I manage the Zillow API program as part of my day job, so the release of the Kiva API (myKRO coverage) a few weeks ago certainly caught my attention given my microfinance interest to go along with my background with APIs. For those of you who don’t know, “API” stands for Application Programming Interface (yes, it’s a geek term). The new Kiva APIs have all sorts of potential to help Kiva over the long haul. I see it serving two main functions:

1. Enabling others to spread the Kiva brand, which will likely increase the number of lenders & the amount of funding on the site
2. Ability to automate tasks that are currently manual. I believe all the current APIs are designed to send Kiva data out to other sites, but it would not surprise me one bit if there were soon Kiva APIs to accept incoming data to populate Kiva. MFIs (field partners) could automate their loan repayment updates, posting of journal entries, etc.

Here are some of the cool apps that have already been built:

1. A wordpress plugin showcasing your loans
2. An app that allows you to get e-mail alerts for loans you’re interested in
3. Map based browse feature
4. A facebook app

Some things I’d like to see built (note the API likely doesn’t support the needed functionality to build all of this) with Kiva data:

1. Wordpress plugin that shows off the impact of a “Lending Team” (such as the myKRO one)
2. An app to search and browse Kiva Field partners by performance indicators (such as repayment rate, average loan size, interest rate, etc)
3. Heatmap showing volume of loan activity as well as overall $ volume by country
4. Scrolling photo widget displaying photos of all the different borrowers in a particular country or region. The ability to show all borrowers for a specific field partner would also be cool.
5. Heatmap showing average interest rates paid to field partners per location
6. An app that recommends other lenders to connect with based on my lending choices

I look forward to seeing the next wave of applications built with the APIs, as well as the release of some new APIs which I have to guess Kiva is working on. I’ll try to do another post soon with some more thoughts and suggestions of how the Kiva APIs can be utilized to bring the maximum value to Kiva over the long haul.

And speaking of APIs, I have a strong hunch this is going to start a trend in the non profit world of NGO’s opening up their data as a means to spread their message to more people in more places.

Since it was announced that the Small Business Administration (SBA) will receive $790 million in stimulus package money, micro enterprise organizations all over the United States have been making the news. The stimulus package funds will ensure that the SBA can raise its loan guarantee from the current levels to as much as 90% for some loans. It will also create a new SBA loan program to provide deferred payment loans up to $35,000 for viable small businesses in the United States that need money to make payments on an existing, qualifying loan.

Check out the following two articles for more information on how the ‘Obama small business plan’ is creating a big job for micro enterprise nonprofits:

http://www.reuters.com/article/pressRelease/idUS22108+17-Mar-2009+BW20090317

http://www.nytimes.com/2009/03/12/business/smallbusiness/12micro.ready.html?_r=1

I have repeatedly wondered this question with respect to natural disaster since I have begun working in Santiago with Esperanza International and Kiva.  What happens to microfinance bank members when natural disaster strikes?

In the case of the Dominican Republic, natural disaster comes often and in the form of tropical storm and hurricane activity.  Since arriving two months ago I have come across the stories of two individuals, each effected by natural disaster.

Gladys, mother of three, lost everything to tropical storm Olga in December of 2007.  Around midnight on a December evening the Tavera Dam collapsed on the Yaque River and allowed 1.6 million gallons of water a second to enter the surrounding communities.  According to Gladys, hundreds were killed.  She declared everyone was sleeping; it was  unexpected.

Due to the failures of the government infrastructure, the Dominican government has built a housing development for those affected by the collapse of the dam.  Gladys has now been living for nine months in this development and is beginning the process of re-establishing her nail salon with her first microfinance loan from Esperanza International.  In additional to free housing, Gladys is also receiving 300 pesos a month for each child living at home, four gallons of gas a month for cooking purposes, and insurance.  Despite the government’s efforts to aid this population it is clear it is a long road ahead.

