MICROCAPITAL STORY: Ernst & Young Donates $1m of In-Kind Resources to Assist Kiva Microfunds with Accounting

Ernst & Young LLP (E&Y), a “Big Four” accounting firm headquartered in London, has donated up to USD 1 million of in-kind resources over the next three years to provide oversight and accountability to the micro-lending process of Kiva Microfunds LLC, a micro-lending website that connects individual lenders with target entrepreneurs via microfinance institutions (MFIs).  The partnership was announced at the 2008 Clinton Global Initiative (CGI) summit, an annual gathering of global leaders in government, business and civil society for the purpose of discussing pressing development challenges and their solutions.

E&Y and Kiva will pool their resources to perform a number of administrative tasks, including checking borrowers’ identities, verifying loan principals and loan terms, and confirming investments.  Help in these areas is intended to improve Kiva’s ability to attract lenders, to provide accurate and transparent data, to foster partnerships with microfinance institutions (MFIs) and to deliver loans to their borrowers.   Kiva president Premal Shah stated that the success of Kiva’s model relies on the accuracy of information provided about the borrowers applying for loan funds through Kiva’s website.  The E&Y partnership, Mr. Shah hopes, will improve Kiva’s accountability by demonstrating more concretely through third-party oversight the effect of micro-lending on borrowers, lenders and financial intermediators. 

The process for connecting lenders with borrowers through Kiva is rather straight-forward.  Lenders browse profiles of entrepreneurs in need and choose to donate to a particular individual.  Money is transferred through PayPal or credit cards to Kiva, which then channels it to an MFI that can then transfer the funds to the selected entrepreneur.  Ideally, the borrower repays in due course the loan in full at which point lenders can withdraw their funds or choose to re-lend or donate the principal to Kiva to offset its operational expenses.

Incorporated in 2005, Kiva is a San Francisco-based online micro-lending platform that has facilitated the transfer of over USD 43 million in loans from over 342,360 Kiva.org users to over 60,000 entrepreneurs in the developing world.   Kiva.org partners with 89 microfinance institutions (MFIs) spread across 42 countries.  According to Kivafriends.org, an online forum of Kiva lenders, the average repayment rate among all partners is 98.61 percent, and the average loan size is USD 461.68.  The minimum lending amount is USD 25.   Currently, Kiva lenders receive zero percent interest on their loans.  Microcapital has provided extensive coverage on Kiva’s launch, growth and operations as a non-governmental organization (NGO), including its recent partnership with VideoJug.  

Founded in 1989, London-based Ernst & Young LLP is a privately-held company that provides assurance, tax, transaction and advisory services to businesses.  

Additional Resources:

Ernst & Young LLP

Kivafriends.org

Kiva.org

MarketWatch: “Ernst & Young and Kiva.org to Work Together to Increase Transparency of Micro-Loans to Entrepreneurs in the Developing World

MicroCapital Profile: Kiva Microfunds

MicroCapital Story: “Kiva and VideoJug Enter Partnership to Promote Online Microfinance” 

MicroCapital Story: “Kiva.org Gets the Press It Deserves for Microcredit Investment

MicroCapital Story: “Peer to Peer (P2P) Microfinance Business of Kiva.org (Kiva) Funds over USD 8.9 Million Internationally for Micro Loans 

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