Kiva Not So Open To American Lenders

Pingree's Potato Patch
Studying the Economics of Detroit

A while back I posted a brief note that microlending operation Kiva was opening its operation to American borrowers. After a reminder from Mom, I've had a look at the site, and it doesn't look to me like the impact is likely to be large, either for Detroit or the rest of the country. Right now, there are only two "Field Partners" administering Kiva loans in the US, one in California and one in the NY/Boston/DC cluster. The requirements for becoming a Field Partner require that the applying entity already be serving 1000 microborrowers, and have been in the field for a couple of years. In Detroit the only significant microloan program I can find evidence of is a partnership between the City of Detroit and CEED, the Center for Empowerment and Economic Development, which after 22 years of microlending has only issued 350 loans; even with the $3 million the city has placed under their management, their targeted loan range of $5,000 to $35,000 still won't get them to 1000 loans.

In a country where loans run just $50 apiece, and there's a substantial danger of intermediaries running off with a few thousand dollars of loan money, the 1000 borrower requirement may make sense, but in the US where the practical minimum loans size is 100 times larger, where there is a relatively effective contractual and law enforcement system, and where the demand for microloans is generally lower, I have little confidence that Kiva is going to achieve any penetration in the US without putting alternate requirements in place (such as established track records in other forms of services, bonding, etc.).

Of course, this could just be sour grapes because it seems unlikely the Kiva network will be open to Detroiters any time soon...

Categories: Blog, Bootstrapping