Olga, mother of four children, has also suffered the effects of flooding and tropical storm activity.  In February 2009 tropical storm activity passed through Santiago and relentless rains persisted for seven days.  Flooding was inevitable.   Olga, as well as her neighbor and fellow member of her microfinance bank, lost their homes due to the flooding.  In the case of Olga and her microfinance bank, unlike the story of Gladys there is no government assistance.  Olga, on her third microfinance loan with Esperanza, is beginning the process of rebuilding.

Countless stories can be told of the effects of natural disaster amongst other cities in the Dominican Republic and throughout the world.  A trend appears to be evident however; the poorest of communities, due to financial restrictions, live in those areas most prone to the sufferings of natural disasters.  According to the UNDP 2004 Reducing Disaster Risk: A Challenge to Development report, “85 percent of the people exposed to earthquakes, tropical cyclones, floods and droughts live in countries having either medium or low human development”.  A cycle of disaster, recovery and disaster can often be seen that leads to the question of how microfinance organizations can best work in these communities.  It is a question I hope to learn more about as I continue to interact with these two women.

Kiva recently made TIME magazine’s list of “50 Best Websites of 2008″.  As described:

You don’t have to give away money to support a good cause. At Kiva you can make a small loan instead. A unique peer-to-peer lending site that focuses on microloans, Kiva lets lenders pledge funds — from $25 and up — to entrepreneurs in developing countries. As of May 2008, that included a cattle breeder in Azerbaijan and a snack-kiosk owner in Indonesia. Kiva works with microlenders in recipients’ native countries and typically pays you back within a year.

Kiva is the world’s largest publis database of micro-enterprise profiles and earned a well deserved spot on TIME’s list.

Recycle to Eradicate Poverty, or RTEP for short, is a innovative group out of Dallas, Texas that is turning recycled phones into microfinance loans. The unique initiative celebrates the last two Nobel Peace Prize concepts: environmental conservation and microfinance. Electronic waste like cell phones pollute the environment (up to 35,000 gallons of water per phone) and microfinance has been proven to be an effective poverty alleviation tool.  In response to these issues and as a fundraising technique The Chiapas Project (also the Grameen Foundation), a Dallas based 501(c)3 non profit founded by Lucy Billingsley, created a program called Recycle to Eradicate Poverty.

For those who are looking for experience in the microfinance field, Microplace has another open internship they are looking to fill — this one in marketing strategy research. If you’re interested in applying, you can e-mail Tracy Turner at tracey@microplace.com.

[via Los Angeles Microfinance Network]

Evelyn Huang leads the Small Business Loan Program at Opportunity Fund, an organization which also provides matched savings accounts, finances affordable housing in Silicon Valley, and lends to real estate projects bringing investment in to low-income communities. Opportunity Fund is also one of the hosts of the Microfinance California 2009 conference, on May 28, 2009.

Kirsten Weiss: Tell me a bit about Opportunity Fund’s microloan program in California.

Evelyn Huang: Microfinance in the Bay Area is targeted towards working people – hard work isn’t always enough to build a solid economic foundation. For example, a single parent with two kids in the bay area needs around $65,000 per year to get by, but a minimum wage earner won’t earn that. Opportunity Fund focuses on individual families, businesses, and communities with the goal of building a financial system. We see microfinance as a comprehensive approach to financial education, savings, business loans, and investment in communities and homes. At Opportunity Fund, we provide Individual Development Accounts (IDAs) targeted toward working families, combined with financial education and matching funds they can save and use for education, retirement, citizenship, etc. We also provide small business loans – lending to support entrepreneurs who don’t qualify for commercial business loans but need and can use capital. Finally we provide community real estate lending, financing non-profit developers to build affordable rental and for-sale housing complexes and also things like community facilities, like child care centers, etc.

Kirsten Weiss: What are the loan sizes within your microfinance program?

Evelyn Huang: The loans range from $1,000 to $200,000. However, 90% of our loans fall within the $1,000-10,000 range.

Kirsten Weiss: How does microfinance in the US differ from microfinance in developing countries?

