May 26, 2009 KV Kiva HQ
By Halle Tecco
Measuring the Social Impact of Kiva Loans

If you were going to rate Kiva loans by their potential social impact, what data would you look at? The team behind Kivuntu, came up with an interesting formula combining Kiva data (loan amount, number of borrowers, and duration) with country data (GDP per capita). Through this formula, their website produces a daily ranking of what they consider the 2o highest-impact loans.  This is based on the assumption that the larger the loan with respect to GDP, the greater the business opportunity and cash flow of the business.  They also assume that shorter loans provide greater social good, as the money will be re-paid and re-loaned to other entrepreneurs. While this site and concept are just beginning, the team plans to refine the formula and add a searchable database with scores of all borrowers. Attempting to answer the forward-looking question of  which loan will have the greatest social impact is much more challenging than looking back at the $70 million that has been loaned to over 166,000 entrepreneurs on Kiva and deducing the net social impact. Each loan, on an individual level, includes a variety of  both predictable and unpredictible factors that dictates success.  And on top of that, each region has unique challenges from currency risk to corruption to seasonal economic fluctuations.   And even if you had all this data, how do we know what success looks like? These are interesting questions, and the creation of this app signals that borrowers are hungry for a deeper credit/risk/impact measurement-- beyond the current combination of "Field Partner Rating" and entrepreneur bio that is availbale.  Some questions I hear borrowers asking are: How will this loan benefit the entrepreneur and his or her community? Will there be job creation?  Is this an eco-friendly venture? What interest rate is the entrepreneur paying to the MFI? So tell me, how would you measure the social impact of your loans?

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