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Entrepreneurship and Globalization

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Session 2 of the AshokaUOnline and George Mason University open, online course on Entrepreneurship and Globalization, with guest Matt Flannery (@mattflannery).

Transcript

0:01 Philip Auerswald

Hey folks! It's Phil Auerswald. I am the co-instructor and the lead instructor for the entrepreneurship and globalization class and I am hoping that everyone is on and listening and then we got a smooth start this week than we did last week. If you are and you're on twitter go ahead and just tweet out that you're there and hearing it and all is good and even better than my being on, Matt Flannery is here with us and willing to share so hears recollection, experiences, thoughts, I mean, it's been a pretty long time since a person I didn't met in his offices in San Francisco and you know, and back then, in order to be -- it seems like he had been on a pretty wild ride, that the wild ride has continued. So Matt, fantastic to have you do this. I know there is a lot of exited folks out there, we've been getting the tweets all day long and so thanks for being on the show.

1:03 Matt Flannery

Of course, I guess whatever we are talking and called. It could be part of the course or on the show or whenever we wanna call it. (Crosstalk)

1:11 Philip Auerswald

Whatever it is. Yes. So Matt again, one advantage here is that this whole crew had bulkier cases to read for and released a day here. So I'm hoping that, you know, most of the folks on the line have read those and so they have some background on your story. But you know, as we discuss, I was hoping that we could kind of go back to the very beginning, you know, should have you and Jessica taking this trip, and then you're back, you're planning your wedding and then what comes after that?. So can you just kind of think this back to the natural origin of the whole, the concepts of Kiva and how it ruled-out?

1:55 Matt Flannery

Yeah sure. Thanks for having me and thanks for asking me the question. The whole story with Kiva really starts when we saw Professor Doctor Yunus speak about his experience with the Grameen Bank at the Stanford Business School that would be February of the 2003 time frame. I think we saw and speak to a small classroom of about 30 people that night and I really didn't know who he was. I had no introduction to this field, but hearing him speak so humbly and so optimistically really, really changed our lives and set us on a new direction that still continues today, so that it was externally exciting time, we decides to go having get married and then a few months after that we took along trip to East Africa where we're volunteering with an MFI called village enterprise fund which is very, very small payer and non-profit and I was just going over there just to make a video and interview people about the effect of a loan on their live, how their small business is going, their hopes and their dreams and trying document that and essentially this make a small documentary for the non-profit guys were so nice. The host is out there. Doing the course about interaction, I think we had the idea for Kiva, I think if I had to trace back when I really, really have the idea, I was still in San Francisco. Jessica was out in Uganda as she would call me from some small house in the countryside and she's is struck by how easy it was to be in touch of their via voice and via text message and how excited she was and that the story she was telling of whether it would be a fish seller or somebody selling clothes on the side of the street.

3:46 Matt Flannery

We just found that there are like really, really hopeful stories and I want to follow along with this area from halfway across the globe. So you're also talking about how they will retain their loans and seems like their paying rate was really, really high, so we started wondering what can you connect my role over here in San Francisco with her role over there in Uganda and it didn't seem like anything we can stop that and certainly if people were hearing what I was hearing and they said men in her voice, they wanna participate too, so I thought over there, you know just for the, the first inspiration of Kiva really came from that interaction.

4:26 Philip Auerswald

Right! Right. So tell me a little bit about what you are doing at the time and you know kind of how you saw that concept in their life, I mean this is just a sort of an idea you have had, did you run away to think, I can see redirecting behind this idea, or was is it just kind of a notion that you're sharing and something that you're talking about much more informally.

4:49 Matt Flannery

Yeah, well -- personally, I was somebody that wanted to start my own business, I'm a computer programmer, I'm working at TiVo. Basically, our mission is to help people pause like TV and I was literally working on the pulse bar for a new Comcast cable box and...

5:08 Philip Auerswald

I think I used that pause bar that was an excellent pulse bar.

