IT innovations help Kiva expand microfinance mission
- 10 March, 2009 10:24
Aaron Yu wants to share his enthusiasm for Kiva, a nonprofit microfinancing organization. He sees Facebook as a prime way to do that.
But instead of posting his own notes or linking to Kiva's Web site, Yu is tinkering with Kiva's latest tech tool -- its API -- to find the best way to bring Kiva's message to Facebook's social networking site.
"It opens up another channel for evangelism, or advertising, so you're able to get more people involved. It leverages the community," he says.
Kiva released its API, or application programming interface, on February 3 after five months of work. Kiva's IT team says the release allows tech-savvy supporters to develop more ways to interact with the organization online that will help it expand its reach. "If we can empower other developers who are passionate about what we're doing, that would be very powerful. It would help us reach more people than what we can do with the in-house staff," says Skylar Woodward, director of Kiva's developer program.
Although it's not a tech company in the traditional sense, Kiva exists solely because of technology and is expanding thanks to IT innovations. Moreover, it's doing all this without pouring millions of dollars into its IT operations. From the start, innovation and efficiency have defined how Kiva would achieve its mission, making it a model for doing more with less amid today's economic challenges.
"We would not be able to be Kiva without technology," says Jeremy Frazao, director of technology. "But at the beginning, we had nothing, and we had to figure out how to make Kiva happen. That scarcity mentality has been the driving force. So by necessity, we're at the forefront. We're looking at the people doing the coolest things and asking, 'How can we do that, too?' "
Here's how Kiva works: Entrepreneurs in developing countries work with microfinancing institutions (MFI) to put photos and information about their business plans and financing needs onto Kiva's Web site. Investors, most of whom come from the U.S., can review that information at Kiva.org and lend to the specific individuals they want to support. The entrepreneurs then repay the loan, and Kiva returns the money to the investors. Kiva officials say most investors choose to reinvest repayments.
Inspired by his wife's work with businesses in East Africa, Matt Flannery started Kiva in 2004.
As a child, he and his family had sponsored impoverished children through various charities, and he found that receiving information about the youngsters "really opened my mind up to the fact that I could connect with them and converse with them and relate to them."
Page BreakFlannery says he knew that traditional mailings and solicitations wouldn't work for Kiva -- they would be too time-consuming, overhead-intensive and expensive -- so he focused on online operations. "What we've found from the beginning is that it worked fine, and it was cheap," he says.
Kiva raised US$1.9 million in loan funds in 2006, its first full year of operation, and ran on a budget of US$175,000 that year.
Like any start-up, Kiva had to grow its IT operations as the business expanded. But it had unique challenges: It had to scale its own IT infrastructure and do the same for its partner MFIs, most of which operate in areas with limited infrastructure and support services.
Yet, as a nonprofit, Kiva couldn't access the kind of capital, such as venture funding, that often finances early-stage companies. Its capital came from donations and grants.
Flannery says that has required some sacrifices. "If we were a VC-backed company, we'd have an engineering team of 25 by now," he says. Without that level of funding and manpower, Kiva has to be more careful about prioritizing its IT needs, and it adds only a few new features each year as resources allow.
"I'm not complaining; we've done a lot. And we've been able to do a lot because of the great efficiencies created by technology," Flannery says.
Kiva has managed to grow without a big infusion of cash. It now has 35 staff members, nine of whom are IT workers. Its annual budget for 2008 was US$4.1 million, which supported operations that sent US$36 million in loans to poor entrepreneurs around the globe.
Its technology spending has gone from about US$18,000 in 2006 (when two employees earned a combined total of just US$14,200) to US$937,000 in 2008 (of which US$776,000 paid the salaries of eight IT workers).
Even with last year's IT budget of just US$161,000 after salaries, Kiva managed to implement an array of tech-driven features that enable partner MFIs, entrepreneurs and investors to access and share information more quickly.
Woodward, who joined Kiva's staff in September but has been a friend to the team and a volunteer from the start, cites the organization's willingness to use existing innovations for its success.
For example, Kiva uses PayPal to move money around, and that has proved to be "even easier than credit cards" and cost-effective, he says. (PayPal Inc. donates its services, allowing Kiva to send 100 percent of the money pledged for loans to the entrepreneurs, according to Kiva officials.)
