Kiva partnered with the United States Department of State and the Inter-American Development Bank to launch the Women’s Entrepreneurship Fund on Friday, signaling the next step in the crowdfunding platform’s ongoing expansion into impact investing.
Seventy percent of small and medium enterprises owned by women in emerging markets are underserved or unserved, leading to a $260 billion to $320 billion credit gap for women, according to the International Finance Cooperation. Despite the odds, women reinvest 90 percent of their incomes in their families and communities.
“We see time and again with Kiva that the most impactful, high leverage, accelerated way to change the world more positively is by getting money directly into the hands of women, and particularly women entrepreneurs,” said Julie Hanna, Kiva’s board chair.
The fund — which aims to enable 1 million women entrepreneurs to access loans ranging from $450 to $100,000 over the next five years — will match dollar-for-dollar what citizen lenders give to women entrepreneurs through the Kiva.org website.
The fund was born of a conversation in July at the Global Entrepreneurship Summit in Nairobi, Kenya, when Hanna, who is also a presidential ambassador for Global Entrepreneurship, met Catherine Russell, ambassador-at-large for global women’s issues at the U.S. Department of State.
“The value of this partnership from my perspective is everybody brings their skills to the table,” Russell told Devex. “There is no way the U.S. government could do what Kiva does.”
The State Department will invest in data collection and analysis on the size and purpose of loans and whether women come back for additional loans, Russell said. This is in response to the lack of decent data, including data on entrepreneurship disaggregated by gender, which makes it more difficult to work to support regulatory changes and empower banks to find new ways to finance female entrepreneurs.
The Inter-American Development Bank Group’s Multilateral Investment Fund brings to the partnership its expertise with regulatory issues and its ability to provide technical assistance to women entrepreneurs. Its participation also helps insulate the partnership from any changes that may result from new U.S. government leadership.
The Women’s Entrepreneurship Fund was appealing to Kiva not only because of the impact it could have, but also because of the way it fits in with how the organization is evolving, Shah said. The original innovation of Kiva was making microfinance easy, but as the organization learned that the impact of microcredit was not as great as it once thought, many changes were set in motion.
The organization started looking at larger loans for small and medium enterprises and encouraging microfinance institutions to think about new loans products such as student loans and clean energy loans. Ongoing conversations include questions about whether Kiva lenders might add value in areas beyond money, such as mentorship.
“Kiva is crowdfunding meets impact investing,” Premal Shah, Kiva’s co-founder and president, told Devex. “If this model works, then it can actually tell the rest of the impact investing space, as well as just the commercial investing space, this thing can not only help people, but make a lot of money.”
Shah gave the example of an anonymous donor who put $1 million into Kiva and generated $13 million of impact with only $50,000 in losses as he matched the dollars of smaller donors and that money recycled over the course of three years.
Kiva is uniquely positioned to provide that kind of impact and this fund is part of its effort to help address the pioneer gap — or the inability of social entrepreneurs to get impact or commercial investments as they seek to grow, Shah said.
Crowdfunding can provide the zero percent interest, risk-tolerant capital for post-grant, pre-commercial small and medium enterprises, even those without a long track record or collateral, that ideally graduate on to impact investors and mainstream investors, he said.
“If microfinance is supposed to be at the edges of banks, Kiva should be at the edges of microfinance,” Shah said. “It’s free, no-risk money to try something that could be impactful and sustainable because that’s the sweet spot we’re going for.”
Kiva will rely on its network of more than 300 field partners to identify recipients and administer the loans through the fund, just as it does with the smaller microfinance loans it provides. More than 75 percent of the borrowers funded on Kiva are women, but as the fund ramps up, the organization will ask those field partners to identify women-owned small and medium enterprises that need larger loans. It’s something Kiva has done before. For example, Yunus Social Business was a partner for a $100,000 loan to Kreyól Essence, a hair and skin care company led by Yve-Car Momperousse in Haiti.
The fund is looking to bring in a new group of donors whose contributions will be used to match the smaller contributions of online lenders. Those big donors, groups or individuals who contribute at least $250,000 will be able to specify a region or sector they want their funds to support and can choose whether to recycle their payments back into the fund or pull their money out after the initial cycle.
“What Kiva does is take this pool of money and deploy it into the stream of the crowdfunding platform,” Hanna said. “It’s a way of getting major lenders to maximize their impact. Rather than just putting their money to work, they can use this as a way to recruit new money into the system, which is what the inherent power of the platform is about.”
With the fund, the partners want to make sure to reach the rural areas where the credit gap for women is wider than it is in urban areas. They are looking to move quickly and hope to announce new partners who will capitalize the fund and even examples of some of that money at work by the 2016 Global Entrepreneurship Summit in June.
Beyond what can be done today, it’s also important to forecast and imagine the status quo of today transformed, Yuri Soares of the Multilateral Investment Fund told Devex.
“When we look at how to support women entrepreneurs, it’s an issue of funding, it’s an issue of leadership, it’s an issue of missed opportunities in the past,” he said. “We want to leapfrog.”
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