A note on due diligence and the cost of vetting social enterprises:
To establish the creditworthiness of potential borrowers, investors and lenders conduct due diligence. For most investors due diligence is a fairly fixed cost, meaning a similar level of due diligence is conducted for an investment of $50,000 as for an investment of $500,000. As a result, investors and lenders tend to prioritize larger investments at the exclusion of smaller firms.
Because due diligence is expensive, most do not want to share their results. They do not want others to monetize their value. Because Kiva is a non-profit that lends at 0% and does not monetize its due diligence, Kiva is in an ideal position to receive and share the due diligence of others. We want others to help us find social enterprises Kiva can work with and we are happy to share the organizations we have invested in.
Crowdvetting reduces the cost of vetting early-stage social enterprises for Kiva, in turn providing enterprises with access to affordable, crowdfunded working capital. It also alleviates the bottleneck of Kiva staff reviewing loan applications by prioritizing the most needful borrowers. By crowdsourcing the vetting of loan applications, Kiva can provide social enterprises access to the capital they need to scale their impact.
More background on the challenge we are working to address can be found in this Kiva Labs post on growing social enterprises (https://www.kiva.org/about/impact/labs/growingsocialenterprises), this post on bridging the missing middle (http://blog.kiva.org/2013/12/27/bridging-the-missing-middle-the-impact-of-larger-loans-on-kiva), also in this announcement of Kiva's Direct-to-Social-Enterprise program (https://www.kiva.org/blog/kiva/2016/06/27/kiva-launches-direct-to-social-enterprise-program).