$5 loans now on Kiva Zip

This week we’re rolling out $5 loan shares for ALL Kiva Zip users. And we’re really excited about it.

This means that all lenders will be able to make loans on Kiva Zip starting at $5, rather than $25.

Some lenders will have noticed that over the last six months, we have been running a trial whereby 50% of lenders have been able to make loans for $5, and 50% of lenders kept the $25 loan shares that Kiva has used since its inception. We aspire to make data-based decisions on the Kiva Zip team, and this trial was a great example of that approach. We wondered whether $5 loan shares might encourage more lenders to try out Kiva Zip for the first time, but we also feared that if we allowed lenders to participate in much smaller amounts, the total amount of money loaned would fall, limiting the number of hard-working entrepreneurs that we could support through Kiva Zip.

Six months later, the results are in, and we’re ready to make a decision. So what did we see?

New user conversion. It’s basic economics that as the “price” of something is reduced, the “volume purchased” increases, and we saw that over the last six months. For the time period analyzed, 6,231 new lenders made their first loan having seen $5 loan shares, compared to only 3,827 new lenders who saw $25 loan shares. This represents a 63% increase in new user conversion. Given Kiva Zip is a new pilot program actively seeking out new lenders to participate, this improvement in new user conversion is hugely important for us.

$ per share. Unsurprisingly, the amount loaned per share was much lower for lenders who saw $5 shares ($15.62), than for those that saw $25 shares ($32.83).

# of shares per lender. But the number of shares purchased was significantly higher for $5 lenders (3.0) than for $25 lenders (2.2).

Total $ loaned. Putting all of these three metrics together, we found that the total dollars loaned was very slightly (0.9%) lower for the $5 group, compared to the $25 group.

Total $ deposited. The picture for total dollars deposited (a metric which is more indicative of the long-term sustainability of the program) was slightly worse (by 4.7%) for the $5 group.

Total # of shares purchased. The higher number of users to lend, and the higher number of shares per user meant that more than double the number of shares were purchased by lenders in the $5 group, than lenders in the $25 group.

Looking at all these metrics together, it was not a straightforward decision. It looked like moving to $5 loan shares would result in more lenders connecting with more borrowers; but slightly reduce the total dollars loaned on Kiva Zip, especially in the long term.

But Kiva’s mission is “to connect people through lending to alleviate poverty”. And in transitioning to $5 loan shares, we decided to place more value on the connections that we are creating between borrowers and their lenders, than the total amount of dollars loaned. That’s more potential customers, business advisors, brand ambassadors and emotional supporters for borrowers, who have told us that they value these connections and supporters even more than they value the 0% interest capital we enable them to access.

With this decision, as a program, and as a team, we are choosing social capital over financial capital.

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Posted by Jonny Price, Senior Director, KIva Zip

Feb 7, 2014

Jonny first came to Kiva in 2009 as a volunteer on a 5-month externship from his management consulting firm Oliver Wyman. After 6 years at Oliver Wyman, first in London and then in San Francisco, he joined Kiva full-time in September 2011, to lead the Kiva Zip pilot project. Jonny is married to Ali, who he met at Kiva, and occasionally you may glimpse them cycling their tandem to work. He graduated with a BA in History from the University of Cambridge, where he represented his college at 14 sports (although 3 of these were table football, pool and chess).

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