5:12 Matt Flannery

Thank you. Thank you. I spent many months looking on that thing, later that thing. I can tell you exactly how the graphics work. If you knew me at that the time and probably me if you know me today, I'm kind of a creative person and I have lots of ideas for businesses and that kind of -- in our full community thinking of new, say often to do things business ideas and then sharing as much and talking about them, and so I was in case that I would call the quarter-like prices. I think that they are 25 and I was living in San Francisco in a mansion house friend, doing all its creative things and I wasn't in that job about my job and didn't think I could imagine myself working there when I was 40 or 50 years old. I just can't imagine my life turning out that way. And so I did this thing where I had an idea everyday, so I have a business idea and I write it down in my journal every single day and so many, many ideas into the project and if one of the idea is promising. I made myself to hold that night and light up a little paper about it, so I wrote all this concept papers about business ideas that one of them -- the one that got the most structure had this idea for online closing rental store where people are gonna rent luxury clothes online, experience usable, those an idea for a robot store, online robot that can get content from the internet. I have all this black areas, but what I noticed was none of the ideas would really sustain me or they want to make the cut several days after I had the idea, I would stop being excited about it or to lose interest. But the idea for Kiva was just one of those ideas.

7:07 Matt Flannery

At first, I didn't think it that seriously, but I notice that even weeks and months later, I was still talking about and still thinking about it and still trying to model without still trying to arrive on a concept so he had some sustaining power to capture my imagination for some reason of another, I think that's really, really important when you an entrepreneur. I think it would be very hard to start up something, to devote your life to something that you didn't really love and were always fascinated by or didn't authentically care about and so for me, it made all the difference when I thought of Kiva with something that I really, really cared about, something I can imagine devoting my life to work to.

7:54 Philip Auerswald

So one of the things that we were talking about last week was the notion that all of us have a lot of assets that have nothing to do with financial assets and trapping into those assets is a really key part of beginning to kind of vision the possibilities of an entrepreneur idea and so, I'm kind of imposing that on you, you can tell me whether or not its true. It really thought this notion of you guys. You're just your wedding list, right? and so you have this concept and then you're sure of deciding, you wanna kind of go forward and in kind of using that is the springboard for really launching the beginning of Kiva, so can you just tell us what happened and then, I wanna ask you a little bit more about that.

8:52 Matt Flannery

Yeah, well on a lot of factors in the story but, I essentially spent a few months out in Uganda. I was amazed by the different tone of my interaction versus my expectation. So, I had an image of Africa, I think that was created by a nonprofits in the media that emphasize warfare and starvation and dangerousness, and disease and conspiracy stuff like that, but you know anyone that goes over to developing roles or anywhere really realizes that the stereotype to have that place are really blown-out of proportion and people are pretty normal and they are pretty much like just you and me and my interaction over there at that time were characterized by strategy and talking shop with entrepreneurs about your goat herding business and profit margins there or your fishing business then how the mechanics is at work. I had all of this football interactions about business and I thought if I could transfer that experience to the massive, you are really, really onto something and I saw no reason clearly why it wouldn't work, maybe I had an emotional sense that it wouldn't work, but intellectually I cannot prove that when at work. So I kept going with it and when I got back, I spent a few months quoting at the website, just making a very simple experience with a picture and text and about in a very simple things and when we got it live, we just e-mailed __10:30__ such as a few hundred people and said "you know one way you could honor, just taking a risk and lending to these people on this website, there is 70 by the time. So people are... (Crosstalk)

10:48 Philip Auerswald

How many loans that you made just dollar volume at this point?

10:57 Matt Flannery

Today or is it back then?

10:59 Philip Auerswald

Today, right now.

11:02 Matt Flannery

Today, we have the loans on our site has been around 800,000 people and that's about 300 million dollars.

11:12 Philip Auerswald

300 million dollars, 800,000 people and you're talking this was 2006.

11:19 Matt Flannery

I think when we put the website about 2005.

11:23 Philip Auerswald

2005 okay. So in 6 years that is your first seven loans and you've work your network to kind of get these candidates and that stories all told, you had a great partner to kind of help you get those initial loan candidates and you hack this site out working in donut shops after hours when your working on a pulse button, and you send us out to your closest friends, this why you have a wedding list is because these are the people you care about most. And so that's kind of, what do expect when you send this out. Because one thing that people don't like to ask people they know for help or money or anything. It is just feel awkward to them, I mean did you feel like this was an imposition or how did you look at that.

12:14 Matt Flannery

Yeah! It did feel like it was in an imposition and I've learned over the years to not think that way, but at this time, I did feel like I was in the position and I thought it was weak to ask people for money and I know that was embarrassed about that, I would love to kind of worried about their risk because I really had no clue about what would happen. I mean, I'm gonna wire this money to this pastor in Africa that I've met a few times and he's gonna withdraw the money and give it out to this seven people in a pretty weird place in Uganda. He has no systems, he has no accounting background and he's gonna somehow collect the money back, put it back to the bank account and wire it back to me, I mean there is no non-profit here, there is no auditorial here, this is going to do my personal checking account, so I did feel very much because pretty much about there and taking the risk, if it all crash, I would feel personally ashamed or somehow no libel responsible, criminally negligent and in the retrospect.

