Harvard Case - Kiva's Impact Strategy
"Kiva's Impact Strategy" Harvard business case study is written by Jasjit Singh, Eva Wu. It deals with the challenges in the field of Strategy. The case study is 26 page(s) long and it was first published on : Sep 24, 2018
At Fern Fort University, we recommend that Kiva implement a multi-pronged strategy to further its impact and achieve sustainable growth. This strategy will focus on leveraging Kiva's core competencies in technology and analytics, globalization, and social responsibility to expand its reach, deepen its impact, and build a more robust business model.
2. Background
Kiva is a non-profit organization that connects lenders with borrowers in developing countries through an online platform. The organization's mission is to expand financial access and create economic opportunity for underserved communities. Kiva's success has been driven by its innovative business model, which leverages the power of the internet and social media to facilitate peer-to-peer lending. However, Kiva faces challenges in scaling its operations, diversifying its revenue streams, and addressing the needs of a growing number of borrowers.
The main protagonists of the case study are:
- Matt Flannery: Kiva's founder and CEO, who is passionate about the organization's mission and committed to finding innovative ways to expand its reach.
- Premal Shah: Kiva's President, who is responsible for the organization's day-to-day operations and strategic planning.
- The Kiva team: A dedicated group of employees who are committed to Kiva's mission and work tirelessly to connect lenders and borrowers.
3. Analysis of the Case Study
To analyze Kiva's situation, we can utilize several frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: Low, due to the high barriers to entry in the microfinance industry, including regulatory hurdles and the need for strong technology infrastructure.
- Bargaining Power of Suppliers: Low, as Kiva relies on a network of microfinance institutions (MFIs) that are eager to access its platform.
- Bargaining Power of Buyers: Low, as borrowers are typically underserved and have limited access to alternative sources of financing.
- Threat of Substitutes: Moderate, with other organizations offering similar services, such as crowdfunding platforms and traditional microfinance institutions.
- Competitive Rivalry: Moderate, with a growing number of organizations entering the space, but Kiva's strong brand recognition and established platform provide a competitive advantage.
b) SWOT Analysis:
- Strengths: Strong brand recognition, innovative business model, global reach, strong technology platform, committed team, social impact focus.
- Weaknesses: Limited revenue diversification, dependence on MFIs, challenges in scaling operations, potential for fraud and risk management issues.
- Opportunities: Expanding into new markets, developing new products and services, leveraging technology to improve efficiency and reach, building strategic partnerships.
- Threats: Increased competition, regulatory changes, economic downturn, reputational risks, potential for fraud and misuse of funds.
c) Value Chain Analysis:
Kiva's value chain consists of the following activities:
- Inbound Logistics: Partnering with MFIs and sourcing loan applications.
- Operations: Managing the online platform, facilitating loan disbursement and repayment, and providing customer support.
- Outbound Logistics: Disbursing loans to borrowers and collecting repayments.
- Marketing and Sales: Promoting Kiva's platform and attracting lenders.
- Service: Providing support to borrowers and lenders, and monitoring loan performance.
d) Business Model Innovation:
Kiva's core business model innovation is the peer-to-peer lending platform. This model has been successful in leveraging the power of the internet and social media to connect lenders and borrowers, but it also presents challenges in terms of scalability, risk management, and revenue diversification.
4. Recommendations
Kiva should pursue a multi-pronged strategy that leverages its core competencies and addresses its weaknesses:
a) Expand Reach and Impact:
- Market Expansion: Target new markets with high potential for growth, such as emerging markets in Africa and Southeast Asia.
- Product Development: Develop new products and services, such as loan insurance, savings accounts, and financial education programs.
- Strategic Alliances: Partner with other organizations, such as NGOs, governments, and corporations, to expand reach and leverage complementary resources.
b) Diversify Revenue Streams:
- Fee-based Services: Offer value-added services to MFIs, such as loan origination, risk management, and data analytics.
- Impact Investing: Partner with impact investors to create new investment opportunities that generate both financial and social returns.
- Corporate Social Responsibility: Leverage corporate social responsibility initiatives to attract new lenders and generate revenue.
c) Enhance Technology and Analytics:
- Invest in Technology: Upgrade Kiva's technology platform to improve efficiency, security, and user experience.
- Data Analytics: Leverage data analytics to better understand borrower needs, optimize loan allocation, and identify potential risks.
- AI and Machine Learning: Explore the use of AI and machine learning to automate processes, improve risk assessment, and personalize the lending experience.
d) Strengthen Corporate Governance:
- Transparency and Accountability: Enhance transparency and accountability by implementing robust governance structures and reporting mechanisms.
- Risk Management: Develop a comprehensive risk management framework to mitigate the risks associated with lending to underserved communities.
- Financial Sustainability: Develop a long-term financial plan that ensures the organization's sustainability and ability to achieve its mission.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations build on Kiva's core competencies in technology and analytics, globalization, and social responsibility, while remaining consistent with its mission of expanding financial access and creating economic opportunity.
- External customers and internal clients: The recommendations address the needs of both external customers (borrowers and lenders) and internal clients (MFIs and employees).
- Competitors: The recommendations aim to differentiate Kiva from its competitors by leveraging its unique strengths and focusing on its core values.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to generate positive financial returns and social impact, although quantifying these benefits may be challenging due to the nature of Kiva's operations.
- Assumptions: The recommendations are based on the assumption that Kiva can successfully navigate the challenges of scaling its operations, diversifying its revenue streams, and maintaining its commitment to social impact.
6. Conclusion
Kiva has the potential to become a leading force in the global microfinance industry. By implementing a multi-pronged strategy that leverages its core competencies and addresses its weaknesses, Kiva can expand its reach, deepen its impact, and build a more robust business model.
7. Discussion
Other alternatives not selected include:
- Mergers and acquisitions: Acquiring or merging with other organizations in the microfinance space could provide access to new markets, technologies, and expertise. However, this approach could also pose significant challenges in terms of integration, culture, and brand management.
- Outsourcing: Outsourcing certain functions, such as loan origination or customer support, could reduce costs and improve efficiency. However, this approach could also lead to a loss of control and potential quality issues.
Risks and key assumptions associated with the recommendations include:
- Competition: Increased competition from other organizations could erode Kiva's market share and impact its financial sustainability.
- Regulation: Changes in regulations could create new challenges for Kiva's operations and impact its ability to serve borrowers.
- Economic downturn: An economic downturn could reduce lending activity and impact Kiva's revenue streams.
- Fraud and risk management: Kiva needs to continue to invest in robust risk management systems to mitigate the risks associated with lending to underserved communities.
8. Next Steps
To implement the recommendations, Kiva should:
- Develop a detailed strategic plan: This plan should outline the organization's goals, strategies, and key milestones.
- Secure funding: Kiva will need to secure additional funding to support its expansion and technology investments.
- Build a strong team: Kiva needs to attract and retain talented individuals who are passionate about its mission and have the skills and experience to execute its strategic plan.
- Monitor progress and make adjustments: Kiva should regularly monitor its progress and make adjustments to its strategy as needed.
By taking these steps, Kiva can continue to grow and achieve its mission of expanding financial access and creating economic opportunity for underserved communities around the world.
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Case Description
Kiva is an online platform that sources crowdfunding for low-income borrowers. By 2018 it has facilitated $1.1 billion in loans to 2.5 million borrowers worldwide. However, as questions are raised about the adverse effects of microcredit worldwide, Kiva must adapt its strategy to demonstrate maximum impact on improving the lives of the poor, while continuing to grow the user base and ensure financial sustainability.
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