Social Start-up

Kiva vs. One Acre Fund

2016.10

Social start-ups: KIVA vs. One Acre Fund (2016)
Social Start-up
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Recently social enterprises [social (social value creation) + enterprise (profit generation)] have been receiving greater attention throughout the world.

  • In the past, social businesses were associated with the idea of using donations to support the livelihoods of the impoverished. Social entrepreneurs would use donated funds to purchase and send essential goods to the needy.
  • However, as of recent, trending social business ideas have consisted of investments into sustainable lifestyles and pursuit of goals. The social enterprise would support to people in developing countries until they could stand on their own feet by paying for their education and providing initial funds.
  • While the face of social organizations were best represented by non-profit organizations, currently, they are best represented by social enterprises (or social start-ups).

Among social enterprises, One Acre Fund and Kiva are two companies worth noting. Both enterprises have been challenging the concept of helping impoverished people by sustaining their livelihood through donations. They are rather advocating for increased support to help those in need pursue their goals.

  • One Acre Fund supplies smallholder farmers in East Africa with asset-based financing and agriculture training services to reduce hunger and poverty. Farmers who worked with One Acre Fund realized a 300% return on their investment and significantly increased farm income on every planted acre.
  • Kiva allows people to lend money via the internet to low-income entrepreneurs and students in over 80 countries. Their mission is to connect people through lending to alleviate poverty.


About One Acre Fund

One Acre Fund was the brainchild of Andrew Youn. While earning his MBA, he visited western Kenya and interviewed smallholder farmers about their quality of life. Upon returning to school, he designed a business plan for a non-profit organization that would employ a market-based approach to introducing productive farming techniques to smallholder farmers in East Africa.

  • Andrew Youn majored in Ethics, Politics & Economics at Yale University, and after graduating magna cum laude in 2000, Youn worked as a consultant at Mercer Management Consulting (Oliver Wyman) until 2004. Afterwards, he applied to and was accepted to the Kellogg School of Management.
  • While completing his MBA at Kellogg, he was inspired by courses on social enterprises and developed a passion and dream to start a social start-up of his own. During one summer break, Youn wanted to find out more about the everyday lives of African natives, and he embarked on a trip to Kenya.
  • While traveling throughout Kenya, Youn was moved by the farmers, most of whom were struggling to make a living from the one acre they were allotted, especially due to the low productivity of their practices. In one town, however, Youn found the villagers were experiencing yields that were 3-4 times greater than the average and even saving agricultural surpluses for later seasons. Realizing that the key to farming success was education on productive agricultural practices, Youn developed an idea to make agricultural education more accessible.
  • Returning to Kellogg, Youn founded an NGO called in One Acre Fund in February, 2006 and began to test his ideas with 38 families.
  • In April, 2006, One Acre Fund was awarded the Social Entrepreneurship Track of the Yale 50K Business Plan Competition, securing funds for the company. Youn also received an Echoing Green Fellowship in May, 2006, which provided a two-year stipend to pursue One Acre Fund full-time.

One Acre Fund has been working to increase the agricultural productivity in Africa and to help farmers sell produce at reasonable prices. One Acre Fund has actively served 400,000 farmer families in various countries in Western Africa.

  • Goal: One Acre Fund aims to help farmers: 1) manage a sustainable lifestyle; and 2) store or sell surplus produce to maximize profit.
  • Solution: One Acre Fund offers smallholder farmers an asset-based loan that includes: 1) distribution of seeds and fertilizer; 2) financing for farm inputs; 3) training on agriculture techniques; and 4) market facilitation to maximize profits.
  • Program model: Elect as manager a local farmer who understands good farming practices and can communicate well with fellow farmers. This manager would then be sent throughout the local area to teach farmers about these practices.
  • Extending the business area: Starting with Kenya in 2004, One Acre Fund has been spreading throughout West Africa. Rwanda (2007) ⇒ Burundi (2012) ⇒ Tanzania (2013) ⇒ Uganda and Malawi (2016)
  • Result: In 2016, the number of households benefitting from the One Acre Fund has grown to approximately 400,000, and 2015 figures of shown that the average farmer yields an ROI of about 300% (e.g. borrowing $100 and generating a profit of $300).


