By John Briggs, KF8 Kenya

Update on sentiment shift: On June 23, Tom, the team captain for the (formerly) Pissed Off Kiva Lenders, changed the team name to Unhappy Kiva Lenders. Tom explained the name change in a posting on the team page: “I want the day to come soon when the team name will be ‘Delighted Again Kiva Lenders’ but the step above in the name change reflects current progress.”

Some Kiva lenders are pissed off about Kiva’s recent launch of loans to borrowers in the United States. Their angry cry has been heard in Kenya.

I arrived in Kenya two weeks ago to work with new Kiva field partner KADET. My marathon orientation-and-training tour is in full swing: this week I met dozens of KADET branch personnel in the western cities of Kisumu and Eldoret.

Successfully setting up Kiva-related operations poses many challenges for MFIs, but my new KADET colleagues made quick work of it. Both branches were able to post borrowers to Kiva on the same day they were introduced to it: Kisumu posted Maulyne’s loan and Eldoret posted Monicah’s loan.

Both loans were funded overnight, and the KADET staff was jubilant. At the Eldoret branch I joined KADET staff in poring over the Kiva lenders and lending teams who had supported Monicah. One lending team for Monicah’s loan jumped out at us: the Pissed Off Kiva Lenders.

Pissed off lenders? People at KADET were surprised. This wasn’t in the Kiva orientation I’d given them. Stephen Makanga, KADET’s integration and donor relations manager, and I decided to open the Pissed Off Kiva Lenders team page to find out more.

Image from the Pissed Off Kiva Lenders' team page

Image from the Pissed Off Kiva Lenders' team page

A statement on the page announced, “Kiva’s stated mission is to ‘alleviate poverty’. Poverty is defined as: ‘the state of having little or no money and few or no material possessions’. Does that sound more like the situation for US Kiva borrowers or borrowers from the Third World countries?”

Stephen gave the page an incredulous stare and kept reading.

 

“Now the truly impoverished are being asked to COMPETE for funds with borrowers in the US. The US is the wealthiest and most resource-full nation in world history. To think that we are asking lenders from the US and around the world to even consider lending to the US is a shameful, disgraceful decision.”

The sharp criticism went on.

“There was a recent Kiva loan request from a US man with a four year college degree in architecture and many years experience in that field. He decided he wanted to do something different and try his hand at website design. He was looking for $7000. If he gets it that’s $7000 which previously would have been available to 7-10 other borrowers in developing countries.”

After reading the whole statement, Stephen turned and looked at me. He waited a moment before he began to speak. “First of all, I believe there are poor people in the U.S. — forget about the wealth of the nation. If someone can reach those poor people because they understand their poverty, I have no problem with that. It’s okay.”

Stephen continued, “Poverty isn’t so simple — it’s a complex web comprising material deprivation, state of mind, and underutilized potential.”

He paused for a moment, and then turned to the Pissed Off Lenders’ criticism of the loan to the U.S. Kiva borrower who quit his job at an architecture firm in order to start his own business.

“I have a brother who stays at home and does vegetable farming. Whenever I go home, I don’t like having to give him money. Instead I like asking what he can do better than what he’s currently doing. The point is: what is more productive for him under his circumstances? If the man who worked in architecture is more productive being a web designer, then people should support him. It’s not like we’re short of people who can continue to support small loans on Kiva — this one won’t seriously affect the equation and supply and demand of small loans. I would be encouraged if that architect became more productive, and then was able to himself become a lender on Kiva.”

I thought about what he’d said, and was inclined to agree. But the Pissed Off Lenders still had a great point — what if competition from large loans to U.S. borrowers on Kiva began to crowd out funding for borrowers in places like Kenya? That would be unwelcome. I asked Stephen what he thought about that possibility.

“I believe there are people at Kiva who are watching to see if small entrepreneurs’ demands are being met,” he answered, adding, “If the demand for these bigger loans by U.S. entrepreneurs goes overboard, the Kiva people will obviously see it and put a check on it. The only time I would worry if is there were a shortage of people funding small loans, but before it would get to that point, I believe that the people at Kiva would have already taken action.”

Even though Stephen has just made Kiva’s acquaintance, it’s clear he trusts the judgment of its decision makers. To a point, however — he continued, “If the worst came to worst, KADET or other MFIs would still have access of loan capital, except those other sources are more expensive. I am also aware that there other peer-to-peer lenders, such as MYC4, although for MFIs their terms slightly different than Kiva.”

I nodded. Stephen had nailed it: While Kiva has helped fund over $75 million in loans so far, its contribution to microfinance funding represents a sliver of the multi-billion dollar microcredit industry. And Kiva, the first mover in person-to-person microlending, is beginning to get competition from other websites with a similar model, giving MFIs more of a choice of which organization they choose to partner with.