Evelyn Huang: There are two general microfinance issues that are really different: the environment and the business model. On the environmental side, the cost of living is very different in California than in many international arenas. Starting a business in California takes a lot more up-front capital, there are frequently more rules and regulations, and the dollar amount required for loans is higher. For example, $200 won’t do much for someone running a business in California. There’s also more critical competition for the microlender. People can come to this country with no credit history or financial education and they will receive credit card offers in the mail. With that type of credit availability, makes the US a much more competitive environment for microlenders. The last environmental issue has to do with the concentration of borrowers. In a lot of microfinance, potential borrowers are highly concentrated, lending microfinance to the village-based model. However, in the US, borrowers are more widely distributed across geography, industry, and loan size needed, which means that our business model as an organization has to be different. As to our business model, here in the US we not only provide capital but also training resources. We meet with clients one-on-one and provide business and credit advice. Given the lack of concentration of borrowers, we have higher marketing and advertising costs. In general, the interest rates we charge will also be a lot lower than those in the microfinance industry internationally. I don’t think domestic microfinance can be a profitable business; it has to be subsidized.

Kirsten Weiss: How is the current economic downturn affecting microfinance in the US?

Evelyn Huang: We’re seeing more demand for microfinance throughout the spectrum of clients. On the higher end, we’ve had applicants with good credit scores and who potentially could have been served by a bank in the past, but can’t get a commercial loan today. Since 2008, we’ve found the percentage of clients with credit scores over 700 – which is quite good – has doubled. On the bottom half we’re seeing applicants in worse financial shape in general. Examining all the applicants that came to our program, we’ve seen increases in clients with tax liens and judgments against them. The mortgage market has also affected clients like ours. The percentage of clients who actually owned a home increased from 17 to 24% – small numbers, but this is an expensive place to live. If you’re a low-income person in our program you’re probably over-indebted if you own a home. The average mortgage outstanding has increased from $260,000 two years ago to $445,000. Homeownership can be an asset but a lot of low income clients are severely over-leveraged. These are the people who hold subprime loans that convert to higher interest rates and unmanageable payments. We see a lot more of these instances in this crisis. In part we’re responding to that by pushing a lot more education. A lot of the clients that call us, if they’re in poor financial circumstances, we’ll try to talk them through as much as we can as well as refer them to other agencies which might have more in-depth knowledge, e.g. to legal counseling on mortgage issues. As to how the environment’s changing and how it’s affecting us as a microfinance institution, it’s harder to make new loans. I think part of that is the amount of risk that we can take. Our delinquency rate is going up because people are having a tougher time. The clients to whom we’ve made loans are losing their jobs; these are typically wage earners and the first to be let go, and they’re highly dependent on their income to cover their expenses. I think the total number of loans we’ll do in this fiscal year will probably drop 15% because clients are in more difficult financial situations and in order to protect our financial health as an organization. On the positive side, the clients that we have worked with – our existing clients that have gone through our business consulting – are in general well prepared. We did a survey of our existing borrowers, asking how their businesses are doing and how the crisis is impacting their personal financial situation. Forty percent of the respondents reported their businesses were experiencing some kind of difficulty. But the vast majority of the clients also said that they did not expect to experience any change in their personal financial situation. They felt they had the tools and knowledge to weather the storm. Our clients are making intelligent decisions. One client told me, “it’s a difficult time but I understand when this happens that I need to cancel my cable and lower the number of minutes on my cell phone.” So they know what they need to do to manage their personal finances during this downturn.

Kirsten Weiss: Is there anything else you’d like to add?

Evelyn Huang: I’d like to let people know about the Microfinance California 2009 conference, at Stanford University in Palo Alto on May 28^th. It’s the first state-wide conference on microfinance in California, where participants can learn more about microfinance, visit Bay Area microfinance borrowers, and meet with practitioners, leaders, and investors. You can learn more about it at: http://www.microfinancecalifornia.org/home/