Nonprofit Tech

Stanford Social Innovation Review (SSIR)

The Profit in Nonprofit

In 2004, Jessica Jackley set out for rural Kenya, Tanzania, and Uganda to perform an impact evaluation for the Village Enterprise Fund (VEF), a San Francisco Bay Area nonprofit that makes modest grants and loans to small businesses in East Africa. A few months later, her husband, Matt Flannery, then a computer programmer at Alviso, Calif.-based TiVo Inc., came to visit her. As the couple traveled around the country interviewing small-business owners, they talked nonstop about the best ways to help Africa’s struggling entrepreneurs.

One year earlier, Jackley had heard Muhammad Yunus, the founder of Grameen Bank, give a talk about microfinance. “I reacted with both my head and my heart,” she recalls. “My head said: ‘Microfinance is effective. It’s powerful. It works.’ But the most important part was what my heart said. The way he talked about the poor was beautiful, respectful, and dignified. I didn’t have feelings of guilt and shame like I did after a lot of nonprofit messaging. Instead, I wanted to be there, listening to people’s stories and talking with clients face to face.”

Once in East Africa, Flannery and Jackley agreed that they too would facilitate loans rather than donations. After weeks of brainstorming, they soon settled on the basic idea for Kiva. At first, they envisioned a few friends and family members lending money to a handful of entrepreneurs in East Africa. And then eventually, although they weren’t sure of the steps along the way, they saw Kiva evolving into a self-regulating online lending marketplace where microfinance institutions (MFIs) could raise loan capital to fund projects for small-business people in developing countries.

Upon their return to the United States, they set up meeting after meeting with contacts in microfinance to discuss, among many other topics, whether the venture should be nonprofit or for-profit. After months of skepticism, disapproval, and rejection from industry insiders, they launched Kiva (which means “unity” or “agreement” in Kiswahili) as a nonprofit. By the end of 2007, Kiva had become one of the fastest-growing nonprofits in history.

Although being a nonprofit presents unique challenges, the organization’s 501(c)(3) status has…

---

Related Materials

• Kiva launches Kiva API