Tag Archives: Kiva

Venture Capital & Crowdfunding

I started giving loans through Kiva almost two years ago. About at the same time, after gathering some savings, I started investing again in the stock market.

Last month, I attended TEDxMadrid, where Nicolás Alcalá explained how a movie he and his team are working on (“El Cosmonauta”) will be financed through crowdfunding. I then discussed with a friend that precisely I was looking for a similar approach, but applied to general businesses: a kind of Kiva for for-profit start-ups.

Subsequently, I first found Kickstarter about a month ago through Fred Wilson (@fredwilson). However, in Kickstarter the funders of projects are not entitled to equity in the venture nor a share of the future profits. The funders get some merchandising or recognition for the helping hand they have given, depending on the amount they have invested.

Then I found GrowVC.

From what I gathered, this is more or less what I was looking for: a way to invest some small amount of cash (~1,000$ a year) together with other funders into a larger pool that will act as a Venture Capital operation, sharing the future profits of the business that was funded.

With this post I wanted to share these initiatives with you and also to explain what I was looking for. Now, let me throw an open question to readers: anyone knows a similar concept that I may be interested in? If so, please, let me know.

(Bear in mind that I haven’t got, yet, hundreds of thousands of Euros to invest following this approach… the larger part is invested in a much more Graham-like defensive approach)


Filed under Investing

Bill Clinton endorsing Kiva (video)

Some months ago, I gave a loan through Kiva to Fizuli Agdjabayov, a man who has a small transport business in Azerbaijan. Yesterday I got an email with the latest post of one of Kiva’s blogs about a visit of a Kiva fellow to Azerbaijan.

I especially liked the two videos that Yelena Shuster, the fellow, had prepared about her visit. I immediately thought about sharing these with you through the blog; this is what I am doing with this post. Enjoy the video:

I believe that seeing these fellows visiting the entrepreneurs in person is the best way to gain confidence about this system. By chance, on a trip to Peru, I could visit as well an entrepreneur that had received a loan through Kiva; then I wrote about that experience in a previous post in this blog.

The second best way to gain confidence on initiatives like Kiva is by seeing Bill Clinton endorsing them in an interview. I came across the following video while watching Yelena’s, in it Bill explains how Kiva works:


Filed under Helping others, Investing

I am an angel

Last 23rd March the three Toastmasters clubs in Madrid organized a gathering at Hard Rock Cafe. The event was a great success with over 40 people attending it. John organized it including 3 prepared speeches, a book review, some table topics and an improvised theatre!

I gave a speech which I had created over a year before. That was my 9th speech in the way to obtaining the Competent Communicator award of Toastmasters. The objective: “Persuade with Power”.

I first gave this speech titled “Angels” on the 4th of February in 2009. Then I used it again for the Area spring contest and again in the Division conference in Lisbon that same year.

With some slight modifications I gave it again in the gathering. This is its script and more or less what I said…

“Do you believe in angels? I do. I do believe in angels. What if I tell you that I am an angel? Wouldn’t you be curious? Wouldn’t you like to hear about it? You will.

I believe in what are called “business angels”.

I guess that most of you have heard the term “business angel” at some point. For those of you who haven’t: business angels are investors who invest part of their money in small and medium start-up companies, helping entrepreneurs to set up their businesses.

In this speech I want to persuade you to become business angels. You may tell me “Javier, I don’t have a spare million to invest in companies”; neither do I.

Do you think that to be an angel… to help someone to start-up with their business, a lot of money is needed?

Microcredits are small loans given to the poor, to those entrepreneurs who lack collaterals and a credit history; this makes them not eligible for the traditional credit given by banks. We are talking about someone in Vietnam who runs a grocery shop or about Mariano Choque who makes handicraft in Peru and whom I met last summer in a trip to Peru.

Microcredits are generally considered to have originated with the Grameen Bank created by Muhammad Yunus in Bangladesh more than 30 years ago. It all started as a research project to examine the possibility of designing a credit delivery system to provide banking services targeted to the rural poor. For this contribution, Muhammad Yunus was awarded the Nobel Peace Prize in 2006.

Ok, this is the theory. Now, I told you I was an angel; do you think I am part of that Grameen Bank in Bangladesh? No, I’m not.

Today the internet has facilitated very much the process. Kiva.org is a US non-profit organization which links those poor entrepreneurs, in developing countries, with us, here in Europe.

Kiva presents us with a list of individuals who are requesting an amount to start or improve their business. There you choose in which project you want to invest and how much do you want to invest. Kiva was started in 2005, and now counts with over 600,000 users who have given credits worth over 120M$ to over 320.000 entrepreneurs.

What it’s more… think of this for a moment: we are talking about credits and not donations; this means that you will get the money back! Say you invested 100$; when you get them back what would you do with them? You can lend them again! Imagine how many people you can help with those same 100$. Isn’t it wonderful?

Let’s see possible concerns you may have:

  • Is Kiva profiting from it? No, as I said is a non-profit organization. Like Toastmasters. Of course, Kiva has operating costs, but these are covered with different donations than the money you lend to entrepreneurs.
  • How do we know the money reached the entrepreneur? Kiva works with several field partners who are the ones scouting the entrepreneurs, uploading the information about them and their projects and finally handing them the money.
  • What if the loan is not repaid? Indeed some loans are not repaid. Around 2% of them. To avoid this Kiva is classifying the field partners. They classify them according to the level of risk of the credits already given to entrepreneurs presented by the field partners. But then again… with investment in the stock market, what would you do to avoid losing your investment: you just diversify!
  • If you have more concerns or questions about the topic you may ask me after the other speeches.

