NB Financial Innovation

March 5

James Militzer

Kiva’s New Fund Targets 1 Million Women Entrepreneurs – But How Much Impact Should We Expect?

It’s one of the most infuriating paradoxes in social business: Getting money into the hands of women has huge benefits for themselves, their families and the broader economy. Yet an estimated 70 percent of women-owned small and medium enterprises (SMEs) in emerging markets are underserved (or unserved) by financial institutions, leading to a credit gap of close to $300 billion.

Three powerhouse organizations joined forces last week to tackle that issue, as the Inter-American Development Bank (IDB), the U.S. State Department and microfinance pioneer Kiva announced the launch of the Women’s Entrepreneurship Fund. The fund is aimed at expanding access to finance for women in the 84 countries where Kiva operates, by matching the contributions of lenders who respond to a woman entrepreneur’s loan request on Kiva’s online platform. Over the next five years, it hopes to crowdfund loans ranging from $450 to $100,000 for 1 million women entrepreneurs. Donors will be solicited to contribute capital to this effort at a minimum of $250,000.

According to Kiva’s co-founder and president, Premal Shah, the fund is part of Kiva’s ongoing evolution, as the organization continues to adjust to the growing research consensus that the social impact of traditional microcredit is not as great as originally thought.

To that end, the fund tweaks Kiva’s approach in a few significant ways:

  • It turbocharges the organization’s long-standing efforts to direct its lending toward women borrowers, in the hope that women will put the funds to better use, and generate more social impact, than men.
  • It will likely help boost Kiva’s loan size, which currently averages about $411.91 – potentially attracting more established, growing SMEs, where the impact of a loan can be greater than it is for early-stage, often struggling microentrepreneurs.
  • It allows Kiva to leverage the skills of two powerful partners, utilizing the State Department’s support with data collection and analysis and the IDB’s expertise with regulatory issues and technical assistance to improve the impact of each loan.

In an article on Devex, Shah said that Kiva’s crowdfunded loans can provide the zero percent interest, risk-tolerant capital that can help post-grant, pre-commercial SMEs move toward the stage where they can attract impact and mainstream investors. “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,” he said. “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.”

But in spite of the legitimate excitement around the announcement, some longstanding questions about both Kiva’s approach and the broader microfinance model remain:

  • While the loans may be relatively risk-free for lenders and donors (as Kiva’s repayment rate is currently over 98 percent), they will be administered by Kiva’s network of “field partners,” ie: microfinance institutions. And though Kiva doesn’t charge interest, these MFIs do – both to cover costs and, in about 40 percent of cases, to make a profit. As the loan sizes flowing through these partners grow, so might the risk of overindebtedness.
  • It’s unclear if focusing microlending on women actually boosts its social impact significantly, with some recent RCTs suggesting this impact is still modest at best.
  • Since about 75 percent of Kiva borrowers are already women, it’s not clear how much of a change this additional targeting represents, or how big a boost it could provide over the organization’s current impact.

Even so, the fund’s potential is intriguing, and it is reportedly moving fast to line up partners in the coming months. So watch this space – we certainly will be.


Main photo: A woman entrepreneur in India. Photo credit: Hand in Hand International


James Militzer


Financial Inclusion, Investing
financial inclusion, impact investing, microcredit, microfinance, SME, SME finance, Women