How to have Kiva's problem

How many nonprofits have this problem: So much revenue from donors that you're struggling to spend it all.

Of all the problems you might face, this has to be one of the better ones.

Yes, it's happening -- even now, when many nonprofits are struggling. And one organization that has the problem of too much money is Kiva. (Read about it in this New York Times Magazine article: Extra Helping.)

Kiva (reviewed on this blog here), raises funds to lend money to small business owners in developing country. Less than three years old, the organization has grown explosively. According to the Times article, they've gathered more than $19.5 million from more than 220,000 people. Over the past holiday season, they sold around $2 million worth of gift certificates. Now they're scrambling to keep up with the demand.

Sure, Kiva has been pretty lucky, getting incredible buzz and high-visibility endorsements from everyone ranging from Oprah to Bill Clinton. But that kind of "luck" comes from being smart, being worth talking about, and being one of the first.

Want to have the too-much-money problem? See if you can put the Kiva formula to work for your cause:

• Make sure you're offering something donors understand and want to do. This is partly a matter of positioning, but it's also a matter of having a cool reality to start with. (It's worth pointing out that micro-enterprise loans have historically been a tough sell in direct mail.)
  
• Put donors in control. Give them clear and detailed control over where their gifts go. This is where the Web really comes into its own, making a lot of information easy to work with.
  
• Give donors tons of feedback. Make donations only the beginning of a rewarding back-and-forth conversation.
  
• Make sure you have a strong social aspect to giving. Kiva makes it easy for people to talk about and share what they're doing.
  

Much, much easier said than done. But if you'd like to be the organization that has too much revenue while others struggle -- it's a place to start.

Technorati Tags: fundraising, Kiva

Comments

[Eric]

I think it matters a lot for Kiva that the lend-ers and the lend-ees communicate directly with each other. So many charities put themselves between the donors and the recipients of the charity's good work.

[Jeff Schreifels]

I actually don't think you want Kiva's problem. What is going to happen when people find out that Kiva is overfunded? They will stop loaning and giving.

Kiva has a problem. They will not spend anything on overhead. The President firmly believes that 100% of the donation or loan should go directly to tha project. While that may be noble...it's seriously flawed.

Just recently I read an article on how Kiva had an open forum for users to ask question and comments to the president of Kiva. Someone asked if Kiva would allocate at least 10% of the loan or gift to overhead so that Kiva could hire more good people to find projects worthy of supporting. The President scoffed at the idea saying he believes loaners or donors want to see 100% of their money allocated toward the project.

This is foolish. The result is that Kiva is now overfunded and they are scrambling to find more projects to fund. If they actually had more staff, they would have not have this problem. There are now thousands of projects out there that are in need of funds, but won't get funded because Kiva won't spend the money to find the projects.

We have been so brainwashed by organizations like Guidestar and Charity Navigator who tell us effective organizations are those that have low overhead and low fundraising to cost ratios. But is that really the true measure? I believe, the true measure is in the effectiveness of the project or work of the non-profit. How is it changing lives? How is it reducing poverty is an area? I believe people understand that their gifts have to also go to overhead to MAKE their gifts work. Somehow though, we have gotten it in our fundraising heads that it's ratios that are the most important.

Well, here is an example of how ratios have gotten out of hand and we actually see less effectiveness from an organization because of it.

Jeff, I'd love you to bring this topic up again and I want to hear from others their point of view.