social enterprise program. In addition, in the field that normally lists the Field Partner it will read: “N/A, direct to [name of social enterprise]”.

What types of social enterprises qualify to be a borrower through the direct to social enterprise program?

All borrowers receiving loans through Kiva’s direct to social enterprise program must meet the following requirements:

  • Have a clear social mission that’s readily measurable and display a strong commitment to serving the needs of poor, vulnerable and/or excluded populations.

  • Have a clear business model whose unit economics are sustainable and enable sufficient cash flows for loan repayment

  • Be legally registered in its country of operation.

  • Have a corporate bank account (i.e. not a personal one).

  • Have an active stream of operating revenue (i.e. must be beyond the idea phase).

  • Be able to legally accept and repay U.S. dollar debt capital.

Please note: there is no plan at this time for the direct to social enterprise program to lend to individuals. Instead, all borrowers will be social enterprises.

How does the direct to social enterprise program differ from Kiva’s direct lending program in the U.S.?

There are similarities between the direct to social enterprise program and Kiva’s direct lending program in the U.S., as Kiva will be lending directly to the borrower without a Field Partner or other intermediary. However, there are a number of things that are distinct to the direct to social enterprise program:

  1. This program will specifically exclude individuals as borrowers by only lending to legally incorporated social enterprises.

  2. PayPal will not be used to send and receive money from borrowers, as is the case with Kiva U.S. loans. Instead, funds will be transferred between Kiva and the borrower using the existing bank wire system Kiva uses with its Field Partners.

  3. Loans will be for borrowers operating outside of the United States.

  4. The program will not use social underwriting for determining risk; instead Kiva will apply a more traditional underwriting model.