Kiva.org, the online organization that allows individuals to invest in development micro-loans around the world, has chosen a community development credit union as its field partner for its micro-lending effort in New Orleans.
Dubbed Kiva New Orleans, the organization hopes its effort, combined with similar work in other cities, will help both highlight the organization in the U.S. and bring home to Americans the impact they can have through micro-finance. Full disclosure: this reporter is a Kiva lender.
Kiva chose ASI Federal Credit Union, the 73,000-member community development credit union that serves the greater New Orleans area, as its partner for Kiva New Orleans.
Kiva also chose an organization called the Good Work Network to help in the effort.
“We are very grateful to Generation Louisiana President Pamela Senatore, who reached out to Kiva two years ago to help assemble this exciting nonprofit coalition which became Kiva New Orleans,” said Premal Shah, president of Kiva.org. “Together with our financial and small business partners here in New Orleans like ASI Federal Credit Union and Good Work Network, we are all very excited to work together to help propel local businesses into the mainstream, and help create jobs.”
“ASI Federal Credit Union has over 75,000 members, drawn to our mission to strengthen the financial health of underserved communities through financial services and education,” said Mignhon Tourné, CEO of ASI Federal Credit Union in a Kiva statement about the effort.
Good Work Network refers its client entrepreneurs that might qualify for a Kiva funded loan to ASI. ASI underwrites the loan application, checks to make sure it meets risk criteria and, if approved, funds the loan. The funded loans plus a picture of the borrower and a synopsis of his or her situation then are posted on the website where individuals are able to invest to help backfill the loan.
So far, ASI is administering 14 loans on behalf of the initiative, including loans for two construction companies, a secretarial services company, a party goods provider and a solar panel installation firm. Kiva and the CU say they hope the effort will lead to loans worth $500,000.
ASI CEO Tourne said one of the most gratifying aspects of the program has been the boost it has given the entrepreneurs to see how much support their efforts have drawn, not just from their own communities, but from all over the world.
For example, Troy Rollins, an electrician that started his own firm to install solar panels, had 165 people fund his loan of $10,000, and they came from all over the U.S. as well as from overseas. “It's just been phenomenal” Tourné added.
Tourné said that the credit union wanted to work with Kiva because it recognized how much impact it could have on the very people that it most wanted to help. Under the terms of the partnership, the borrowers have to become members of ASI Federal Credit Union, and while the principal is repaid to Kiva, the CU keeps the interest from the loans. This helps fund the underwriting effort, Tourne said.
And Kiva made it clear that ASI does not have to be Kiva's only credit union field partner and that it is open to working with other CUs, particularly but not exclusively CDCUs.
Shah said that there were regulatory reasons Kiva favored working with credit unions when possible. “Regulations in the U.S. frequently prevent credit unions from making risky or nontraditional business loans with capital from member shares or savings,” Shah said, adding that community development credit unions such as ASI are potentially strong partners with the organization since they have somewhat overlapping missions.
Shah also remarked that Kiva felt very encouraged about its effort in New Orleans since all 14 of the initial loans, totaling more than $125,000, were funded within 24 hours of being added to the organization's website.
Overall, the organization reported that since its launch in the U.S. in 2009, Kiva has facilitated over $2.1 million in loans to 391 borrowers across 20 states. The majority of these borrowers are located in Texas, California, New York, Boston, Louisiana and Florida.
But it’s is also clear that more than just goodwill is going to be necessary if a CU wants to work with Kiva. The organization requires that its U.S. have at least two to three years of lending to poor, excluded or vulnerable people for the purpose of alleviating poverty or reducing vulnerability; be registered as a legal entity in its country of operation; have at least one year of financial audits; and preferably have a profile on the MIX Market, an organization that tracks micro-finance firms around the world.
This last in particular brings home what might be the biggest obstacle, the credit union has to have expertise in business lending, something many credit unions still do not have.
This is part of what has concerned Communicating Arts Credit Union, an 8,300-member credit union in Detroit, which was the first Kiva city to launch earlier this year. Communicating Arts CEO Hank Hubbard said Kiva's effort is “on our radar” but that the CU had not really considered it deeply because, in part, it has not offered business loans before.
“We have had plenty to do, and that's just not been part of our activity,” Hubbard said, but he added that the CU would be open to working with Kiva if doing so would dovetail with its mission.
Another issue may be whether a credit union subject to the cap on member business lending would have to count loans made with Kiva against the cap. On the one hand the loans would seem to qualify, at least for a time, since the credit union initially funds them. But then Kiva backfills them so, at that point, they would seem to not involve CU funds any longer. As ASI is a low income federally chartered credit union, Tourne said the CU has not had to face the question.
For its part, NCUA said that loans made to businesses even in partnership with Kiva would count as member business loans and against the cap but also noted that the cap excludes loans where the entire business lending balance with the borrower is less than $50,000.
The rule “contains an exclusion to the rule if the aggregate outstanding loan balances, including the new financing, for the borrower and associate members are less than $50,000,” wrote NCUA spokesman David Small in an email. “In this situation that may be the case as the funding is for micro-credit loans.”
Tourné said that she hoped more credit unions would partner with Kiva and take advantage of the ability to draw money and attention from all over the world to highlight the development efforts that need it the most. “The best thing about these loans is that we have been able to fund them, been able to help the very people we have wanted most to help,” she said.