Kiva microloans, uncovered.

When you lend out a loan on kiva, upon repayment, you get the entire amount back. One of the most frequently asked questions about Kiva’s work is – how can Kiva do this work without charging lenders anything at all?

These past few days, we have been undergoing training at Kiva’s HQ in San Francisco. The office has a very silicon-valley-tech-start-upy-feel to it, which is really cool. Here’s a snapshot of front desk!

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Kiva has been extremely transparent with us, explaining every part of their operations in details down into the weeds. Kiva runs on the donation-model where they rely on lender contributions to Kiva (on top on any loan) to sustain their operations cost. Today, for every dollar of loan made on Kiva, about 5% extra is donated by lenders to fund Kiva’s operations; and since Kiva is running so lean, the donation revenue just about offsets overall costs. One critical piece of this pie is a “gift” offered by Paypal. A little history – the co-founder of Kiva used to work at Paypal, and miraculously managed to get Paypal to offer a 0% transaction fee on all credit card transactions made on Kiva. This means that when you make a $25 loan, the full amount flows through the system as the payment processor Paypal does not take a cut. Amounting to somewhere between 1.5-3%, this cost saving courtesy of the goodwill of Paypal plays a significant role in the overall workings of Kiva. Kudos to Paypal!

Another development brewing at Kiva is a new product called Kiva Zip. While loans flow from a lender to Kiva, to a microfinance institution (MFI) on the ground, to the borrower in the “classic” Kiva model, Kiva Zip loans flow directly from the lender to the borrower. Right now, due to resource constraints, Kiva Zip is only available in the US (widespread knowledge of P2P crowdfunding) and Kenya. Why Kenya? As a forefront leader in the mobile payments space, through Kiva Zip, your loan can directly reach a lender in Kenya via his brick-mobile phone. Probably a Nokia 3210. This is the technology revolution.

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I have also been tremendously impressed by the overall culture of the company. Despite being a non-profit, they continue to innovate and test out new ideas with an almost start-up like mindset and approach. As the company matures, they have also tried to become more sophisticated in the MFIs and types of borrowers they would like to have in their marketplace. When Kiva first started, in order to reach scale, they needed to get as much “supply” as they could to meet the “demand” from lenders. The “quality” of the supply was not monitored as closely in the initial growth stages. Think about a Kiva loan from you as a loan with 0% APR, or other terms, risk-tolerant capital. Today, Kiva is thinking about how they can encourage their field partners (MFIs) to post loans that are more “risky”, which a risk-tolerant source of capital could serve better. Examples of this includes student loans with longer repayment terms (ie. 10 years – no repayments during first 4 years in school plus an additional year of job-hunting, then repayments from year 6-10), first-time entrepreneurs, conflict-zone loans etc. It is a form of “market intervention”, but generally re-designing systems to serve more catalytic loans. Here is a sweet video that explains the objective of these high social impact loans!


Microfinance 101


As part of the preparation before my Kiva Fellows training this week in San Francisco, I was assigned to complete the United Nations Microfinance distance learning course. It has been a while since I graduated college and boy have I forgotten what it was like to sit through a comprehensive online learning course. Thankfully, a gruelling 10 hours later, I did feel a lot more informed about the concept of microcredit.

When we think about microfinance, there are generally 3 groups of parties involved: The borrower, the lender (microfinance institution), and the source of funds (commercial funds, kiva funds etc.). I had 3 main takeaways from the course:

1. High MFI interest rates

MFIs plug the void left by traditional banking institutions by providing small loans to borrowers who need them, often at significant interest rates. There are many reasons for this, ranging from the high administrative costs of managing multiple small loans to higher operational costs of a more “hands on” lending approach. A typical borrower profile could be someone living in a rural area who is looking for funds to start a new sundries shop in his or her village. There are a few fundamental reasons why borrowers may prefer smaller loans at higher interest rates. One of the primary reasons is simply having access to such loans, as traditional banks may not lend out micro loans due to the burden of managing many small, disparate accounts. Secondly, even if traditional banking systems are available to borrowers, the overall cost of borrowing a lower-interest rate loan from a bank may be higher than that of a higher-interest rate loan from an MFI located in the vicinity, due to a multitude of other factors including cost of travel to the bank, cost of obtaining legal documents/notaries, opportunity cost of time away from work etc. Additionally, MFIs typically accept non-traditional loan collaterals such as jewellery and inventory which are not considered legal collaterals by traditional banking systems. As such, MFIs continue to play a critical role in development and poverty alleviation in many developing countries.