As I said at the beginning, I believe in angels. I am an angel. And what is more important: each of one you here can give a loan that can change a life… each of you can become an angel.”


Filed under Helping others, Investing, Toastmasters

A Kiva success story

Kiva’s mission is to connect people, through lending, for the sake of alleviating poverty.

A friend recently wrote in his blog a post about Kiva, therefore I will refer you to it for a deeper explanation of what Kiva is (in Spanish), or to Kiva’s website to know about it in English.

For those of you who like statistics and facts, these are the ones shown in the latest newsletter:

  • 53 months old
  • $124,156,585 raised
  • 98% repayment rate
  • 312,345 entrepreneurs funded
  • 681,527 Kiva users
  • 193 countries represented

Kiva’s slogan is: “Loans that change lives”. I wanted to write about how it changes both borrowers and lenders lives.

I believe that the two main “selling points” that Kiva has are:

  • The fact that you are lending money instead of donating it.
  • Being able to chose one specific project to which you want to loan money.

The fact that you are lending money instead of donating it. This aspect is positive again in a twofold way: you incentivize the borrower to use the money in building a sustainable business and when you get the money back, you can lend it again, and again, etc… therefore with the same amount of money you may help many different people.

The minimum amount you can lend in Kiva is 25$. It’s obvious that if you lend only 25$ you will have to wait until this loan is fully repaid before lending these 25$ to someone else. But, if you are lending to several people the picture changes.

Let’s see an example in which you start lending 25$ to 4 different projects (e.g. handicraft in Peru, a food market in Tanzania, a grocery store in Viet Nam and a small restaurant in Nicaragua).

Let’s imagine that all four projects will repay their loans in 10 months, starting from the next month of the loan disbursal.

You can see in the graphic that since you are collecting 10$ in the first 3 months, in that third month you can already re-loan 25$; in the fifth month you will be able to re-loan other 25$… Before the end of the 10 months you’re already helping 8 different projects. From that moment on you will be always be supporting between 6 and 7 different projects at every time.

Loans repayment "money creation".

And believe me: it’s both entertaining and rewarding to read the stories of these people, trying to grasp how they’re trying to improve their business.

Being able to chose one specific project to which you want to loan money. We are attracted by this for whatever reason: we identify ourselves with the person, we find the business especially interesting, we think it’ll have a larger impact in the community… we “put a face” to the act of lending money.

Last year I went on holidays to Peru. Since I had funded some projects in Peru I thought it would be a good idea to learn from one of those business first hand and see how Kiva is making an impact.

Reynita de Belen de Ccorao is a community founded 7 years ago in the village of Ccorao, near Cusco. It is formed by more than ten people, each of them dedicated to a different business. Together they requested through Kiva 3,950$ to “purchase more supplies for their handiwork and to buy seeds and dry grains”. They would repay in the following 8 months.

Once I was in Peru I was quite flexible about the plan of whether to visit or not this community, since I didn’t know where Ccorao was and also in the Kiva description another name was given  for the name of the village, “Corroa”, which didn’t appear in any map (it seems that Ccorao is a Quechua name, being Quechua mainly used in the Altiplano region).

Ccorao in the World.

Luca and I were going to spend some days in Cusco and surroundings, with an intermediate escape to the Amazon Basin. During those days we wanted to visit the city of Cusco with a guided tour including the ruins of Sacsayhuaman, we would go to Machu Picchu, and make an excursion to the Sacred Valley ending in the fortress of Ollantaytambo, all these under continuous threats of transport strikes.

The day of the Sacred Valley excursion, on the way to Pisac we passed through a village with a sign post that read “Ccorao”; that immediately rang a bell and I told Luca: “This is the place”. That day in the afternoon I went to an internet cafe to check the names of the people that we would look for the next day.

The plan was simple: we had 3 hours in the morning before taking the flight back to Lima, we would use them. The following morning we took a taxi and went back to Ccorao, and with the help of the taxi driver we tried to find that group. Of course, the taxi driver had never heard of it.

I tend to be lucky: although the first stop we made wasn’t successful, in the second one we completely hit the target. We reached Mariano Choque Raya, “Mariano”. We introduced ourselves as what we were: a couple of tourists that had lended money to a group through Kiva. Mariano had never heard of Kiva, or if he had he didn’t recall the name, but he knew very well Arariwa, the field partner Kiva works with in that region. He not only had taken loans from Arariwa but had received certain financial education from it.

Reynita de Belen, Mariano and our way to Ccorao.

The group had taken several loans from Arariwa and from other lending institutions. This particular loan was fully repaid in November 2009.

He showed us their handicraft exhibition and went on explaining how they had grown their business. The first loans he used were employed in buying grain and feeding cuys (guinea pigs) that he would grow to later sell them to restaurants in Cusco. Then, as tourism grew, they focused on the handicraft business and he advanced in the value chain of the cuy business: he continued to grow them but instead of selling them he started running an eatery post that opened only during the weekends and there he would cook and serve his cuys, retaining more margin for himself.

With time, more and more buses filled with tourists were stopping in Ccorao in their way to Pisac. Other groups started their handicraft exhibitions along the road, so competition became fiercer (though be sure that the items we purchased came from his shop).

Thanks to Mariano’s entrepreneurship and skills, and partially to the loans offered to him, as he said: now, his children are attending to school, something his generation couldn’t afford to, and he is able to save some money for his retirement as he won’t have any pension when that moment comes.

Kiva: loans that change lives.


Filed under Helping others, Investing, Travelling