13:25 Philip Auerswald

Yeah. It's __13:25__. Getting once in while.

13:27 Matt Flannery

So anyway yeah, I have all those fears for sure. I told you remember that feeling, and remember of being like an Easter party with my family and apologizing for it might not work and worrying about it. __13:41__ wasn't a big deal, like dude, I'll put in $50 to your website. It's not a big deal. I'm not gonna sue you if it goes wrong so I figured...you know what's the worst thing that happened if we lose $3000 to $2000. So that's the worst thing that happened and I don't think that any of these people are gonna hold on against me. If so, I could probably pay them back, it's not a bigger the deal. So just take a risk.

14:07 Philip Auerswald

Right yeah... and so the risk works out. You fund the initial loan, you're able to scale, just bring as to the website crash story and you know what led up to that, any kind on how you dealt with it when you sort of first realized that you have a possibility that you have something pretty big.

14:32 Matt Flannery

Yeah so you'd have to fast forward a year and a half to get to that point. About half a year later, all of a sudden Kiva was featured in some big blog, especially this blog called Daily Kos which at the time was I think 'the worlds biggest blog' and so I woke up one morning, when I am still working at TiVo and Kiva was in this blog Daily Kos and the website was crashed and I also got probably hundreds, I don't know if maybe a thousand emails to my Gmail account and which I was checking while at work and I just realized this thing is going crazy and here I am working on this TV interface and its impossible to do both because this website that I have on the side is raising -- at this point, tons of thousands of dollars everyday and the money is going to my personal checking account and I have always customers that are complaining or they have a lot of demand and questions and so I was turn juggling these two worlds at the same time and at that point, I just completely realized that I could no longer do both things at the same time and I really had to prioritize because this one thing Kiva was gonna blow up if I didn't fix it and I was putting a lot of risk by neglecting it during the day.

16:04 Philip Auerswald

Well I mean, this is the thing -- I mean, again I know all of this because __16:09__ I am just trying to remember. I mean, you're like a good 9 months into this right or at some point that.

16:18 Matt Flannery

Yeah that point, I'm the web setter then for about 6 months and (Crosstalk) there was like a 50 people total that returned to get loan on the site.

16:29 Philip Auerswald

But you're kind of working all hours, coding before them.

16:38 Matt Flannery

For that, interviewing 6 months, this is a total blur, once you started taking money into the site I had to build the rest of the site so I had to involve the feature for them to repay money, the feature within the blog the feature for them to post-off a new loan. I had no the diligence __16:57__ calling them at night asking accounting question and wondering where the money was going and __17:03__ also inspired. I also had an experience this feeling of potentially competitive so I learned that other people who working on these ideas especially eBay and ebay.com, and that point I had in my mind that were gonna have somehow launch competitor and try to blow me out of the water which is a completely stupid idea, they weren't gonna do that, but that competitor experience made me just fears and wanting to clean the ideas that I had thought of myself and I think that I saw like I had a lot to prove. What to prove when I have a big chip in my shoulder and it was me against the world and I was not going to stop for anything, so basically I have put my -- I just exhausted myself. I stayed up all night, many nights a week for many months in a row.

17:58 Philip Auerswald

But you sound like a pretty terrible entrepreneur there. I mean, since you had no plan, you got overwhelmed, couldn't you just mapped it all out and done it 9 and 5, is that where it goes?

18:11 Matt Flannery

That is not the way it goes. I think its better just to start with something small and learn as you go and anyone that tells you that they have it all figured out and had a time is either the most talented person that have ever lived or they are crazy or they are a liar. So for me I had to learn that every face of the way and I must be pushed from the behind in every few months with some realization.

18:42 Philip Auerswald

I wanna fast forward to two different point in the Kiva's development. I think people -- I mean -- I have you on call because you know we have known each other for long, and I am following your story. I get some push back last week from few of the folks in the course because I was being so positive with you there, but I think in most grade, I take the responsibility. So, folks are waiting for me to kind of go out __19:11__ critically in attack you are just gonna be disappointed. I think about your story and what happened last years. One really interesting point was the whole kind of discussion that happened -- I'm trying to remember exactly what sparked __19:30__, whose post it was or how we got it. You know Kiva is not really doing what they say, like they're not actually lending the individual people, the whole thing is a shame but its really sort of through this Microfinance Institution, then I am thinking, just go to them __19:46__ with the whole thing in 2007. The whole model is there. It not like anything was never hidden. And that's why from the beginning, I have to understand the critic, you know I wasn't particularly sympathetic, but anyway I'm doing a lot shorthand inside base. Could you kind of take us to exactly what the discussion was, what happened and how you responded and there were gonna go to some open questions. But I thought there was real and important (Crosstalk) kind of hear of.

