Matt Flannery is the CEO and Co-founder of Kiva.org, a popular website that allows individuals from around the world to loan as little as $25 at a time to entrepreneurs in the developing world. In just two years, Flannery's vision has exploded, helping to facilitate over 30,000 “microloans” funded at a total value of over $22 million. In an interview with HPR, Flannery discussed not only how Kiva itself brings about social change, but also how it represents a fundamentally new means through which such change may take place.

Harvard Political Review: Can you tell us about the ability of microfinance to effect change, both financial and social, in wealthy and poor societies?

Matt Flannery: In this day and age, access to financial services is a really important part of increasing one's chances to be included in society and to possibly exit out of poverty. Without access to financial services, you have nowhere to deposit money or withdraw money, nowhere to get a loan or credit or have insurance, and therefore no real way to operate in the global economy. Microfinance is a movement providing those services to people who were previously excluded from access. It's about including people in a worldwide system who have been traditionally marginalized or excluded from it.

HPR: How does the Kiva model compare in terms of effectiveness to other humanitarian means of ending poverty?

MF: Well, Kiva is one of the most “disintermediated” models of philanthropy ever. Through Kiva you can send your money to somebody that you see—and you know when they get the money and if they repaid the money. There are fewer middlemen and less bureaucracy in the process than ever before. People can make their own choice about where they send their money and get a lot of feedback directly from the recipient, and that's pretty new.

Traditionally in philanthropy the givers have been concentrated in a small number of people in an organization. Especially in international philanthropy, dominated by the wealthiest of the wealthiest foundations and governments, the recipients often get processed through massive bureaucracy. At Kiva we're doing something really new. We're allowing hundreds of thousands of people to get involved and make their own decisions. So in a sense we're democratizing the sources of philanthropic money.

HPR: We hear a lot about the failure of charity to really make change in the lives of the poor. Many also criticize microfinance institutions that only lend to entrepreneurs who already have enough money to have started a business, leaving out the poorest of the poor. Do you believe that Kiva can improve the quality of life for these people, and how can you measure this?

MF: The main criticisms of microfinance are centered around the concept that it is not perfect and doesn't serve everyone. Those are the main criticisms with which I completely agree. Microfinance is just one method of providing services to poor people. Certainly access to credit is not the most fundamental of human needs; it's a very important human need, but certainly if you are starving, if you have no water, those are pretty important human rights as well. If we stop looking at microfinance as the end all be all to poverty alleviation, but as one service that people around the globe deserve, then that's an accurate portrayal and accurate way to frame it. I don't think you can necessarily help most of the poor; certainly it can help many people who are the poorest of the poor, but not everyone, upon getting credit or savings will be truly helped, in and of itself, just by the fact that they got that credit. But it's certainly one thing that can really go a long way to including more people in most financial systems.

HPR: In terms of alleviating poverty, many elements are necessary, such as healthcare and education. Some microfinance organizations do also provide these services or spread literacy on these topics while providing loans. Does Kiva or any of the microfinance institutions it works with address these issues?

MF: Kiva works with about 100 microfinance institutions all around the globe; some are NGOs and some are banks, some are something in between. Typically the most humanitarian and charitable of those organizations provide wraparound services, non-financial services such as mentoring, business development, accounting training, even healthcare sometimes, though that is more rare. Some view themselves really as aid organizations; some see themselves more as businesses that attempt to scale by providing one service really well. Kiva works with both of them. On our website the only service we currently allow our lenders to provide is credit, but you can imagine in the future our users might be able to help provide other services as well.

HPR: Some have touted microfinance for its potential for profitability. To what extent should microfinance be a for-profit initiative?

MF: Microfinance can be very profitable. It's a great business model and pretty much everywhere around the world that it's being employed, it's taking off. It's growing exponentially worldwide—it’s one of the most rapidly growing sectors in the world. That's really wonderful, and some people step in and latch onto that with profit maximizing mentality. Some people come to that phenomenon with a humanitarian aid mentality. For me, I think the best course is probably right in the middle.

People are using business to enact social change. That's what I'm most excited about, when you create a business that's primarily focused on social change, you use the tools of capitalism to help bring about social change. There's a lot of predatory lenders out there using code words such as microfinance to get rich, to mislead people, and I've seen it, and I hate it. I don't mind making a profit, but there's a way to do it in a transparent way that gives the poor a fair deal. That's the way it should work.

HPR: What has Kiva taught you about the world and about social entrepreneurship?

MF: My experience working at Kiva has taught me that people are a lot more motivated and generous than you think. If you merely provide an easy way for them to channel their social motivation, their generosity is something you can unlock; if you really tap into the source, it's really powerful. When I started Kiva, I was quite pessimistic about its potential. My mind has been changed and I've been just blown away. People were looking to reach out to other people in this way—they just didn't have the opportunity. They felt disempowered. Technology and the internet can allow normal people to feel empowered again, and that's been really exciting for me. ]]>