Some prewriting that I forgot to post last time about my final paper…
According to the work of Ronald Burt, it is evident that Kiva has managed to fill a “structural hole”. A structural hole is loosely described to be disconnects in the structure of information that is shared between people and in society. Furthermore, “A structural hole between two groups need not mean that people in the groups are unaware of one another. It means only that the people are focused on their own activities such that they do not attend to the activities of people in the other group” (Burt, 2005 p. 16). The structural hole that Kiva has filled directly connects willing lenders with entrepreneurs in need in developing nations through their website.
Although those who were willing could make donations to microfinance institutions before Kiva existed, the lenders had a much different relationship with the entrepreneurs they were supporting. In a typical microfinance scenario, a lender would simply make a donation to a microfinance institution of their choice. After that, there was usually not a way for the lender to know either to whom their money was going or if the person was even able to pay the loan back. This was mostly due to the fact that microfinance institutions usually did not have the time, resources or desire to track simultaneously who the donations were coming from and where that specific money was going. The Flannery’s realized that there was a desire on the behalf of the lenders to make the loans more personal, yet they acknowledged the challenges and difficulties they would face organizationally in order to help connect the lenders to the entrepreneurs. This would mean that Kiva would have to take on the unique challenge of developing a system that effectively coordinated the interactions not only between the lenders and entrepreneurs, but the local microfinance institutions that were ultimately responsible for distributing the loan.
Matt Flannery states, “There is a historical tension between the donor/lender desire to ‘know where my money goes’ and the recipient organization’s need for efficiency” (Flannery, 2007 p. 36). Luckily for the Flannery’s, Matt was a programmer at TiVo and had substantial knowledge and expertise with programming and websites, which was precisely the vehicle by which the Flannery’s thought would be most effective to reach both lenders and MFIs alike. Therefore, it was only logical that their main platform for attracting lenders and facilitating the process would be through a website. The platform of a website also allows for a highly personal connection between lender and entrepreneur through feedback mechanisms. The lenders are able to log on to Kiva’s website, read about the entrepreneurs they are supporting, and finally receive timely updates on the progress the entrepreneur is making in paying the loan back. In turn, the entrepreneurs and MFI’s themselves have the unique and unprecedented opportunity for Kiva’s website to serve as a form of a credit score. “We are reaching down into the long tail of MFIs, giving them the ability to prove themselves as good borrowers on the internet, put their reputation on the line, and gain the ability to access future debt” (Flannery, 2007 p. 48). Feedback between the involved groups is necessary to support the relationship and create more valuable social capital not only for Kiva, but for the lenders and entrepreneurs as well. Thus, the social capital that Kiva is able to create through its bridging of the structural hole is the underlying factor to their success.