Kiva Lets You Fund a Student’s Education, $25 at a Time

The pioneer in micro-loans expands beyond business and applies its crowd-funded model to education.

Kiva Lets You Fund a Student’s Education, $25 at a Time
Kiva student loan program


Global micro-lending site, just got smarter.

It already allows people from all over the world to donate small micro-loans to entrepreneurs in developing countries. Today the forward-thinking non-profit has announced it’s making available higher education loans for individuals in Lebanon, Paraguay, and Bolivia. The move opens up the micro-lending process from a focus on small enterprises to empowering individuals in developing countries to attend college. The basic Kiva model will continue, allowing people all over the world to make loans as small as $25. After a yearlong pilot program in the three countries, Kiva plans to expand to at least 15 countries.

“Student loans don’t really exist in the developing world, like they do in the U.S.,” Kiva President Premal Shah tells Fast Company. The process is like watching a “new baby being born,” he says. “Everyone wants their child to be able to go to school.”

The idea to expand to higher educational micro-loans was
gradual and evolved mostly with feedback from the field. It wasn’t just
Premal or Matt or Jessica’s idea (the latter are the organization’s
founders). Kiva only recently opened up its site to lending to U.S.
entrepreneurs, but “We have no plans to enter the U.S. market at this
time,” Shah says.

Kiva learned extensive lessons in its early years in Africa and made mistakes along the way, which is part of why the organization is especially strong right now and ready to take this next step. They know that reliable, trustworthy partners are critical, for example, and that’s why the three initial countries–Lebanon, Paraguay, and Bolivia–were chosen.


“We’re in a place where our own due diligence is really strong. We believe we have the basic model really working, and this next phase is to do some innovating on top of the general model,” Shah says.

“Do you remember when Amazon launched with books? When it first launched with books, it was the largest bookstore. That was cool back in 1994, but a few years later, Amazon moved into music. It was more than just books. They took that platform and expanded it, but they really had to nail books. I think that’s really similar to Kiva’s story at this phase.”

Has Kiva seen a drop in other loans? “No. Actually, I think [last Wednesday] was our best day ever. We had $500,000 in one day,” Shah says. “The core Kiva experience is still really strong and is still spreading. This new category of lending, student loans, is very small and nascent, a little more risky but, hopefully five years from now if we’re having another conversation, it will be as big as the original category.”

Kiva’s partners on the ground will remain the same for the new college loan program, Shah says. Kiva works with more than 120 partners in 50 countries, but what’s different on the ground in the school loan program is the way loan officers go about their jobs–instead of looking for small businesses, the loan officer now is open to identifying students for loans, Shah says. “If that woman that they’ve been lending to has an adolescent child that would like to get a one-year certificate in accounting, say in Peru, that officer will be in a position to facilitate a loan so that the child can get an education in accounting. The main thing is that it’s an unproven loan.”


Unproven, of course, spells risk. “This is really a very public field test,” Shah says. “This is like that moment 30 years ago where it was unproven whether unsecured loans to unbanked women would achieve a high repayment rate. That’s what’s so interesting about what’s happening now.”

Above all, Shah says he’s confident. “I feel good. It’s really appropriate for Kiva’s model. What’s happening is there is a risk tolerance because empathy creates generosity and there’s a risk distribution on the website. Hundreds of
thousands of people are sharing the risk—spreading across countries and people–there’s a higher risk appetite to try these new risky loan products in the developing world. If you can prove that the repayment rate is high over the next 1 to 2 years, it has a huge demonstration effect for more traditional providers of finance.”

Of course money and loans are just part of what is necessary to help individuals learn and grow, and even education itself is just one part of the quest toward global poverty alleviation. Shah agrees that an entire ecosystem must be in place for the full benefits of education to be actualized. OLPC received massive criticism for thinking it could drop computers off into villages without a comprehensive system of trained teachers and formal classrooms in place. Families, teachers, classrooms, and access to funds all form part of the ecosystem that allows individuals to benefit from higher education.

“Kiva sees the educational loans as part of a larger ecosystem,” says Shah. “Not all households are in a community or have the status or luxury of having your child achieve even primary education, let alone tertiary education. It’s a massive problem when an 8-year-old girl can’t go to school because her family’s in a camp or, if you were to go to school, the issue of employment is also there. It’s a complex problem. What we’ve seen is of those people that can get an education, there’s a 200-300% lift in income level. That’s why it’s so prized for those that can access it.”

“In the U.S. there’s about a 75% repayment rate; credit cards are about 94%,” Shah says. “Student loans don’t get re-paid as much in the U.S. so it will be exciting to see what happens.”

About the author

Jenara is an overseas reporter for Fast Company and a freelance writer/producer in Asia, regularly on CNNGo, and a graduate of Harvard and UC Berkeley.