Here's how Kiva which means "unity" in Swahili works: Lenders visit Kiva's Web site to find entrepreneurs from developing countries looking for a small loan. Kiva posts the entrepreneurs' funding needs and pictures online with the help of 38 local microfinance institutions around the world.
Anyone willing to lend as little as $25 perhaps to Peter Muchiri, a furniture maker in Kenya who needs carpentry materials, or Roza Boguckaya of Tajikistan, who wants to expand her bakery does so through the site, where they can also track the entrepreneur's progress as they repay their loans, typically over a one-year period.
To date, nearly 40,000 people have used Kiva to lend money to 5,000 borrowers in transactions totaling $3.3 million. No one has defaulted on their loan just yet, though 10 percent are falling behind on their payment schedules.
It's a remarkably simple system that highlights the power of online communities. Yet just as remarkable is how adeptly Kiva has harnessed the collectivepower of the Silicon Valley tech community.
Among the growing number of companies providing Kiva with free services are Google, PayPal, Microsoft and MySpace. And more outfits want in, including San Francisco startups Automattic,
Much of that interest owes to strategic philanthropy; certainly, it doesn't hurt a brand to associate with an outfit that represents global giving.
But Kiva's Silicon Valley connections are also playing a key role in its success.
Take Premal Shah, Kiva's contagiously enthusiastic 31-year-old president. Shah is a Stanford graduate who was awarded a microfinance research grant from the university before heading to PayPal in 1999 as a product manager, staying until late 2005. Before leaving, Shah used his close relationship to management to indefinitely secure free payment processing for Kiva's lenders the only such commitment PayPal has made to a nonprofit.
"Kiva isn't completely alone in its approach, but in part by leveraging its relationships, it's doing microcredit online better than anyone else," said Peter Panepento, a senior reporter who covers microlending at the Chronicle of Philanthropy. "It'd be much less appealing to potential lenders if they thought a cut of their loans were going to PayPal," he added.
Kiva's deal with San Bruno-based YouTube is nearly as unique. While most startups would kill for real estate beside YouTube's wildly popular online videos, Shah says that YouTube co-founder Steve Chen personally reached out to Kiva late last year. "Steve and I are old pals; he said, 'We'd love to help you.'" Today, YouTube shows banner ads for Kiva 40 million times a month and accounts for 15 percent of the nonprofit's traffic.
Matt Flannery a former programmer at Alviso-based TiVo who co-founded Kiva with his wife, Jessica, just months before connecting with Shah still marvels at the good will Kiva receives, including $300,000, from the 11/2-year-old Draper Richards Foundation, which provides six early-stage grants a year to social entrepreneurs with a vision of changing the world.
"These guys have connected new breakthroughs from Silicon Valley and packaged them together to bring much more life to the microfinancing world," said venture capitalist Bill Draper, who served as CEO of the United Nations Development Program in the late'80s.
"So many people want to help build this organization," Flannery, 29, said. "We're really lucky."
How lucky? For one thing, every day after 7 p.m. Kiva's shabbily chic offices on the first floor of a converted stationary printing press fill with friends from Yahoo, Google and PayPal, "people who just come to hang out and pitch in with problems," he said.
Even Kiva's nine full-time employees recruited themselves, including Shah, who made a fortune as one of PayPal's earliest employees, and Olana Hirsch Khan, who joined Kiva last May after six years at Google, where she managed an international sales team.
"It wouldn't be impossible to do what we're doing elsewhere," said Flannery, pointing to the growing popularity of microfinance, a concept whose biggest proponent, Muhammad Yunus, won last year's Nobel Peace prize. Nevertheless, he calls Kiva's Bay Area home a "huge advantage. The sheer amount of resources available (to us) is enormous."
That extends to some of Kiva's lenders, most of whom are American, and many of whom live locally, like San Francisco real estate agent Ken Gardner, who first learned of Kiva during an episode of the PBS show "Frontline" in October.
Gardner has already lent $2,200 to 72 individuals, saying that he is "hooked." He adds that the only time he has been flummoxed by Kiva was "the first time I tried to log onto the site, during 'Frontline.' Its servers were down. They'd crashed."
That may have been the only time that technology has let Kiva down so far.
Contact Constance Loizos at firstname.lastname@example.org or (408) 920-5920.