Hey folks,

We’ve been keeping track of the community conversations about Strathmore loans and wanted to reach out to address some of these concerns. First, I want to stress how important lender feedback is to us at Kiva, and please know that your questions about gay rights, over-indebtedness, marketplace balance, and guilt-driven marketing are all concerns we share. Since many of you put together a thoughtful summary in an open letter, we thought it might be easiest to address that directly.

1. “The loans to Strathmore University students are on terms that are both detrimental to the students' financial future and hostile to the Kiva ecosystem.”

I hope it goes without saying, but we believe the issue of over-indebtedness is important for Kiva and the rest of the microfinance industry to address. That’s why all of our partners must endorse the Smart Campaign’s Client Protection Principles, which include a focus on preventing over-indebtedness.

Providers will take adequate care in all phases of their credit process to determine that clients have the capacity to repay without becoming over-indebted. In addition, providers will implement and monitor internal systems that support prevention of over-indebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing).”

Further, the main reason why these loans were structured with a 5-year grace period and a far-below-market interest rate (2-6% per year) is specifically to help alleviate the burden of debt for these students and give them time to secure employment. When we initially explored these loans, we looked at things like the debt-to-income ratio based on earnings estimates. And even though these loans are much higher than the average Kenyan income, it’s important to note that the average income figure is inherently skewed by a large population of Kenyans without high school diplomas, let alone college degrees.

During our due diligence process, anecdotal research showed that jobs paying around $2,000 USD/month were common for university graduates. Since the expected repayments for these student loans are roughly $200 USD/month (depending on the degree earned) that would mean a 1:10 debt to income ratio, which we believe to be very manageable.

The question about the effect on Kiva’s ecosystem is a great one too. Lenders continuing to cycle their loan repayments into new loans is vital to the sustainability of our marketplace, and is something we’re continuing to monitor and discuss as a team. While Kiva has been doing more long-term loans over the past year, this subset of our portfolio still accounts for a very low percentage of the overall amount funded through Kiva. In fact, Strathmore University’s loans were just 2.7% of the total amount posted to Kiva in June (and only 0.2% of the last 12 months). As we grow, we’ll continue to monitor the diversity of repayment schedules for all loans--from the multi-year Strathmore loans to all of the short-term loans that constitute the vast majority of our portfolio.

We know many of our lenders prefer these shorter-term loans, be it 4 or 6 months, because they give them the opportunity to impact more individuals over a long period of time, but we also believe that there are great opportunities to impact change that don’t fit this more traditional model. The Strathmore loans are a great example of this, as these students wouldn’t have the opportunity to attend school without loans from Kiva. While different, we believe these loans still provide an opportunity for lenders to make a huge impact in someone’s life and community.

2. Strathmore University actively opposes gay rights. Strathmore University is affiliated with Opus Dei, an ultra-conservative wing of the Catholic Church.”

While Strathmore is a not-for-profit university started by Opus Dei, Kiva chose to partner with Strathmore University to support these students. Religious affiliation aside--Strathmore is one of the top universities in Kenya and through this partnership we were able to specifically target bright students from very poor backgrounds that wouldn’t be able to go to school without the support of Kiva loans.

Kiva is not a religious organization, however we are open to partnering with organizations that have a religious affiliation.  For instance, we currently partner with organizations that have Muslim, Jewish and Hindu affiliations. Our partnerships are not an endorsement of any one system of belief, but a way to support individual borrowers by creating opportunity for themselves and their family.  

Like all of our Field Partners, we link directly to Strathmore’s website from their partner page, where information about their affiliation with Opus Dei is clearly stated.   We haven’t ever listed religious affiliation directly on Kiva partner pages, in part because we already face challenges with overwhelming lenders with too many details. Our hope is that lenders who are concerned about or interested in specific partner criteria, such as religious affiliation, will take time to check out the organization’s website for more information. That said, we hear your concerns about transparency and we’ll definitely consider adding this to partner pages in the future.

In the meantime, I know that the A+ team has historically run a spreadsheet to keep track of all our Field Partners and their respective religious affiliations, so I’d definitely recommend checking that out if a partner’s religious affiliation is of interest or concern to you.

2. (continued) Following this "spiritual orientation", Strathmore blacklists organizations who support gay rights, and punishes students who work with them. On page 34 of "The Outlawed Amongst Us", a report by the Kenyan Human Rights Commission (KHRC), a Strathmore student describes their attempt to volunteer for the Gay and Lesbian Coalition of Kenya (GALCK)”

Because Strathmore University wasn’t quoted in this report, we reached out to them to get their response. Here’s what they said:

The Strathmore faculty was unable to find any such refusal of acceptance of internship report. They mentioned that their statutes also make a provision for student grievances to be heard (Statute XXIC-C:Student Grievance Committee) and they have no formal complaints in their records from this committee. Further, they confirmed that they have no blacklisted organizations for internships. If you’re interested in learning more about their internship requirements, all of the information is posted here.

Having said that, we should note that homosexual acts are illegal in Kenya, as they are in most African countries. And setting aside our own moral stances, you might imagine how difficult it would be for any university operating in that context to partner with LGBT groups. The fact that Kiva works in Kenya of course doesn’t represent an endorsement of their laws, but instead, a hope that we can help citizens pursue better lives wherever they happen to reside.  

3. “Kiva advertises these loans with a guilt-driven marketing strategy: if you do not loan to Strathmore students, you are kicking them out of school and ruining their lives forever.”

If you received an email from us about Strathmore loans or saw a social media post that made you feel pressured into making a loan you wouldn’t otherwise make, we sincerely apologize for that. It was never our intention to guilt-trip anyone into making a loan, and Kiva will always be a website where lenders are able to make choices about who they would like to support with their loan funds.

We often send out emails to our lender community highlighting different loans and partners that are in need of funding. And big picture, our strategy around Strathmore loans was similar to what we’ve done for other partners that have faced lending challenges: we wrote a blog, posted about the loans on social media, and very recently, reached out with a last minute appeal via email. We also decided to only email lenders that have funded higher education loans to hopefully better invite those lenders who we thought would be interested in these loans.  

A certain level of urgency is inherent in the work that we do, and our intent is to always explain why we perceive that sense urgency in a factual and honest way. It’s clear from all the negative comments that we didn't nail the messaging with these student loans and we're really sorry that our communication was perceived as so forceful. This is a huge opportunity for us to learn and work to improve future emails.

Beyond the messaging, there’s another topic I wanted to touch on that’s come up in the last couple of days: a concern that since all Strathmore loans posted in June were fully funded, we’d view these loans as a pure success and wouldn’t take any learnings from it. Let me assure you that if anything, this has already been an enormous learning experience for us! To echo the last section, a clear takeaway is being more mindful of how we reach out to lenders about different loans and partners moving forward.

On the operational side of things, we’d also love for Strathmore to spread out their loan postings for these tuition loans next year. We originally hoped that these loans would fundraise over the span of 2-3 months, but with delays in the process of gathering loan information and developing a robust loan program with a semester start date of July 1, their posting was unfortunately compressed to a single month this year.

There are many other learnings we’ll apply to this partnership and others, but bottom line, I can’t overstate how much we appreciate your response to these loans. Thanks again for sharing your concerns with us and for your continued support of Kiva.

Best wishes,

Brandon Smith
Community Marketing Coordinator