Moreover, the Internet makes it possible for Kiva to find and organize volunteer translators and editors. And social networking sites have enabled the organization to build recognition without massive investments in IT infrastructure or marketing, Woodward says.
Page BreakAnd now, Kiva has launched its API, leveraging the talents of technologists who want to develop new ways of integrating Kiva into online venues such as blogs or Facebook pages. "We're going to encourage people to work with the API and give feedback on what works and what doesn't," Woodward says, noting that the goal is to add more features to the application to enable more customizing and more interaction with the entire Kiva enterprise.
For example, he says, a blogger who writes about Cambodia could use the API to direct readers to loan requests that Cambodian businesses have posted on Kiva.
Job 1: Efficiency
While Woodward has looked to the outside IT community, Frazao has focused inward, finding ways for Kiva's IT unit to foster greater operational and fiscal efficiencies. "All our decisions are centered around those two things," he says.
His team spent most of 2008 reworking the partner interface -- the back-end operations that investors don't see and that allow the MFIs to interact with Kiva's systems.
"It's about making our site load much faster, making it interface with video and cameras, making it easier to work from a place like Cambodia or Uganda," Flannery says.
The MFIs were spending an inordinate amount of time waiting for Web sites to load, Frazao says. (Remember, they're working in developing countries where reliable, high-speed connections aren't the norm.) Some workers were spending 90 minutes to upload information for just one entrepreneur's loan request, and any telecommunications hiccup would cause the whole upload to be lost.
So Kiva's IT group rewrote the interface to speed up the process and to protect information from being lost during a disconnection, Frazao says. They cut the time it takes to upload a loan request, including an image, from a high of 90 minutes to just 15. The interface automatically saves information once workers complete a field, so they don't lose all their work if a connection is dropped.
The IT staff also reworked the way investors are repaid. Previously, investors who loaned, for example, US$25 for 10 months would have to wait the entire 10 months to get repaid. Now investors are repaid incrementally as entrepreneurs pay back their loans.
It might seem unimportant, Frazao says, but when investors see that they have money lying fallow, they tend to reinvest it -- often topping off the repayment amount with more money.
"The day we released that code -- it's called 'liquid repayments' -- in August last year, we flooded the system with US$10 million, and that was the single biggest day we had," he says.
Page BreakIn fact, Kiva's success has occasionally gotten the best of it. There have been times when the volume of contributions temporarily outpaced the rate at which new loan requests could be posted, requiring would-be funders to wait.
In the future, Kiva will be less likely to encounter such delays, since MFIs in the field will be able to post new loans more quickly, thanks to the improvements Kiva's IT staff has been making.
Kiva's internal IT group can't take all the credit for its successes, though. The organization's leaders freely acknowledge that they use commercial technology for the sake of cost and functionality.
For example, Frazao says he switched in mid-2007 from maintaining Kiva's own server to using Amazon.com's Simple Storage Service (S3). There's no immediate cost savings, but because S3 is infinitely scalable, Kiva will never run out of space, and it will be able to create future capacity without a big capital outlay. Moreover, by outsourcing this function, the in-house staff can focus on delivering technologies that support Kiva's core mission.
An individual donor gave Kiva 40 Flip video cameras from Pure Digital Technologies, and Kiva is encouraging partners to take videos, which it's uploading on its Web site using YouTube APIs. "We want video all over the site," Flannery says. "It might help us overcome some of the language barriers. If you can't write, maybe you can make a video that connects people."
Frazao says building on YouTube's interfaces required no money and just a week's worth of work from a four-person Kiva team. "We're thrilled that YouTube has done all the work for us," he explains. "To do this without YouTube would be a massive undertaking."
In fact, Frazao says, that's typical of the approach that keeps Kiva lean yet still on the leading edge of technology. "We're asking what's the fastest, easiest way to get something done. And it [often] happens to be something that a lot of people are working on," he says.
Despite Kiva's impressive growth, Flannery admits that he has accomplished only about 5 percent of what he'd like to do. "We're not growing like a VC-backed company that gets US$10 million all upfront, so there are so many things we want to do that we haven't been able to do yet. We have to prioritize," he says.
But the good news, Flannery says, is that such organic growth creates a lean operation, because there's no room for extra expenses that don't produce results.
That's an approach pretty much everyone can appreciate today.