By being Kiva’s eyes and ears on the ground, Kiva Fellows undertake a bunch of deliverables ranging from process improvement, risk management, control audits and my favorite part – uncovering opportunities for innovation.
Where does innovation come in with the Kiva model? Put in very simple terms, one of Kiva’s main objectives is to encourage our field partners to take advantage of our 0% risk-tolerant financing to reach higher-risk demographies, or charge a lower interest rates to clients. Alternatively, they could also design loan products using risk-tolerant capital to cater to unique circumstances (ie. a bullet payment term: farmers paying back their entire loan at one shot after the harvest season).
The benefits of having Kiva Fellows out in the field gives us an opportunity to immerse ourselves in the local environment, and understand needs that are endemic to our geography. I was fortunate enough to chance upon a rare opportunity for innovation through an encounter with a client out in the remote Shariston region.
Following the collapse of the Soviet Union, the healthcare system in Tajikistan fell to shambles. Today, few in the city are covered by insurance, and those in the villages do not even consider that a possibility. When one needs medical help, microfinance becomes the best alternative to fund their treatment costs. However, I noticed that any healthcare-related loans falls under the “personal loan” category because there are no special healthcare loan products in this country. As “personal uses” typically carry higher risks (relative to income generating purposes), they carry the highest interest rates.
Moment of field epiphany: What if we could design a special loan product using Kiva’s risk tolerant capital specifically for the purposes of paying for medical expenses, surgery bills etc?
I rushed back to the office, ran some data analysis, and put together a proposal for our partners – Kiva funded healthcare loan product at a break-even interest rate, specifically for the impoverished rural clients. Furthermore, it is a no-brainer for the partner because healthcare loans typically fund 100% of the time on the Kiva website! For the geeky ones out there, here’s what a break-even interest rate means for the client. In the example below, through Kiva, field partners can then design loan products that have lower interest rates (to the point where it covers their operational expenditures – the true cost of delivering the financial service), longer grace periods etc.
The following numbers are just for illustration purposes:
This was a month ago.
Today, the first of three field partners in Tajikistan (HUMO) officially launched the new Kiva Heathcare loan product – at half the interest rate of today’s personal loan. That is half-off the initial cost whenever clients now need a loan for healthcare! Just to put things in perspective, assuming a US$1000 loan in the illustration above, 15% off (US$150) is the equivalent of an entire month’s salary in the urban areas here. This, is the exact moment when a Kiva Fellow sees the hard work out in the field paying off.
Can’t wait to get the others onboard!