2. Types of “borrowers”

One would traditionally think of a borrower as an individual. However, in the microfinance world, there are various models of borrowers. They include: individuals (based on individual character and capacity to repay), solidarity groups of 3-10 (often based on stepped lending secured by the group collateral), village banking (financial intermediary formed to disburse loans, collect payments and follow up on delinquencies) and branch banking through groups (combination of the latter two). I personally felt that group lending was definitely an innovative milestone in microfinance – having group members conduct self-selection, choosing members they trust and providing group collaterals generally reduces delinquency and provides sustainability.

3. Strategies to control delinquency

In rural settings, it is unlikely that an MFI will “take a delinquent borrower to court”. Instead, strategies are put in place to minimize the delinquency rate within a pool of borrowers. Firstly, lending is based on an important set of criteria such as the repayment capacity (overall household income streams) and relationships/character references. Also, loan sizes often start small, and increase in amounts over time/track record if necessary. Loan officers also establish frequent contact with borrowers to assess their business operations, and help create incentives for on-time repayment (using the carrot rather than the stick).

Ten hours of navigating the course and countless spreadsheets later, my major takeaway is that microfinance continues to be heavily dependent on relationship-based lending. Effective and efficient MFIs are often connected to responsible borrowers by word of mouth and vice versa. At the end of the day, borrowers who lack access to traditional banking systems are willing to pay significant interest rates to access the micro loans (which they would otherwise have no alternative sources) as a means to the end of working hard for a better life.

East vs West


Having spent big chunks of my life in both the East and the West, it is really interesting to witness how both cultures view things very differently. There are some “concepts” that are more dominant in one versus the other. A classic example is the notion of interdependence vs independence. Generally, interdependence sets the foundation for family and society in Eastern (Asian) cultures, while in Western cultures independence is often emphasized…

This past week Lysia and I were trying to understand why we haven’t gotten a sore throat for almost a year since we moved to Austin. Back in Singapore, getting a sore throat was a bi-monthly occurrence for me. We concluded that this had to do with a concept that is part of everyday life in the “East”, but almost does not exist in the “West” (or exists in a completely different form) –  related to the concept of “Yin” and “Yang”, but applied to foods. Chinese people often refer to foods in two categories – “heaty” and “cooling”. If you’re reading this and from the “West”, you may find this concept very intriguing.

Here’s an excerpt from an online source: (by no means a legitimate source but does an adequate job of providing a brief explanation)

In Traditional Chinese Medicine, the notion of “heaty” foods is related to the balancing of ‘Yin and ‘Yang. To most people, especially the Chinese, in Asian countries such as China, Hong Kong, Malaysia and Singaporeans, such concepts are very much part of the indigenous culture and are commonly used as a form of expressing certain set of symptoms or sensations often associated with emotional or physical reactions such as: Feelings of irritability, Short temper, Fever, Constipation, Flushed face or cheeks, Dark yellow urine, Sore throat, Nose bleed, Outbreak of pimples, Rashes, Mouth ulcers, Indigestion. Excessive “cold” energy in the body, on the contrary, will make us feel weak, lethargic, tired and restless.

We asked the Americans around us if they ever came across this concept of “heaty” and “cooling” foods, and almost everyone gave us a very puzzled glare. Fascinating. A ubiquitous concept where we grew up in the East, but a completely foreign concept where we are living right now in the West.

