Kiva.org has faciliated more than $100 million in loans in a few short years. Really outstanding, except it could be millions of dollars more. Nearly half of the people who create member accounts on Kiva don’t end up making a loan. One reason for this is because Kiva doesn’t show you the impact of your potential loan at decision-making time. A lender only sees the impact of the loan he made some months after he made it. Instead, imagine this

Welcome Olivia!

Want to see what Jim did with $25?  His $25 funded 20% of the money Amelia needed to buy a refrigerator to store the lunches she makes and sells. Now she sells one-third more lunches by traveling to new neighborhoods. She used to spend every morning making food to sell that afternoon, but now Amelia can make food one day and spend the entire following day selling it, allowing her to reach more customers.

How far can you make your $25 go? Here are a few suggestions to get you started…

Does this give you greater incentive to part with $25?  People who lend through Kiva make an average of five loans, so Kiva’s lending power will grow exponentially, but it’s critical to get people in the pipeline and hooked on the feeling of direct impact.

Framing your message and setting up the action for users doesn’t need to be complex. 37Signals shows their products by how you will benefit from them. Simple, clear language; no humorous, clever or emotional pitch needed. 

Consumers who were given the opportunity to “take a philanthropic action after leaving the store, perceived their experience very differently,” notes Leyla Farah of Cause+Effect. She cites a continuing campaign between Crate and Barrel and DonorsChoose.

Crate and Barrel spends some of its (advertising) budget on gift certificates for its customers to finance projects they like on DonorsChoose. DonorsChoose features projects posted by teachers across the United States that donors can choose to donate to. The gift certificates have made a huge impact on students (347,000 students have benefitted from 14,500 funded projects) and on consumers. People who used their gift certificates to fund a project were more likely to shop at Crate and Barrel for future purchases than a control that didn’t receive certificates (82% versus 76% in a 2006 study).

Making it easy for your customers to do good doesn’t even require your company to pay. Here are how some companies have made me feel good without spending a nickel:

1. When I ordered a book, Amazon included a sleeve for me to ship my old cellphone, postage free, to Cell Phones for Soldiers, a nonprofit that gives discarded cellphones to troops abroad. Benefit: old phones stay out of landfills and soldiers get free phones to call home.
2. When I make a loan through Kiva, I can donate to the nonprofit’s operating costs. When I do so, even with a few dollars, I feel even more altruistic than if I had just made the loan. Benefit: Kiva receives money to sustain operations.
3. When I bought a pair of TOMS Shoes, I had the option to donate the identical pair of shoes that TOMS gives to child without shoes (as part of its business model) to someone else. Now, not only was I supporting a social enterprise and putting shoes on a child, I was making a donation in my friend’s name. Benefit: more people are brought into and made to feel a part of TOMS’ model and mission.

What companies have given you the opportunity to feel better? What’s your feeling toward them as a result?

Photo credit: jjinbeat

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Microfinance hit hockey stick growth in the past few years in large part because:

• Muhammad Yunus won the Nobel Peace prize in 2006 for providing credit to the poor with Grameen Bank;
• Kiva created a participatory platform that engaged Americans in micro-lending and financed $100 million worth of loans; and
• It’s mighty effective. It works for individuals in any country, in any industry, of any ethnicity and under any government.

This growth means that:

• You have more choices about what you finance due to niche micro-lending sites like Vittana, Samasource, GiveForward andDonorsChoose;
• Microfinance organizations are segmenting and learning to work in concert with each other;
• We’re not far off from a Mark Burnett reality microfinance production; and
• Millions of people now have the seed capital and tools to work their way out of poverty.

I spoke with Windy Wilkins and Steve Schwartz from Unitus, a non-profit that works to increase access to microfinance services, to learn about Unitus’ specialized model (instead of working directly with borrowers, Unitus identifies high-impact microfinance institutions (MFIs) and helps them attract capital and systematize processes) and why the organization is so effective. Unitus-supported MFIs are growing seven-times as fast as traditional MFIs, and in its eight years of operations, the organization has helped its partner institutions to serve more than 10 million families. Wilkins leads the global network and Schwartz manages media relations.

What makes Unitus unique?
Windy: We partner with high-potential microfinance institutions. We currently have 23 partners to whom we provide a variety of services including help with capacity-building and seed or early stage funding.  Are work is intended to help the organizations grow and deliver high-impact services to their clients.

How do you identify high-impact institutions?
Windy: We’ve surveyed 1000s of MFIs and have come up with only 23 partners, so it’s a rigorous process. We choose partners who are working in high-demand regions. Once we identify regions where we think there’s extreme need or potential for growth, we start to identify institutions. Typically, we partner with early-stage institutions. We also look for a commercial focus. We want to make sure the institutions are taking a commercial approach to microfinance.

Windy: An organization that is dependent on donor funding and doesn’t have a plan to change that. We feel that in order for scale to be reached, there needs to be an element of commercial capital. An NGO-focused model that may be reliant on one or two major donors is also a more non-commercial approach.

