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Kiva Zip | Frequently Asked Questions <br />https://zip.kiva.org/faq[8/27/2013 9:42:15 AM] <br />The principal difference between the two models is that the Kiva Zip model involves payments from Kiva Zip directly to Borrowers, whereas in <br />the main Kiva model, these payments are routed via Kiva’s field partners. Kiva Zip still partners with organizations that work closely with <br />Borrowers (these are called “trustees” in the Kiva Zip model), but these organizations never handle the loans. <br />Another differentiating factor of Kiva Zip is the target Borrower populations. The Kiva Zip alpha is intent on genuinely expanding financial access <br />to Borrowers who cannot otherwise access a loan from a bank or an MFI. This means that the Borrowers that are made loans to on Kiva Zip <br />may be different than the Borrowers on the main Kiva website. For example, in the United States it is becoming apparent that a lot of start-up <br />businesses currently lack access to capital, and that these are prime candidates for Kiva Zip loans; whereas most of the United States <br />businesses on Kiva.org are already established. <br />At least for the foreseeable future, Kiva Zip Borrowers will be paying 0% interest rates. By contrast, in the main Kiva model, most Borrowers do <br />pay interest rates to the field partners, in exchange for their administration of the loans, and the whole host of other services that field partners <br />provide to Borrowers (technical assistance, financial advice, etc.). <br />Another important difference is that Kiva Zip loans are riskier than loans in the main Kiva model. Kiva.org has been operating for over 6 years <br />now, and many of the kinks and loopholes in the model have been ironed out over time. Because the Kiva Zip model is new, it is likely that <br />there will be some teething problems over its first couple of years. For example, the default rate on Kiva Zip is expected to be significantly higher <br />than the 1-2% seen on Kiva.org today, as due diligence methodologies on both trustees and borrowers are worked out and improved. <br />In the main Kiva.org model, most of the exchange rate risk is borne by Kiva.org’s field partners. Whereas in the Kiva Zip model, the lenders take <br />on the foreign exchange rate risk (for more on this, please see the question: “What about exchange rate fluctuations?”). <br />There will hopefully be a number of other smaller trials and experiments on the Kiva Zip website, which will be different to the main Kiva <br />website. For example, the look and feel of the borrower profile will be slightly different; Kiva Zip borrowers are able to make comments and <br />updates directly on their own loans; different loan sizes might be explored, or displaying loan amounts in Kenyan Shillings. It is hoped that some <br />of these experiments will be successful, and subsequently exported to the main Kiva website. <br />How small is a “small” pilot project? <br />As of the end of August 2012, the Kiva Zip pilot had disbursed loans to about 250 borrowers, via about 1,000 lenders. This compares to over <br />650,000 loans made on Kiva.org to-date, by over 650,000 Kiva.org lenders. <br />Why might making loans directly to borrowers fail? <br />There are many reasons why lending more direct to borrowers may fail. Kiva Zip could fail to find a good way to estimate repayment rate; it <br />could fail to find a way to respect privacy; or it could fail to discover a credible social benefit of going direct. Kiva’s field partners provide so many <br />valuable functions for the poor, unbanked and under-banked. It goes without saying that over the past 5 years, the impact of Kiva has been built <br />on the hard work of the staff of its amazing partners. That said, Kiva Zip may discover new markets, and new audiences to reach, that are <br />currently underserved. Kiva Zip may fail to find a promising approach. But what better way to find out than by trying? <br />What are Conversations? <br />Conversations are a way for borrowers, lenders and trustees to interact with each other directly on the Kiva Zip website. There is a <br />Conversations tab on every loan page. Since we launched the Conversations feature, we have seen lenders expressing support for borrowers <br />they have made loans to; borrowers and trustees updating lenders on their progress; borrowers marketing their businesses and products to <br />lenders; etc. In August 2012, we launched the ability for users to post images to the Conversations tabs of loans. <br />Who can participate in Conversations? <br />Kiva Zip admins, the borrower and trustee related to a particular loan, and all lenders to that loan can participate in that loan's Conversation at <br />all times. While the loan is fundraising, borrowers can choose to make the Conversation on their loan open to all users if they want to. This <br />enables all users to both view the Conversation, and make a comment in it (although users must be logged in to make a comment). When a <br />comment or image is posted, it is automatically sent to the borrower, the trustee, and all lenders to that loan (unless they have asked to <br />unsubscribe from these notifications) -- via email or SMS message. <br />What are Borrower and Trustee Badges? <br />Borrower and Trustee Badges are a system designed to recognize and reward borrowers’ and trustees’ engagement with the Kiva Zip website, <br />and the on-time repayment of loans. <br />There are two types of badge: <br />1. 'Repayment badges' are awarded for the on-time repayment of loans. <br />2. 'Connectedness badges' are awarded for engagement with the Kiva Zip website.