The definition of “heatiness” and “cooling” do not directly refer to the physical state of the food, but it’s effect on our bodies. For example, cucumber is a “cooling” food because it generates cool energy in our body. In contrast, something like mangoes is a “heaty” food which produces hotter energy. Striking a balance in both groups of food provides an “yin-yang” balance in your diet. The interesting thing is, you can actually turn a “cooling” food into a “heaty” food just based on the style of cooking. One of the famous delicacies in Singapore is an amazing dish called Chilli Crab. Now crab is defined to be a “cooling” food, but Chilli crab is considered to be a “heaty” food because of how it gets prepared.


One may think that this is indigenous folklore of sorts. In fact, I am not sure if this concept can even be proven with science. However, back to the story I started this piece with – a great reduction in occurrences of “sore throat” – qualitatively I can assert that it makes a lot of sense. When we were living in Singapore, a significant portion of our diet consisted of “heaty” foods such as tropical fruits and (google ‘durian’ and ‘jackfruit’) various spices. In the US, we have adopted very different diets that could have “turned down the heat” in our bodies. Yes, we avoid fast/fried food often. Now, do note that different people have different thresholds to “heat” or “cool” – so it really depends on the individual as well.


Every darn concept and idea in the world originates from somewhere, and to a large extent, has its own authenticity based on real people who experienced or witnessed it. “heaty” and “cooling” foods are a classic example.

Backpacking Mexico on a shoestring

I recently discovered a new photo-journal platform called Exposure. There are some really amazing stories and pictures on the site which you should definitely check out. The folks did a great job in building a platform that allows users to tell stories more vividly. I really love the UI and flow of the product!

I tried to use it for the first time to tell the “story” of our journey through Mexico here, hope you enjoy it!


One of the many beautiful colonial towns left behind by the Spanish Conquistadors.


AirBnB 101: 5 simple tips to be a great host!

Ever since I moved into my new apartment, I have been able to host Airbnb guests since I now have a lot more room to accommodate people. I put my guests up in the loft bed, while I sleep in the adjoining room behind a closed door which gives everyone sufficient privacy during the night. Since July, I’ve hosted about 10 different guests (from Europe, North America, Central America) and I thought I would share some ideas to make your place super Airbnb-friendly.



1. Photos

Don’t make the rookie mistake of uploading random poor quality pictures of your apartment/house. The very reason why Airbnb offers to have photographers come to your place to take professional pictures is because they really do matter. Appealing photos are one of the first things noticed by Airbnb guests when they are browsing through the available options. At this link to my listing, you can see how professional photos make a significant difference.

2. Respond with details

Whenever guests indicate any interest in booking your apartment, respond promptly and provide helpful details. Put yourself in the shoes of the prospective guest – imagine if you are travelling from out of town and it will be your very first time in this new city, what are some of your top concerns? Be proactive and help address them in your communication to your guest.

3. Provide a welcome basket

This is a nice gesture I always do for my guests. I put their fresh towels, toiletries and some snacks in a nice basket which I place on the chair – the first thing they notice as they enter the apartment. Trust me, it changes the entire experience. In our previous Airbnb stay in Albuquerque, our host even provided toothbrushes, toothpaste and mouthwash!

4. Suggest places to eat/things to do

Always offer suggestions to your guests regarding activities they should do around your city. Tell them about places off-the-beaten-track, bespoke bars and hidden dining establishments. I provide my guests with a list of my favorite food trucks around Austin, and a map of places and amenities in my immediate neighborhood. Guests will always appreciate good advice from the locals. In fact, if you have time, go the extra mile to show your guests around town!

5. Cook a meal

For guests that are staying for more than 1-2 nights, it is a wonderful thing to share a meal together. On multiple occasions, I have cooked simple dinners for my guests and we have had great conversations. This allows both the host and guest to really get to know each other, rather than to treat the stay as just an economic exchange.

At the end of the day, hopefully you will have guests leaving behind a lot more than just some extra cash you can use!

Charlie and Elyse from Chicago!

Charlie and Elyse from Chicago!

Here’s a link to get free US$25 credit to use for your next Airbnb reservation!