Are there any commonalities among the MFIs despite their geographic and cultural differences? How do they vary in terms of size, government support, aptitude?
Windy: the commonality comes out when you look at the management. I’m responsible for running the network so I connect all of our partners to each other, find ways for them to share best practices and learn from each other. Every year we do an annual leadership summit that brings together the CEOs and senior management of our partners. I’m always surprised by how much commonality there is among them. When you look at their capability and their passion, they have a lot in common.

What do you specifically offer your partners and how do you develop these programs?
Windy: We offer functional consulting in human resources, technology and operations. These three areas were chosen based on needs that we saw as essential to helping these businesses grow. In operations for example, we work with MFIs to become more efficient, to streamline costs and reduce operational expenses. This ranges from analyzing the cost of customer acquisition to teaching middle management project management.

How much tweaking do you need to do for programs for each region?
Windy: there’s always some tweaking involved, particularly as we work more in East African, where the institutions are generally younger than in India.

What’s a signature program for Unitus?
Windy: I was recently in East Africa providing support to our East African Growth Center, which is a leadership development program for MFIs in Tanzania and Kenya. There are 11 MFIs participating. We conduct growth workshops to help CEOs become better leaders and grow their organizations. Part of this is helping them develop strategic plans. Initially, some of the staff didn’t see the value in strategic planning. It was the first time they had been through an exercise like this. Giving them the opportunity to think through what their organizations’ missions and goals would be for the next year helped them feel more connected to their institutions and inspired in their ability help people.

Most of the Unitus team, which is small, is located in Seattle. How do you effectively work with your local partners?
Windy: We also have offices located in Bangalore and one in Nairobi and our staff there works very closely with local partners.

Steve: Windy’s being modest. She and her team spend a good portion of the year traveling and working closely with our partners as well.

Unitus-supported MFIs are growing 7-times as fast as those not affiliated with Unitus. What do you attribute your success rate to?
Windy: We have these great early-stage partners with high potential for growth. We’ve found institutions that are the best and brightest in microfinance. A lot is owed to our rigorous selection process. Once we’ve selected our partners, we take a needs-based approach to help them reach their goals. Having team on the ground helps as well.

Steve: Unitus has not shied away from innovation—whether it’s the delivery of microfinance through the MFIs or innovation in the marketplace to discover new ways to capitalize MFIs.

Do you have to customize training programs specifically for each region?
Windy: We’ve found that we can take much of what we’ve developed for India and use it with our new partners in East Africa. Microfinance operations are similar across regions so we’ve been able to apply our knowledge about operations and technology in both geographies. With mobile technology, for example, we are able to take what we learned in Africa and apply it to India.

Do you see others adopting the Unitus model?
Windy: I don’t see anyone replicating our emphasis on early-stage and high potential institutions in the short-term because it’s a little bit risky. There are a lot of players in the microfinance space but not a lot who provide capacity-building support as well as seed capital.

Steve: Microfinance is a very diverse area. As it grows, it becomes more complicated for one organization to serve all of the needs. We’re focused on expanding early stage MFIs and creating more opportunities for empowerment. Everyone’s playing a slightly different role; we’re not to the point where there is genuine competition.

What drew you to microfinance?
Windy: I’ve had a long-time interest in development, but what attracted me to microfinance is its potential for impact. I’m a firm believer in grassroots, bottom-up approaches to development. Getting money in the hands of people who need it and who have the potential to lift themselves and their families out of poverty is really exciting.

Steve: I got a degree in international relations and public diplomacy and I took that down to Wall Street to misuse it for a couple of years representing hedge funds. I then went into the Peace Corps and ended up in West Africa and Benin and did microfinance with a lot of women’s groups. I saw the potential impact microfinance had on these women’s self esteem and identity. The add-on effects of microfinance were fantastically profound when you saw them in action. Now I’m working to tell the microfinance story at Unitus.

What do you suggest to people who are interested in microfinance?
Windy: Go work in the field, work for an MFI. But I recognize it’s not something that everyone can do—that wasn’t the route I took.

Steve: There’s 10,000 MFIs worldwide. Even being in one that’s failing miserably, you get to see what the advantages and challenges are.

At Kiva.org, you can see the name, picture, age, occupation and purpose of the loan for thousands of entrepreneurs around the world. Lenders make a credit card loan, which Kiva passes along to its certified micro-finance partners worldwide. These partners distribute the funds, and typically provide training and other support to maximize the entrepreneurs’ success. As a lender, you receive email progress updates as the loan is repaid. Recently, Kiva switched to returning portions of the loan as they were paid off, which allows for immediate reinvestment in another project (like the purchase of cattle,grain, computers, looms or solar panels).

Nobel Laureate Muhammad Yunus popularized the model of micro-lending with his successful Grameen Bank in Bangladesh. Kiva took this model and adapted it to function and scale online. Brilliance, and I’m not the only one to see this. In recent months, the amount of lenders that Kiva has attracted has topped the number of loans available, leaving the organization scurrying to get more vetted entrepreneurs signed up for their future.

My friend made a loan to a 51-year-old in agriculture entrepreneur in Ghanna. Her investment fulfilled the remainder of the woman’s loan request ($625). Within eight-months, my friend will have her money back and is then free to re-invest or withdraw it. I’m on my third cycle of
investment. For me and thousands of others, it’s an infinite loop of making a difference in individuals” lives and feeling amazing about it.