Kiva is a lender with a difference. Under the slogan “borrowing that saves lives”, they set out to achieve this by lending small amounts of money to borrowers in the developing world. Alongside this philanthropic work, they also provide loans to small businesses in wealthy countries.
Kiva is operated on a non-profit basis, and has links to field partners on 5 continents. It crowd-funds resources from lenders, allowing them to contribute their capital for the benefit of small businesses, NGOs or community groups that need it, but don’t have access to conventional financial services.
What Kind of Services Does Kiva Provide?
Kiva operates two separate lending arms. One, Kiva Zip, is focused on the US. The other is Kiva’s developing world section, which partners with micro-lenders across the world.
Kiva Zip is a fast, flexible lending service for US customers only that has provided loans for over 11,000 small businesses. Here are some of the features of a typical Kiva Zip loan:
- Kiva Zip enables borrowers to apply for loans of between $25 and $10,000.
- Loans can be arranged over periods of 6, 12 or 24 months depending on what amount the borrower can pay every month.
- Kiva Zip’s loans come with a 0% interest rate.
- Loans are available to any US resident over the age of 18 who has a verified PayPal account and is not currently in bankruptcy.
- A credit rating and financial information about each applicant is not required to obtain a loan.
- Loans cannot be for purely personal reasons and must have a “social purpose.”
Kiva’s International Lending
Kiva also lends to customers outside the US. This is always carried out in conjunction with the organisation’s field partners, and borrowers need to make an application via the field partner, not Kiva itself.
These partners are often reputable micro-credit firms or NGOs in host countries, such as VisionFund, Novica or LiftFund. Customers can filter the list of partners by region and risk factor.
The risk factor includes several metrics. Most importantly, it assesses a delinquency rate for every partner. This is calculated by dividing the amount of money currently delinquent by the total amount of capital loaned by Kiva via that particular field partner. Kiva also calculates a default rate, giving an idea of how many of the partner’s loans fail.
Additionally, borrowers and lenders can find out about the partner’s “social strengths” which could include how poverty-focused they are, whether they focus on vulnerable groups and whether they have the ability to offer entrepreneurial support.
The idea is to allow lenders to know where their money is going by making Kiva’s international lending as transparent as possible.
How Kiva Review Their Lenders
Prospective borrowers with Kiva Zip apply online, where they can specify the size of their loan and their preferred term. It’s the next part that sets Kiva Zip apart from other online lenders.
To find out whether borrowers qualify for a loan, Kiva uses a process called ‘social underwriting’ which seeks to ascertain how trustworthy and community-focused they are. Kiva Zip customers have two options if they want to be approved for a loan:
- The first method is to take part in the Borrowers Network program. Basically, this involves customers taking out at least one loan themselves. The company states that this is intended to educate borrowers about the lending process, and to create a community of Kiva users who both lend and borrow on the platform.
- The other method is to find a “trustee” within your community who will vouch for the borrower. Trustees are a key component of the Kiva review process, as they vouch for the borrower’s character and their proposal’s potential benefits. They are encouraged (but not required) to help out the borrower after they have endorsed them, and to spread the word in their communities about the services that Kiva Zip offers.
- Trustees do not need to be individuals. They could also be churches, NGOs, business associations, educational institutions or other businesses that have a relationship with the borrower (such as suppliers).
- In both cases, borrowers need to assemble a network of lenders before their money is disbursed. This network has to include at least 5 lenders on the Kiva platform (with a maximum of 30). When details of this network have been supplied, Kiva generally approves the loan, and are satisfied that the borrower is creditworthy.
Whether customers use the Borrowers Network or rely on a Trustee, they can attract lenders to their application by sharing information with their social media networks. They can also access the social networks of their Trustee, and use platforms like Facebook and Twitter to raise awareness of their fundraising effort, in a system that resembles crowd-funding sites like Kickstarter or JustGiving.
The Differences Between Kiva and Bitbond
Kiva has plenty of competition in the small-scale Fintech lending sector. Bitbond is a great example, and offers a range of borrowing options that differ significantly from Kiva:
- Borrowers with Bitbond can access credit over terms of between six weeks and five years.
