Q & A with KIVA co-founder Jessica Jackley

Several Illahee attendees spoke with KIVA co-founder Jessica Jackley after her talk, or followed up via email.

Richard Breene asked if could we change capitalism to KIVA’s vision by 2015, since it only took five years for KIVA to go from zero to $130 million?  Jackley would love to do that. She always hears, “we invest in people” from venture investors. Her response: Yeah, right. Let’s actually do that.

Alan Hickenbottom wanted to know, as a tree hugging capitalist, what’s KIVA’s business model, how does it work? Jessica’s reply was that she just found the best way to do what she wanted to do. It happened to be in the form of a non-profit. KIVA thinks of the 501 c 3 rules as a tax code not a religion; grants and donations are important, but KIVA is profitable. It makes money. The board and staff just don’t get to keep it personally. KIVA asks lenders to contribute money when they make a loan, say $2.50 when they loan $25.  Plus KIVA makes money investing the funds that may sit in their accounts for that period between transactions. KIVA works with many micro finance partners around the world.  The partners actually find the entrepreneurs, while KIVA finds the source of debt capital. KIVA could charge interest to partners, but it chooses not to.

Another attendee wondered if Grameen Bank and micro lending in general weren’t based on a system of capitalism that causes a lot of poverty in the first place.  Alan Hickenbottom took this one for Jackley, and responded that corporatism is the problem, where as capitalism with a small c is an engine of prosperity.  Jackley agreed, observing that it’s not bad to be in the business of farming, or whatever.  Sure, the system needs to be changed, and that’s it’s own work, being done by others, rather than KIVA. In the mean time people need to get through the day.

Charles Leatherwood observed that the electric car was killed by the oil industry, and water as a human right is undermined by bottling companies and large water services corporations. In other words, we’re known by our enemies. So who’s against KIVA?  This surprised Jackely, who nevertheless admitted that critics say micro finance isn’t the solution, and that it would be easier to just go big and forget the stories. Other critics say KIVA should only fund green businesses, and should stay out of certain counties. Then there’s the New York Times story about how entrepreneurs on the site are not real time; they’ve have already been funded. (At the same time, no big bad force is out there trying to undermine micro lending.)

Mary Volm worried that, OK you’re helping people around the world, but what about this community right here in Portland, with ten percent unemployment?  Jessica led with the caveat that this question was not a “plant,” because the company she’s currently launching directly addresses that. It’s called ProFounder.com. You want to start a café, or a repair shop, or whatever business here in the US, and ProFounder helps you refine your business plan, pitch, investment structure, and crowd sourcing, starting with community contacts and working outward via social networks.

Another attendee asked if Jackely had a sense of, among KIVA’s target demographic of poor people, how many have a good idea, but just lack capital. Does KIVA have statistics on success, and does KIVA help people who need basic business skills to put their idea into action? Jackley replied that people in poverty often just start with “what can I do to survive.” Then it gets to what business can I create. To the second question, it’s really the micro finance partners that do this rather than KIVA.  As an aside, Jackley recommended we look at The Barefoot MBA program. As another aside, this is what Mercy Corps Northwest is doing in our region.

Chris Harker encouraged Jackley to look at peer-to-peer funding for college education, or post-secondary education in general.  For example $1500 gets a guy through truck-driving school. Jackley recommended that we check out Vitana.org, and Enzi, which invests in graduate students.

What about KIVA fellowships? How does volunteering fit into the relationships KIVA creates.  The answer is that KIVA fellowships are basically what Jackley was doing when she first got herself over to Africa. She recommended looking at “Do More” on the KIVA web site.

A follow-up observation was that volunteering is sometimes just rich people parachuting in and leaving a half-baked solution and then disappearing.  Jackley admitted that, yes that happens.  KIVA addresses this by working with partners who are already in the community and stay there.

Another attendee wanted to know more about KIVA’s field partners. Jackley explained that KIVA has four tiers of partners, from ones that are well connected for sourcing capital, to ones that really need a lot of help on many levels.  You can go from banks to start up micro finance institutions, to non-governmental organizations.  And they’re different in different parts of the world and always evolving.

Finally, from an email we received after Jackley’s talk: What about the issue of high interest rates  – from 70 to 125% – that some micro lenders charge, as documented in a New York Times article (published the day after Jackley spoke in Portland)?  Reading the article, U.S. micro finance clearing houses like KIVA believe these usurious rates constitute no more than ten percent of their partners, and Mohammad Yunus cites rates of 10 to 15% above the cost of rasing the money as “reasonable.” But sometimes groups like KIVA feel they have to work with the partners that are available. In a conversation before her talk, Jackley cited 12% as the overall ballpark interest rate that KIVA micro lending partners charge. KIVA itself charges zero interest to its micro lending partners.  Still, the interest rates of partner micro lenders should be more transparent on KIVA’s web site. For more on micro finance transparency, go here: http://mftransparency.org/

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