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Moody's and Kiva at CGI: Rating Credit Risks for a Hand in the Future of Micro-lending Banks

While it's a thrill for me to help engage companies in strategic philanthropy, corporate social responsibility (CSR), skilled volunteering, and other forms of giving and service, I've always believed that corporate initiatives are only sustainable if there's a solid business case to be made. So after my initial excitement about a terrific new corporate-nonprofit partnership, my next question is: "How did you sell it to the board?"

At last week's CGI, I was delighted to meet with Premal Shah, President and CEO of Kiva, the world's first person-to-person micro-lending website, established in 2005. Kiva helps alleviate poverty by raising $1 million a week in small loans (many are $25) to invest in micro-businesses in Asia, Africa, South America, and Eastern Europe. Shah explained that corporate partnerships are essential to Kiva's success.

Shah described Kiva's new partnership with Moody's that was announced on stage at CGI. Moody's will do three things:

  • "Moody's Investors Services will assign initial ratings, pro bono, to 20 of Kiva's MFI [microfinance institution] Field Partners, providing an independent assessment of creditworthiness that individuals can consider when selecting an entrepreneur to lend to."
  • "Moody's Foundation will fund the establishment of a Moody's Field Specialist Program to recruit local microfinance specialists who will help MFI Field Partners implement best practices in lending and loan servicing, and to identify new MFI Field Partners."
  • "Moody's Analytics will train Kiva staff, including Moody's Field Specialists, in credit risk management."

Kiva-Moody's relationship is potentially game-changing for microfinance. Why? Access to capital. "We will provide MFIs with the opportunity to access global markets, by bringing even greater analytical rigor, transparency, and information to the Kiva marketplace," according to Rob Sherman, Vice President, Communications, Moody's. "We will broaden the pool of investors interested in microfinance because they will better understand the credit risk," says Fran Laserson, President, Moody's Foundation.

So, what is the business case for Moody's? "The double bottom line," says Laserson, "social responsibility and responsibility to shareholders." And how is this good for business? "By offering ratings to MFIs which will evolve and grow into deposit-taking institutions—banks that will become regulated—Moody's is developing a relationship with them now through this initiative."

Another synergistic opportunity for both Kiva and Moody's was in the creation of the project itself. At the outset, Moody's asked Kiva, "What are your most pressing needs around the credit risk?" In developing the Kiva-Moody's initiative, Moody's wanted to apply their unique expertise and engage their talented people. "At the table to mold this partnership were Moody's senior people in corporate development, global banking, legal, business planning, philanthropy, and ratings administrators," says Laserson.

As with other sustainable and high-impact CSR programs I've described in this blog, the Kiva-Moody's partnership has all the hallmarks of excellence: alignment with company goals and objectives, research and metrics to demonstrate need and progress, partnerships and alliances, employee engagement, and leadership from the top.