Like any business partnership, a partnership with Kiva brings both financial and non-financial benefits and costs to a Microfinance Institution (MFI). I believe that partnerships, whether personal or business, need partners’ values to align in order to succeed. So I will analyze this topic within the context of Kiva’s values – dignity, accountability, and transparency. The question I’d like to discuss is “What are the non-financial costs and benefits to an MFI in aligning with Kiva’s values of dignity, accountability, and transparency?” Since this blog represents my observations of one MFI partner (Christian Rural Aid Network – CRAN, in Ghana where I’m currently serving), I’d like to invite others to share their observations and enrich the discussion on this topic.
As a summary of my observations at CRAN, the primary benefit of their Kiva partnership is an increased maturity in their non-Kiva operational processes. As the Director of Microfinance put it, “Because of Kiva, all our operational processes have started to improve.” The discipline and rigour required as part of its Kiva partnership has pushed the organization to revamp its operational processes. They are now questioning things they didn’t question before. They are re-thinking how they do things and whether there are better ways. They are applying lessons learned from their Kiva partnership to the other aspects of the organization.
The primary cost to CRAN of its Kiva partnership is the coordination required to make Kiva processes happen. Kiva’s partnership requirements are not necessarily a priority to non-Kiva staff within the organization. However, their participation and help is essential in maintaining the partnership. Borrower profiles and journal updates cannot be posted without loan officers. Monthly reports cannot be submitted without the data management team. Maintaining a Kiva partnership requires an organization-wide effort – breaking of departmental silos and a united MFI team. Slowly and surely, they are making strides, but these things take time.
I have broken down the next section of the discussion to Kiva’s three values – dignity, accountability, and transparency. Under each section is a definition of the value on Kiva’s website and my observations of its benefits and costs.
Definition on Kiva:
Kiva encourages partnership relationships as opposed to benefactor relationships. Partnership relationships are characterized by mutual dignity and respect.
A mandatory Kiva process for MFIs is ensuring that borrowers posted on Kiva have signed client waiver forms for the use of their personal information. This waiver has been produced by Kiva’s legal team at headquarters and offers protection to all parties involved – clients, MFI, and Kiva. While signing the waivers, loan officers are expected to explain to borrowers why their picture is being taken and how their story will be shared. This educational piece protects clients to ensure they are comfortable with their information being shared.
Since most MFIs likely do not have an in-house legal department, they get to indirectly access legal expertise through their Kiva partnership. This is a benefit. At CRAN, for example, they have implemented the client waiver form as part of all their loan forms, not just Kiva borrowers. So what started as a Kiva requirement now serves to benefit CRAN’s entire client base, while also legally protecting CRAN.
Also, Kiva is not just using its MFI partners to get money to clients. They take the time to invest in their partnerships. There is a Field Support Specialist that manages the MFI’s partnership with Kiva. They are a resource to answer all and any questions that the MFI might have about Kiva. They link the field to Kiva headquarters in San Francisco, where the MFI can access even more diverse set of skills. There are Kiva fellows (More information here) that serve within the MFIs on a voluntary basis to support them with their Kiva processes. These resources and tools strive to build successful business partnerships rather than donor-benefactor relationships.
Microfinance at its core is about poverty alleviation with dignity. So aligning themselves with Kiva’s value of dignity is not a huge stretch for MFIs. However, Kiva’s client waiver form requirement does not come without its challenges. Some micro-loan recipients are illiterate. Some live in such remote locations that they don’t know the Internet. How do you explain to someone about Kiva if they don’t know about Internet? It’s not possible without simple messaging and some creativity – a dialogue that loan officers embark on day in and day out.
Definition on Kiva:
Loans encourage more accountability than donations where repayment is not expected.
Kiva takes data integrity very seriously. Each month, MFI partners have to submit a repayment report on all their borrowers posted on Kiva. This report compares expected borrower repayments to actual repayments, which is a fairly standard accounting process in most organizations. Though it sounds simple, it is not if your Management Information System does not track data to the individual level. This was the case with CRAN, where each month, the Kiva team had to access a client’s savings report to deduce repayment information. Each month, the team had to spend many hours going back and forth with the branches and the data team, confirming and re-confirming repayment information to ensure accuracy.
Where is the benefit you say? Well, prior to the Kiva partnership requiring repayment reporting, CRAN did not have a business need to report loan repayments at the individual level. They were being tracked at the group-level. With the push of the Kiva coordinator, they have implemented individual-level loan tracking as an organization-wide process. This individual-level data has started to become used by other departments, the units, and loan officers. The increased traceability of their data has enabled CRAN’s recovery team to better target its efforts on delinquent loans. The discipline required to be accountable is trickling to other parts of the organization and creating a positive cultural change.
Accountability is one of those catch-all words that many organizations strive for. However, to be truly accountable takes time and effort. For MFIs, satisfying Kiva’s accountability requirement often means implementing new, more diligent operating standards. It requires changes to their data management processes. It requires better co-ordination and communication between departments, units, and field staff. Accountability requires savvy change management. And we all know how much people like change.
Additionally, Kiva is a very young and nimble organization. So if they receive feedback on a way to do things better, they implement it. While this responsiveness and commitment to operational improvement should be commended, you can imagine that it won’t always be rosy from an MFI’s perspective. Just when you’ve learned and perfected something, an upgrade comes along to bring you back to ground zero. It has happened to all of us. I know I was crushed when I had to upgrade to Office 2007 after spending grueling hours learning Excel and PowerPoint in Office 2003.
Definition on Kiva:
The Kiva website is an open platform where communication can flow freely around the world.
Transparency pushes MFIs to discover, acknowledge, and address operational problems earlier rather than later. This spurs both process improvement and innovation. The Kiva website provides MFIs with an excellent platform for information sharing and learning. The metrics on the Kiva website give MFIs an opportunity to benchmark themselves against peers all over the world. Especially with the Cerise Social Performance Assessments that Kiva is conducting (Read more here), Kiva’s MFI partners get to participate in setting some shared standards for the microfinance industry. This is very exciting!
Transparency on Kiva can have unintended consequences. In one case, a Kiva borrower had ended his loan with Kiva and applied for a loan with a different institution. Initially, this borrower’s application was denied. The second institution saw the client’s Kiva profile and mistakenly assumed that the client still had the loan and did not need a second one. With the involvement of the unit managers and Director of Microfinance, this issue was resolved. While this is a one-off case, it points to some potential costs and unintended consequences of an open platform.
Also, transparency can be an uncomfortable concept. While we love hearing praises about ourselves, the criticisms are often much harder to swallow. When you are striving for transparency over an Internet platform, it means that the world knows the good, the bad, and the ugly about your business. The challenge is to use the uncontrollable nature of web information flows to create business opportunities rather than threats. As a result of the speed of the Internet and social media, many businesses are having to re-vamp the way they think about technology’s role in delivering on business strategy. So MFIs are not alone in this challenge.
By Zerrin Cetin, KF12 Ghana. Zerrin is currently serving at MFI partner CRAN in Cape Coast, Ghana. She is enjoying the Ghanaian hospitality and while not at work, the Ghanaian coast line.