Kiva Zip: People’s Insights Volume 2, Issue 22,

What is Kiva Zip?

Founded in 2011, Kiva Zip is a true person-to-person micro-lending platform which enables people to lend directly to entrepreneurs in the U.S. and Kenya without a middleman. Entrepreneurs share their business ideas online and lenders can directly contribute to the amount they need.

Like Kiva, Kiva Zip does not charge any fees, and service provider PayPal waives its fees, and because there is no middleman, borrowers receive loans at 0% interest.

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Kiva Zip is still in alpha, but is a good indication of where charitable lending is going: from indirect P2P to direct P2P and from supporting overseas borrowers to supporting local and foreign entrepreneurs.

Background: How Kiva works

Founded in 2005, Kiva was the first online platform to indirectly connect lenders with borrowers in developing countries, via its extensive network of field partners (microfinance institutions, social businesses, schools and non profits). Field partners approve borrowers, collect their photos and stories and share this with Kiva volunteers, who translate and upload these to

Choose a Borrower

Blogger David Roodman pointed out the importance of these stories:

“People donate in part because it makes them feel good. Giving the beneficiary a face and constructing a story for her in which the donor helps write the next chapter opens purses.”

Lenders browse through borrower profiles, by location and type of loan (educational, personal etc), pick a borrower to lend to and transfer money to Kiva using PayPal. Kiva aggregates the micro loans and distributes money to its field partners who in turn lend it to the next set of borrowers. Over time, borrowers pay back the field partners who return the capital to Kiva, which in turn returns the loan to lenders as Kiva Credits. Lenders can choose to withdraw their money, or fund another loan.

How Kiva Works

Several lenders have reported the process can be addictive. Luz Iglesia reflected:

“You can link Kiva to your social network, so you can celebrate with your friends – like Greg and Lindsay and Pearl – when they make a new loan or get a repayment. You can be on a lending team, like we are at the Ian Martin Group, and work together to increase your pool of loans. You can recruit friends with “free” loans so that they can try it out (the loans are funded by angel donors). And if you’re nerdy like me, you can track your Kiva metrics against the averages of other users.”

While Kiva does not charge any money from these transactions, Field Partners charge interest fees to cover their costs and safeguard against defaulters. Kiva covers its operation costs through grants, donations and discounted services from corporations and foundations.

To date, Kiva has enabled 951,000 people to lend $449 million to 1 million borrowers in 69 countries.

From Kiva to Kiva Zip: Demand for a true P2P Network

The design of makes it seem like loans go directly to the borrower that lenders have picked. This is not so. Borrowers actually receive the loan before their profile is uploaded to – the money lent “backfills” all the loans – a fact that not many lenders were initially aware of.

In a comprehensive post on this topic, micro-finance specialist David Roodman explains why Kiva follows this process:

“What Kiva does behind the scenes is what it should do. Imagine if Kiva actually worked the way people think it does. Phong Mut approaches a MAXIMA loan officer and clears all the approval hurdles, making the case that she has a good plan for the loan, has good references, etc.

“The MAXIMA officer says, ‘I think you deserve a loan, and MAXIMA has the capital to make it. But instead of giving you one, I’m going to take your picture, write down your story, get it translated and posted on an American web site, and then we’ll see over the next month whether the Americans think you should get a loan. Check back with me from time to time.’”

Lender Monika Jankun-Kelly commented:

“I find it very troubling that Kiva *needs* to rely on mythology and oversimplification to draw in lenders, yet that’s the way it is. Human nature is what it is, our society is what it is. Let’s improve those, and Kiva’s advertising methods will follow suit.”

However, many lenders were unhappy when they understood the process. Some shared their discomfort through their blogs and videos.

The Truth About How Kiva Works

Others were unhappy that they money was going to causes they did not support, like a loan to support a cockfighting business in Peru (legal in Peru but illegal in California).

Sources:, and

Yet others were unhappy with the heavy interest rates charged by the middlemen, especially when other platforms, like Zidisha, had found a way to connect people directly at significantly lower interest rates.

Lender melliecarma commented:

“after 106 microloans to kiva borrowers in two years time i came to a similar conclusion and invest on now as i’m fed up with micro finance institutions getting in the way between lenders + borrowers.”