- Bitbond disburses loans for a wide variety of purposes and is focused on online businesses. Credit ratings are informed by data from social media accounts as well as online seller accounts with companies like PayPal and eBay. This gives Bitbond greater global reach, and means that borrowers don’t have to rely on local trustees to access credit.
- Bitbond charges interest rates on all loans, which are related to the borrower’s credit score and the term of the loan. In addition, borrowers must pay a small originating fee of between 1 and 3 percent of the total loan.
- Repayment schedules with Bitbond are flexible, and loans can be paid off before the term ends, with no financial penalty.
Should I Choose Bitbond or Kiva for my Next Loan?
When you compare the borrowing options offered by Bitbond with Kiva’s services, plenty of differences become apparent.
One of the major problems with Kiva is that although it promotes itself as a solution for areas with poor access to conventional banking facilities, it actually fails to cover large portions of the globe.
When you do search through their partner agencies, it becomes clear that Kiva has some major blind spots in its international coverage. There are no partner lenders in Western Europe and none in Eastern European nations like Romania or Bulgaria. In South America, there are plenty of options for borrowers in Peru, but very few in Brazil or Argentina. Similarly, West Africa has greater coverage than countries like Zimbabwe.
This means that millions of farmers, craftspeople, marketers, schools and clinics are all outside the Kiva network. For them, a truly international borrowing system is sorely needed, which is exactly what Bitbond provides.
Kiva Zip is also solely US-focused, so small businesses in other rich countries will have to look elsewhere.
Slower Approval and Processing Times
Kiva Zip claim that their approval process is hassle-free, and that applicants do not need to supply large amounts of information. However, this is not entirely accurate. The firm actually employs a “robust” series of checks for all borrowers. This includes using EarlyIQ to verify their identity, connecting to social media accounts to assess their social networks and conducting online research on the borrower and their business.
With Bitbond, approval requires granting the company read-only access to an online selling accounts such as PayPal account. Within a few hours, users will have been allocated a personal financial manager, their accounts will be linked, they will have been credit rated and they are ready to borrow.
Kiva’s loans can also take a long time to process. On their website, Kiva admit that “due to a large number of loan applications, and our small team, it can take us a long time to follow up with applicants.” This can be a serious problem for businesses that need working capital fast. With Bitbond, credit can be accessed much more quickly.
Different Fundraising Systems
Fundraising with Kiva can sometimes be a pain. Borrowers (and trustees) need to be pro-active in seeking lenders to add to their personal network, and appealing to social media channels can be awkward. With Bitbond, fundraising takes place on the firm’s marketplace, and there is no need to enlist trustees or appeal to your Facebook friends.
The two lenders have different expiry dates for fundraising as well. In this case, Bitbond gives you less time, with auctions ending after 14 days. Borrowers with Kiva have 15 days after posting their loan application to create their lending network, and 45 days to reach the full amount after passing the minimum amount of lenders. At that point, the loan will expire if it has not been funded, and the process will have to start again.
Kiva Review | The Takeaway
Although Kiva and Bitbond might seem different from the outside, this Kiva review has highlighted how similar both organisations are.
All Kiva loans require a social purpose, which may exclude some purely business-related ventures. This is not the case with Bitbond, who can disburse loans for a wider range of business purposes. Kiva leverage online technology to provide crowd-funded credit with a community focus. Bitbond seek to create a new way to lend and borrow across the world, using a completely new currency. The two platforms both have a place in the world of online finance. It’s just a matter of finding the right one for you.
It might be that your online retail business is better suited to Bitbond, while a Fair Trade chocolate seller may prefer Kiva. Bitbond has a track record of serving eBay sellers and online marketers in general, who need credit quickly, at unpredictable times, and can also benefit from Bitcoin’s global nature. On the other hand, Kiva excels in supporting community businesses that traditional banks have stopped lending to.
Both lenders are part of the wave of innovators who are finding new ways to lend for the millions of borrowers who remain frozen out of conventional banking systems in rich countries and the developing world. If you run a small business and need working capital, it’s well worth checking out what the two companies have offer.