APPROACH AND METHODOLOGY
The Visa and Kiva partnership was formed to accomplish a mission shared by both organizations - providing economic empowerment for small businesses. This partnership is supported by a $1 million contribution from Visa to support Kiva's growth in the United States.
As part of the partnership's commitment to small business growth and raising awareness of the microfinance opportunity in the U.S., Kiva City was created. Kiva City is a new partnership model for Kiva that can bring micro-lending to all corners of the country - even in places where microfinance institutions have yet to establish local branches. The new model leverages current and future Kiva field partners as lender and underwriter, and works with local partners to support the three components of micro-lending: sourcing the businesses to apply for microloans, administering the loans, and funding the loans. The four local partners that make up a Kiva City partnership alliance include: Kiva; local civic leaders; community organizations; and financial institutions. Whereas Kiva has traditionally worked with microfinance institutions who conduct all of the activities required to fund a loan on Kiva, these new partnerships will be alliances of local organizations based on a division of responsibilities in order to increase greater awareness of access to microfinance throughout the country by empowering local organizations to contribute to this work. Using the power of its Internet platform, Kiva then has the opportunity to engage Americans in the effort to help support these small businesses' microloans.
While Kiva will not be tracking job creation statistics through this effort, all of the businesses supported have fewer than nine employees, and on average only three employees. 75 percent of the firms in the U.S. fall in this category of less than nine employees, and thus represent a significant proportion of U.S. jobs. These smaller firms are the most likely to close their doors and the slowest to recover from economic shocks. Access to finance is a critical element of helping these businesses to sustain operations within a challenging economic environment, and thus contributes to job preservation as well as faster economic rebound with job growth potential.
IMPLEMENTATION, TIMELINE, AND DELIVERABLES
The timeline for rolling out this unique program is as follows:
- June 29th, 2011 - Kiva City goes live on Kiva.org with a call to action for civic leaders and community groups to apply to bring Kiva to their city.
- June 29th, 2011 - Kiva Detroit is launched as the first Kiva City and loans to entrepreneurs in Detroit are posted on Kiva.org. Americans then have the opportunity to help support Detroit small businesses.
- July 2011 and ongoing - Kiva's U.S. Portfolio Manager will screen online applicants for Kiva City and will begin the vetting process for new Kiva partners. All applicants in the first round will be reviewed by the end of August 2011, and they will be reviewed on a rolling basis thereafter.
- August 2011 and beyond - Kiva will do outreach to city government, foundations, and other supporters to promote the Kiva City Program, as well as a heavy promotion through social media channels.
- September 2011 - January 2012 - Launch the second Kiva City in a location to be determined with loans available at Kiva.org, and develop a shortlist of possible cities to be launched in 2012 from the pool of applicants.
- February 2012 and ongoing - Continue partnership development for the next Kiva City location(s). Launch of new cities will be determined based on how quickly each partnership can operationalize the loan sourcing process.
- June 2012 - Announcement of the results of the first year of the Kiva City program, including the amount of borrowers reached in the U.S. and the amount of loan volume flowing to U.S.-based businesses, along with a shortlist for the next Kiva City locations and a timeline for when new cities will be launched.
- July 2012 - June 2013 - Continue reviewing applications for Kiva City, creating strong partnerships in target cities and launching new Kiva City locations as they are ready.
American small businesses are a vital component to economic growth and play a pivotal role in stimulating employment, infrastructure, and revenue growth. However, the last few years presented a myriad of significant challenges and caused an unsettling downturn in this sector.
Visa and Kiva commissioned a study with The Economist Intelligence Unit (EIU), to better understand the challenges faced by the small business sector and to more effectively address key pain points through innovative solutions. The study looked at small business trends in the 50 largest Metropolitan Statistical Areas (MSAs), among firms with nine or fewer employees. According to the study, 20 of the 50 largest MSAs (40 percent) lost one percent or more of their small business population from 2006 to 2008. Some of the more heavily affected regions like Detroit also experienced decreases in their employment levels by more than five percent. This compares with the overall national growth of private employment by 0.4 percent in that same time period.
Given the size of these businesses, one of the many hurdles that led to these downturns was the lack of access to new capital. Many small firms have difficulties accessing traditional bank loans, making it impossible to purchase new product and equipment, pay rent, hire and retain employees, or promote their business offering. As a result, many stakeholders have looked to new and unique sources of capital - including loans from microfinance organizations.
Kiva launched in the U.S. two years ago with ACCION USA, based in New York, and Opportunity Fund, based in California, with the goal of opening new avenues of capital for small business owners in the U.S. As Kiva has sought expansion across the country, they found that there are very few microfinance institutions operating at scale and there remain large regions within the country that simply do not have operating microfinance institutions. The high cost of creating branch locations across the nation and a lack of awareness by small business owners that microfinance is a viable option, make reaching scale more difficult.
Visa challenged Kiva to accelerate the growth of microfinance in the U.S. by raising awareness of availability, supporting the growth of current field partners, and by bringing microfinance to the areas where small businesses are facing the toughest challenges. Kiva quickly realized it was missing the vital link among lenders, communities, and the small businesses that need help.
Kiva is always seeking new funding and implementing partners to support the expansion of the Kiva City initiative into additional cities. For example, in 2013 Kiva partnered with Accion Texas Inc. to launch Kiva City Little Rock. Accion provides Kiva-funded loans up to $10,000 as well as additional loan products ranging from $500 to $250,000 serving small entrepreneurial endeavors or start-ups that lack access to commercial credit. In return, Accion received branding on the 'Kiva City Little Rock' landing page, on Kiva's partner page, as well as extensive social media and mainstream media recognition.
In terms of implementing partners, Kiva is seeking to partner with credit unions and Kiva Zip trustees (both institutional and individual), to source potential clients, both in existing Kiva Cities and the cities Kiva has identified as near-term targets: Pittsburgh, Louisville, Philadelphia, and New York City.