Some, like pss1, justified the need for interest rates:

That “middleman” fee covers the cost of making the loan and working on the KIVA platform. As described above, they are paying people (and a relatively high local wage) to vet the clients to eliminate scammers, take pictures, write the client stories, and put them on the internet. Interest rates are much lower than the typical local “money lender” rates.

To address the concerns of lenders, Kiva introduced many design changes to and introduced Kiva Zip.

How Kiva Zip works

The Kiva Zip platform is similar in design and concept to crowdfunding platforms (like Kickstarter). Instead of facilitating loans to anyone in need, Kiva Zip focuses on entrepreneurs in the U.S. and Kenya.

The Kiva Zip website says:

“Now, Kiva Zip will enable lenders in the United States to make loans more directly to borrowers. Instead of working with a local partner on the ground to facilitate your loan, we’re sending your funds to the borrower electronically (e.g. using mobile and electronic payment methods). This increased efficiency allows for 0% loans to the borrower, but a greater risk for the lender.”

(Emphasis in original)

Blogger Dave Algoso wrote:

“Kiva [Zip] is using mobile and other technology to offer very low cost loans to borrowers who don’t even have access to normal microfinance institutions. Pilot borrowers for the new system are in the United States and Kenya, because of M-PESA. In place of local microlending partners, Kiva Zip uses “trustees” who vouch for the borrowers but never handle any money.”

Trustees and borrowers must both submit an application online to be considered for a loan. Once the loan is approved, it is posted on Kiva Zip and must be funded within 90 days. If the loan is not fully funded, the money is returned to the lenders. On Kiva Zip, the minimum loan amount is $5.


This new model adds even more importance to the reputation and social presence of borrowers and even the trustees. Borrowers need to rely on their networks to recruit support. Trustees need to rely on their reputation to increase the borrower’s chances of getting loans.

Fast CoExists’s Alex Goldmark points out that Kiva Zip makes loans available to people who may not qualify for bank loans, and stresses the importance of distributed risk and trust:

“The average Kiva lender puts up $25, not a disaster if it vanishes. That helps increase the risk tolerance for users. And the average loan size is just $250 to Kenyan borrowers and $4,000 in the U.S. The small scale keeps defaults from devastating any one lender’s assets. But nobody likes to lose their money. So the trust network remains an important, if still experimental, aspect.”

Fast CoExist Alex Goldmark

In addition to endorsing borrowers, trustees also help identify local businesses and entrepreneurs who could benefit from Kiva Zip. Here’s the role Kiva Zip Trustee AEDC will play:

“AEDC is partnering with the Alaska Small Business Development Center (SBDC) to identify Alaska businesses that would benefit from the Kiva funding model. As a trustee to Kiva Zip, AEDC will play a crucial role in the program by recommending borrowers for the Kiva Zip loan and ensuring they meet the criteria for the program. In addition, AEDC and SBDC will provide borrowers with ongoing support and business coaching.”

The Kiva Zip model ensures that borrowers receive financial support and also community support. Trustees and lenders can offer business advice and feedback, and promotional support to help them successfully fund their loan. They may also become customers of the new businesses they helped set up!


Pushing the barriers of micro-lending

In addition to connecting lenders and borrowers directly and creating a local support system for borrowers, Kiva Zip is also exploring partnerships to help borrowers succeed in their businesses.


Pando Daily’s Carmel Deamicis reports on Kiva’s new partnership with startup Zaarly:

“Kiva is giving micro loans to a handful of Zaarly’s storefront owners that need a loan to take the next step in growing their businesses. In exchange, Zaarly will provide online storefronts and resources for a few Kiva borrowers.”

Other approaches to P2P lending

We are seeing several types of P2P lending platforms in the social good space. Zidisha connects lenders and borrowers directly, and allows lenders to decide the interest rate. Vittana (video) focuses on borrowers who need educational loans. United Prosperity uses micro-loans to guarantee borrower’s bank loans, helping them qualify for larger loans and build credit history. LendwithCare (video) connects lenders and borrowers through microfinance institutes vetted by CARE International.


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