Archives for category: Economics

Have you heard of Kiva? If you haven’t, you are seriously missing something! Particularly if you are interested in social entrepreneurship. Kiva is not just a very successful example of peer-to-peer lending but a story of global social change. Till date, Kiva has disbursed more than a hundred million dollars in capital to about three hundred thousand entrepreneurs in roughly 200 countries around the world. Despite the on and off controversies that Kiva has fallen into, it has managed to not just continue to grow but the capital being channeled through Kiva has continued to increase every week.

So what makes Kiva so successful? Is it because people are more prone to lending than donating or it because its people helping people (vs than people helping organizations)? Is it the easy and intuitive online experience that Kiva provides or the credible nature of Kiva and its field partners? Is it about the stories that Kiva is able to put together which really inspire the haves to support the have-nots? Well, these are not just questions I am interested in but Kiva is slowly becoming a case study around the world. Be it  SSIR or NextBillion, everyone’s talking about Kiva.

On Kiva, anyone and everyone who is interested in helping entrepreneurs can participate in micro-lending and support small businesses in the developing world. You can lend as an individual or as a group. You can track how your money is helping the entrepreneur that it reached and receive regular updates about his progress from the field. Not just Kiva has maintained a very low default rate, it has been able to scale drastically.

As a supporter of young student changemakers and entrepreneurs, what can we learn from Acara? That working capital can change the lives of people. That a lot of people are entrepreneurial by nature and given the chance of rise up the economic ladder, people work hard and earn smartly. That people who can, want to help those who are under-privileged, specially when it’s just about lending.

What I love the most about Kiva is its tag line – “Loans that change lives”. Simple, articulate and straight-forward. You can read ieteresting facts about Kiva here. It was indeed an idea whose tome had come.

“…1 million farmers in Mexico live on less than $2 a day. They can’t afford drip-irrigation systems, which would save them time, allow them to grow more crops, and often double or triple their income. At least that’s what a first analysis might conclude.

But Amanco, a multinational company that focuses on water distribution solutions in Mexico and throughout Latin America decided there was a way to help these farmers. With the help and insight of citizen-sector organizations in Mexico, Amanco re-engineered its business model to increase the cost-effectiveness of small transactions, especially with regards to quotation, system design, and installation…..This new model has been profitable for Amanco. In Mexico alone, the newly created drip-irrigation market is reported to be $200 million a year…Amanco estimates income from low-income market segments will double year on year, compared with just five to 15 percent growth in other segments.”, Valeria Budinich (Vice president at Ashoka: Innovators for the Public) in the Harvard Business Review.

What we witness here is the power of investing in low-income markets by partnering with citizen-sector organizations (or non-profits) and working with local communities to build solutions, hence building what we call a “Hybrid value chain“.  According to Ashoka, “Hybrid Value Chain (HVC) is a business model that leverages the capabilities of the business and citizen sectors to enable the delivery of needed goods and services to low-income populations in a more cost-effective way.” What an HVC does is help corporations understand these markets better, build localized solutions and deliver products and services at affordable prices. CSOs or non-profits, who have local knowledge and strong relationships with the community, help these corporations and in the process, build new sources of revenue and accelerate social impact in the community. It’s a win-win for everyone.

In several developing countries including India,  the rise and spread of MFIs has also made the delivery of basic services in last mile areas easier and below poverty line populations are now getting access to low cost water, healthcare and education services. Leading corporations are using this infrastructure too to reach out to new markets and make more revenues.

The opportunity here is not just for big companies but for start-up entrepreneurs too who want to build services in unformed markets be it for street vendors or rickshaw-drivers. It’s very much the right time to get started!