Why Does Kiva Work?

Kiva.org, a “peer-to-peer online microlending nonprofit organization,” is successful largely because of the organization’s ability to humanize the lending experience.  Kiva’s Field Partners lend to and profile aspiring entrepreneurs, including photographs and stories in the entrepreneur’s profile.  Lenders, members of the general public, browse Kiva, select an entrepreneur’s profile, and lend funds via PayPal or a credit card.  Kiva provides the funding to the Field Partners, who eventually are repaid by the borrowing entrepreneurs, and the money works its way back up the chain.  This brief synopsis of the business model begs the question, “why then does Kiva work?  Couldn’t traditional lending methods handle this better?”

The answer is the humanization factor.  It is far easier to secure money from lenders when the lenders can directly observe the impact of their financing generosity.  Factors that might inhibit funding in a traditional lending system do not impact Kiva’s business model in the same way.  Kiva is filling a niche and creating value in a global economy, and, therefore, ought to continue to grow and experience success in the foreseeable future.