Moreover, as microfinance has come into its own, institutional investors with deep pockets have been aggressively courting many MFIs, albeit investors primarily interested in financial, not social, returns. So even if Kiva has misjudged by partnering with lenders that fund U.S. borrowers, its non-U.S. lending partners still have a variety of options of which to avail.

For all his faith in Kiva, Stephen did have one doubt related to Kiva’s launch of lending to U.S. borrowers. Towards the end of our conversation he said, “I have just recently learned that the individual loan limit for U.S. borrowers on Kiva is $10,000, but in Kenya and most other countries it’s only $1,200. I don’t like this at all.”

Stephen explained, “There are different categories of microfinance borrowers in Kenya who require loans that are far beyond the limit of $1,200.” He paused and looked at me intently, adding, “My last word is: it’s high time that Kiva think about revising the loan limits for countries like Kenya.”

I’d agree. Kiva’s limit on an individual loan size is $10,000 for borrowers in the U.S., $3,000 for borrowers in some countries in Eastern Europe, Central Asia, and the Middle East, and $1,200 for borrowers elsewhere. Kiva’s limits on loan sizes are usually pegged at or above the average size of microloans for a given country, but for most countries the limits haven’t been adjusted in a long time. If you’re a microentrepreneur in Kenya, $1,200 may not get you very far.

In working with KADET, I ran an analysis of loan disbursals the MFI made for the month of May and found many of them didn’t qualify for Kiva. Most of the disqualifed ones were below $2,000, and often they were just above the $1,200 loan limit. Group loan limits of an average of $400 per borrower also crimped things.

There were, however, more than enough smaller loans that qualified for Kiva to meet KADET’s fundraising target, so shutting out larger loans wasn’t a serious problem. It simply meant that a narrower range of KADET borrowers would make it to Kiva; borrowers with smaller loans tend to be newer (and riskier) KADET clients, while the ones that get larger loans are established clients who have proved their mettle and business acumen. Limit or not, KADET is committed to representing as many different kinds of its borrowers as possible on Kiva, small and large.

Like Stephen, I have faith in Kiva and the braintrust that has made it such a success. I’d imagine revisions to loan limits are in the works, especially with the advent of lending to U.S. borrowers.

I’m curious to find out what you think — should Kiva raise its loan limits? If so, should it be done on a universal basis, or should it be done on a country-by-country basis?

More on Kiva’s launch of U.S. lending: an open letter from Kiva President Premal Shah and CEO Matt Flannery about pilot partnerships in the U.S.; a Kiva Friends discussion of USA Lending; the Pissed Off Kiva Lenders page; and an earlier blog post I wrote, “Upending microcredit: Cambodians use Kiva to lend to U.S. borrowers“.

Kiva borrower Maulyne Obura and Stephen Makanga in Kisumu

Kiva borrower Maulyne Obura and Stephen Makanga in Kisumu

Stephen Makanga is from Emali, Makueni District, Eastern Province, Kenya. Growing up, his father and mother were subsistence farmers who grew corn, beans, vegetables, and coffee (“when the industry was still good”), and raised livestock such as cows and goats. He has four sisters and five brothers, and is the youngest among his siblings. Stephen is the only one in his family to have attended university, though one brother attended a teacher training college and is now a primary school teacher. Stephen attended Egerton University in Nakuru, working his way through school as a public high school teacher; he got some support from his parents, but he also took out loans from the Higher Education Loans Board, which he’s still paying off at the age of 40. He graduated in 1994 with a degree in agricultural economics.

After graduation, it was hard for Stephen find steady employment, so he took a series of small teaching jobs. In 1997, he got a job with the Ministry of Agriculture as an agricultural extension officer, training farmers as a beekeeping specialist. He left his government position in 2000 to work for World Vision Kenya. At World Vision, he started as a program coordinator for a small food security project in the northeast of Kenya. He went on to be a program manager in charge of the Wajir (district in NE Kenya) relief and rehabilitation program. After that, he moved to Monitoring and Evaluation for the coast region of World Vision Kenya. A year later, Stephen became the program manager overseeing all World Vision development programs for coastal Kenya. He joined KADET, which is owned by World Vision, in 2007 as the manager of Integration and Donor Relations.

John Briggs is a Kiva Fellow serving with the Kenya Agency for Development of Enterprise and Technology (KADET) (KF8). Before being posted in Kenya, he worked with Kiva field partners Ahon Sa Hirap, Inc. (ASHI) (KF7) in the Philippines and Maxima Mikroheranvatho (KF6) in Cambodia.

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