Patt Morrison Asks

Lender 2.0: Kiva's Premal Shah

How Premal Shah went from Silicon Valley's "PayPal mafia" to creating Kiva, a matchmaking philanthro-banking site that provides the feedback loop that is so often missing in philanthropy.

I could just see the eyebrows rising around the room. I was moderating a panel on philanthropy not long ago, and on my left, Premal Shah, the president of Kiva.org, was talking animatedly about how much fun Kiva donors had, competing with each other, in teams, to see who could do the most good. Fun? This is not your father's philanthropy. Shah"s online matchmaking philanthro-banking site lets people in the donor door for as little as $25. Kiva posts loan appeals from thousands of worldwide "entrepreneurs" on the site -- Shah doesn't call them "the needy" or any other such term. Prospective lenders log on, pick their favorites and a match, in the form of a loan, is made. Shah himself is among Silicon Valley's "PayPal mafia," young men and women who took know-how from working at PayPal to their own pursuits. In his case it was Kiva, a Swahili word meaning "unity" or "agreement" -- $25 at a time.

How does Kiva work?

Kiva is kind of like EBay for micro-financing, for social lending. It's run by a nonprofit organization. On its website, you can browse through profiles of entrepreneurs. You pick, you make a loan. The average loan term is about 10 months.

So say you want to lend to a woman who wants to buy a cow to start a dairy business. She starts selling milk at the market; she starts making repayments. You get a repayment back every month. If you lend $25, every month you'll get $2.50 back. There's a 98% repayment rate now. You can re-lend that money to another entrepreneur, which is what 88% of people choose to do, or you can withdraw that money.

Last fall we added students. Student loans largely don't exist in the developing world. There are about 100 students who have received a Kiva loan in four different countries; if they repay on a high level, I think other sources of capital will come.

How do you know these people asking for loans are for real?

We're working with field partners. They're the ones vetting each entrepreneur or student, posting the photos, collecting and disbursing the money. We have about 130 of those organizations in 58 countries. Kiva vets the field partner organization; it's very rigorous due diligence. It is [the partner organizations'] job to figure out which entrepreneurs need a loan and can handle it responsibly. These partners charge an interest rate [to] help cover their costs, like going out to the rural village. Kiva doesn't charge an interest rate. It's zero-percent-interest lending. It's the space between a donation and a commercial investment that we're trying to pioneer.

You're a native of India, an alum of Irondale High School in Minnesota, and you graduated from Stanford in 1998. Tell me how you got from there to here.

When I was a year old, my parents immigrated to the U.S. and, of all places, they landed in Minnesota. My dad is a mechanical engineer; my mom was a civil engineer.

When I was 5 years old, my parents [took me] to India for the first time. I remember walking in a village market with my mother. Like many villages in India, there's a sewage stream right through the center of the village. My mom [gave] me a rupee coin. One rupee was worth less than a cent at the time. I'm a little kid and that coin slipped out of my hand and rolled near the sewage and my mom yanked me away because she didn't want me to chase after it. I remember a woman almost the age of my grandmother, in a very ragged sari, went over to that stream, picked up that one-rupee coin and looked up at the sky and thanked God. I come back to Minnesota, in the back of my mind thinking one day I want to do something about this.

It really did stay with you?

I learned about microcredit at Stanford; I was studying economics.There's this great quote: "Don't ask what the world needs, ask what makes you come alive." It totally describes what happened.

I was in the middle of a sophomore slump and I saw this incredible approach [to poverty] by Muhammad Yunus. By the time I was a senior, Stanford gave me a grant to research microfinance in India.

I joined PayPal early on. The fifth year I was at PayPal, they gave me a sabbatical. This really changed my life, being able to get out of the cubicles and go to India. By day I worked with a women's economic cooperative to help them sell their silk works on EBay, and by night I [planned] how we'd allow people to make loans via PayPal and EBay to the women I was working with. I came back to the U.S. very excited about this idea of online person-to-person micro- finance. Matt Flannery and Jessica Jackley [launched] Kiva in October 2005. We became really great friends.

You mention Muhammad Yunus, Nobel Prize winner for his microfinance bank in Bangladesh. Authorities there have removed him from the bank because of his age; they talk of irregularities. What do you make of what's happening to him?

It's really hard to say with any certainty hey, this is right, this is wrong. I will say, though, in my own personal interactions, he is a saint. There's been a lot of people who've commented that this does seem like a very political act by the government. I hope it resolves in a good way. We've tried to support him as much as we can.

There's a sense of playfulness and competition on Kiva.

We've been intentional about not underestimating fun. We have all these lending teams, over 15,000 on the Kiva platform. It's the lenders who form their affinity groups; like the atheists and Christians competing for the top spot. Or women who lend to shirtless men. A group of women noticed a lot of [photos of] men who don't wear shirts who are looking for loans, particularly in Southeast Asia, and they created a team and made that something they look for. There's another group focuse[d] on baskets in the picture. You connect with people and go about making an impact together.

Why should that be part of philanthropy?

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