Sometime in late December 2006 (or was it early January), I had the bright idea that I should try to combine my family visit trip to Perú with an attempt to investigate the opportunities to connect any of the existing Perúvian MFIs with Kiva. Since I have absolutely no insight in the fascinating world of international financing (oh wait... I'm a Kiva investor! I am an International Financier!), it took quite some thinking to figure out how to approach this. Well-- business development is business development, whatever you do! So you start talking to the people that do have contacts.
I emailed the MFI officer that had originated several of the loans that I subscribed to in Ecuador, Ing. Luis Crespo of Mifex. He put me in contact with a colleague of his, who has spent many years in microfinancing, a gentleman by the name of Vicente Avalos. We exchanged emails, and we agreed to meet in Lima on Friday Feb. 9, 2007.
We met that afternoon at the San Isidro (Lima) office of his employer, SwissContact, a Swiss NGO that provides technical assistance to microfinance institutes, for about 2.5 hours. I presented him with an extensive slide deck with Kiva's value proposition, which MFI's would be most helped by it, and how to join.
- SwissContact (or Mr. Avalos, I am not sure) is currently providing technical assistance to 3 MFIs throughout Perú: in Cuzco, Ayacucho, and Puno.
- Generally, these are well-established MFIs; one of them is even listed at MixMarket.Org.
- They have well-established procedures, including underwriting procedures. Changing the way they do business will be a hard sell, even if they could save ~7-10% in loan costs.
- They currently are funded through private funds, governmental funds, and Worldbank/IMF loans.
- The average microloan bears an interest of about 17% annual; this is very low compared to alternative loans that are provided to these businesses: an informal lender charges between 5-15% per month! For comparison, current mortgage rates for primary residence mortgages in USD are around 10% annual.
- We jointly identified three ways to get Kiva involved in Perú:
- Get an existing, well-established MFI to sign up with Kiva. This would be the slowest of all three possibilities according to Mr. Avalos (at least 6 months-- Hora Peruana?). However, this is the one that Kiva strongly prefers, as it will entail a smooth application process and a running start of the cooperation.
- Get an existing Kiva partner, like Mifex, to expand into Perú. Both Mr. Avalos and Kiva realized that this will be hard: The only real candidate would be Mifex, and their operations are currently limited to Guayaquil, Ecuador. They are already one of the smaller and younger MFIs that Kiva deals with; in short, Kiva wasn't thrilled about the idea, Mr. Avalos wasn't thrilled, and -without asking them- Mifex themselves probably wouldn't be thrilled either.
- Start a new, Kiva-only funded MFI. This would be the easiest and best solution according to Mr. Avalos, who said that he would be able to jump-start this with a number of well-experienced MFI executives. This should cover those regions that are currently under-served by the existing MFIs. He sees this as the quickest path to get Kiva involved in Perú. However, Kiva is currently not able to accept this, for a number of reasons: lack of time and resources to mentor such a new MFI, lack of possibilities to do the necessary due diligence on the operation from the US, etc. Both Ben Elberger and Chelsa Bocci of Kiva told me in no unclear terms: "not now, maybe in a few years or so"