About Kiva

Initially inspired by a lecture given by Muhammad Yunus at the Stanford Business School, Jessica Jackley and Matt Flannery developed the idea in Africa and founded the NGO Kiva in October, 2005.

  • Jessica Jackley received her B.A. degree in philosophy and political science from Bucknell University in 2000 and worked as a Senior Program Manager at the Stanford Business School.
  • In 2003, while working in Stanford, Jackley was greatly moved by a lecture given by Muhammad Yunus and moved to Africa in order to work for a small business called the Village Enterprise Fund.
  • Discovering that many of Africa’s talented and passionate entrepreneurs had trouble securing funds for their ideas, Jackley and Flannery tested out a budding idea by giving seven African entrepreneurs $3,500 each in April, 2005. All seven entrepreneurs were able to repay the loans in full. This inspired the couple to officially launch their social start-up.
  • Jessica Jackley was admitted into the Stanford Business School in 2005 and in October of that year, founded Kiva, which utilized crowd-funding to lend money to African entrepreneurs.

Kiva relies on a network of field partners to administer the loans on the ground. The field partners include microfinance institutions, social businesses, schools, or NGOs.

  • Goal: Kiva’s goal is to connect people in order to provide loans to low-income entrepreneurs, ultimately to alleviate worldwide poverty. The company does not follow the standard donation model, but rather encourages people to invest in the dreams of budding entrepreneurs.
    • Mission: "To connect people through lending to reduce poverty."
    • Slogan: “Loans that change lives.”
  • Solution: local field partners in developing nations help entrepreneurs by reviewing their business ideas, taking team photos, and helping them upload their information onto the Kiva website. Individuals can invest in $25 per idea and if the entrepreneur reaches the target amount through crowd funding, Kiva provides loans to the entrepreneur.
  • Services for lenders: For those who decide to invest, Kiva gives frequent updates on the progress of the entrepreneurs and pays back the seed money to lenders when the enterprise succeeds.
  • Program model: lenders browse and choose an entrepreneur they wish to fund. The lenders transfer their funds to Kiva, which aggregates loan capital from individual lenders and transfers it to the appropriate field partners, who then disburse the loan to the entrepreneur chosen by the lender. Kiva does not use any of the loan to run Kiva.
  • Result: As of March, 2016, Kiva has distributed a total of $827M in loans from 1.4M lenders to 1.9M borrowers. The average loan size is $411, and current repayment rate for all its partners is 97.1%.


One Acre Fund & Kiva

There are several interesting similarities found between Kiva and One Acre Fund.

  • The founders of both companies were inspired to develop their social start-up ideas while attending business school.
  • They obtained their motivation to found the social start-ups after visiting the target areas and observing firsthand the hardships of the locals. This process allowed them to imagine ways to alleviate the problems.
  • During the MBA process, the founders developed and acted on their ideas to start NGO social start-ups.
  • Despite being a social start-up, neither One Acre Fund nor Kiva rely on external donations to fuel their businesses, but rather on sustainable business models sustained that positively impact low-income individuals throughout the world.

There are some implications we can draw from these two social start-up as well.

  • The world is plagued with a variety of social issues, but simultaneously, there are solutions that can address these issues.
  • Every person has the capacity to generate ideas that can improve society (e.g. sharing knowledge about sustainable farming practices.)
  • In order for social start-ups to grow and have a greater impact, they must be based on sustainable business models.
  • Those with business experience are more capable than most to contribute to social start-ups.

How do modern-day social enterprises differ from traditional NGOs? How did the founders of One Acre Fund and Kiva begin their start-ups? What are the similarities and differences between the founders of each company? Do you have any plans to use your career to help the needy?

Ask your Ringle Tutor is he or she has any intention to be a part of a social enterprise. Please discuss this topic further and take the time to work on your spoken English.

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