What is Kiva Zip?
Kiva Zip is a pilot program launched by Kiva, the world’s first and largest micro-lending website. Kiva became famous for enabling anyone with an internet connection to lend as little as $5 to alleviate poverty.
Kiva Zip takes this model even further by making it possible for lenders to send funds directly to the entrepreneurs they support. We have three major goals here:
- Help entrepreneurs access the financial services they need. While microfinance has helped millions, many people have been left out: Think remote rural villages in Kenya or recent refugees with no credit history in the United States. By making lending easy on the internet, and tying loans to borrowers’ characters rather than their credit scores, Kiva Zip aims to reach the world’s most marginalized entrepreneurs with the financial tools they need to succeed.
- Lower fees and interest rates to make borrowing affordable. Because Kiva Zip operates online and uses mobile payment technologies to move money, it’s able to slash the cost of making microfinance loans. These savings are passed along to borrowers in the form of lower interest rates. In fact, Kiva Zip loans are currently offered at 0% interest with no fees.
- Cultivate community between borrowers and lenders. Kiva is all about forging connections between lenders and borrowers on opposite sides of the world. Kiva Zip strengthens these relationships even more by letting people send messages back and forth, including words of encouragement, updates from borrowers as they succeed, and notes about how loans have helped businesses thrive.
How does it work?
Borrowers apply for Kiva Zip loans by filling out an online application form. Every borrower must be endorsed by a trustee. Trustees never handle the money, but their public reputation is tied to the repayment record of the borrowers they endorse.Lenders visit the Kiva Zip website, and choose which borrowers they want to make a loan to. Once a loan is fully funded, Kiva Zip sends the loan amount directly to the borrower. Over the course of the loan term, the borrower promises to pay their lenders back in regular installments. As the lenders get their money back, they can relend the money, or withdraw it from Kiva Zip.
Why Kenya and the United States?
Currently, Kiva Zip is focused on serving loans in the United States and Kenya only as we develop this direct lending model. We chose to work in Kenya because the prevalance and popularity of M-PESA mobile payment technology makes it easy to transfer money directly to the cell phones of borrowers. Kiva also has an office in Nairobi, making it easy to monitor the program as it expands. The United States was also a natural choice -- home to Kiva headquarters as well as thousands of small businesses and entrepreneurs that could uniquely benefit from Kiva Zip’s 0% interest capital.
New ways to use Kiva
Kiva Zip is a bold new step for Kiva, making it possible to do much more than lend. Now, in addition to being a lender, you can also be a trustee or a borrower yourself.
The newest term here is ‘trustee.’ Providing the foundation for Kiva Zip, trustees can be individuals or organizations, and are responsible for identifying borrowers that would be a good match for Kiva Zip loans. They do this by assessing the character and creditworthiness of borrowers. If these check out, trustees can publicly endorse them on the Kiva Zip website, and provide ongoing support over the course of their loans.
So how does Kiva Zip work for these different roles?
For lenders, Kiva Zip works very similarly to Kiva. Lenders can browse loan profiles, get more information on individual loan pages, and choose who they want to support. Loans can still be as small as $5, and lenders can still get their money back as borrowers repay. These funds can be withdrawn or lent again to help even more borrowers.
One key difference is that lenders can exchange messages directly with borrowers via the ‘Conversations’ tab on any loan. To try out Kiva Zip as a lender, start browsing loans now on the lend tab.
Entrepreneurs and small business owners in the United States and Kenya can apply for loans right on the Kiva Zip website. These loans are available at 0% interest and give borrowers the opportunity to make connections with potentially hundreds of lenders and fans. This can pay off big -- a lot of lenders become customers, vocal supporters, and trusted advisors of the businesses they support on Kiva Zip.
To be eligible for a Kiva Zip loan, borrowers must be endorsed by a trustee. Before a loan can be posted to the website, both the borrower and the trustee need to submit an application -- to be reviewed by the Kiva Zip team -- and the trustee needs to provide an official endorsement.
Once a loan is posted, it can be funded by Kiva Zip’s community of lenders. This can happen in a few hours or over a couple of weeks. While there’s no guarantee that loans will completely fund, they do not expire until after a full 45 days on the site. If a loan expires, the funds are returned to lenders. Borrowers are encouraged to write a compelling profile, take a great photo and promote themselves to friends and family to help their loan get funded as quickly as possible.
Once a loan is fully funded, Kiva Zip sends the money to the borrower via PayPal in the United States and M-PESA in Kenya. The borrower can make repayments the same way on a set schedule. During this time, borrowers can post messages to the ‘Conversations’ tab on their profile to let their lenders know how things are going. Borrowers who pay back on time can apply for larger loans in the future.
Please apply here for a Kiva Zip loan.
Every Kiva Zip borrower must be endorsed by a trustee. Whether a trustee is an individual, a community center, a church, or a nonprofit, they need to be committed to supporting local entrepreneurs and willing to publicly endorse them on the Kiva Zip website. This action enables borrowers to access 0% interest microloans.
Trustees actually play three crucial roles on Kiva Zip: Firstly, they identify borrowers that could benefit from Kiva Zip loans; secondly, they assess borrowers for character and creditworthiness so that others can feel comfortable lending to them; and thirdly, they provide ongoing support to borrowers over the course of their loan terms.
While trustees never handle the money, they do tie their reputations to the repayment rates of their borrowers. This is what makes their endorsements so valuable.
Now, for the first time ever on Kiva, Zip enables anyone -- including you -- to step up and support an entrepreneur or small business in your community as a trustee. To view our growing network of trustees, or apply to be one yourself, please visit our trustee page.
Still looking for more information? Read the FAQ here