20:11 Matt Flannery

Yeah! Kiva has had a few minor crisis or sagas in our history, one of them happened in 2009. So I'll talk about that one. But we have had our share, I have my share of scarred issue for sure. So the story behind that really communication crisis that's what I would say, is that you have to look at the whole story as a whole starting back in 2006. Kiva started by working with a few pastors in East Africa. I set up the banking accounts in Uganda, Kenya, and Tanzania with these pastors, while these pastors would do there, they served not lenders at all. There is no banking infrastructure so I would just wire them the money to a bank account, their personal bank account, they would withdraw the money and then distribute it to people in their community and personally collect it and wire it back. So those pastors at that time had no spare cash or what we called working capital in their bank account and so they would wait for the money and I would send them the money at the end of the month. And then disperse it to the borrowers after I wire them the money. So wire would take 4 days __21:30__. Every wire cost only $40 at that time which is -- so it is trying to bucket down once a month. And so that's the way it hit the modern world for like a year and a half and then we started getting all this business that really need that model sort of unscalable and we had a lot of risk and flood into diligence issues when working that individual that more part of an organization that was audited. So we sort of getting more professional, we hired thinkers and credit analysis people and had been travelling around the globe and we started working with MFI (microfinance institutions).

22:11 Matt Flannery

As you know, the best vessel to both source and administer and collect the loans. Okay. So at this point, we started developing a partnership network now its in 60 countries. So every working and move on, they would work with World Vision, a small branch of World Vision out there, outside of Kigali or in Nicaragua, an NGO helping people on the Caribbean coast. So we started working with these organizations, that were already lending to poor people in our community and we just wanted to help them to that more and so we build a whole infrastructure for that whole software package for that so that they can upload lots of profiles and really scale this business internationally into that, not the millions, but the tens and millions, eventually the hundreds and millions. As it happens, Kiva continued to have supply crisis or shortages so what I would say is, we had run out of loans on the site. We are so successful, were getting on __23:17__ and TBS, with so much business that we are selling out of loans constantly and so what the MFI started doing was, they would disperse the loans to the people of the Caribbean coast and Nicaragua for instance before I would wire them the money, so what sort of happening was in organization in Cambodia would assign somebody, give them the loan at the same time take the picture, write the profile and put it on the website, then I would send them the money at the end of the month. And so was happening was, their tight linkage between your funding them and then were giving the money was broken and so became a little lot connected, although the repayments still went to use the lenders so, if you have went to that __24:07__ in Cambodia, if they'd didn't repay the loan you still wouldn't get repaid.

24:10 Matt Flannery

But front-end, they were already getting their loans before we wire them the money. So I had this all explained on the website, but it wasn't explained very well and I certainly didn't keep up with the explanatory challenge of that complexity. And so people started blogging about this, coz they could read it on the website there were sort of thing. Kiva isn't explaining this very well and Kiva's based on the information I'm getting off of on their own website, its different than what you think it is, and so, we really have this crisis of negative blogging, negative publicity based on the perception that Kiva was more fake than the average internet user saw. And I thought some of the criticism was valid, we weren't hiding anything, I mean all the information they got was some of our website, but recently over simplified what was happening on the back end and that's part of my design property, as an entrepreneur, I like to simplify things, I would like to make the website really easy to use and have lots of pictures and if you wanna find out more you can find out more, but you have to dig a little deeper and that's the casual user might not see it essentially. So when I learned back then was your only as good as your average user believe you are, so you need to really got over the top in explaining how you work to the average user even that the average user only spend in a 5 minute a month on your website. You need to educate that person as well and so since that time, over explaining their model, if you check it out please give me suggestion if free in that. Also were getting back to the original model so in other thing, were doing is getting back to the true what have were I've cant direct lending model not true intermediary.

26:09 Matt Flannery

So right now in Kenya and in US, were lending directly to people, so in Kenya were lending directly to individuals, theatre and their mobile phone so we're tapping into the mobile payment networks. It's nearly a return to the original model, if you return to the exactly a thing I was writing about in the first innovation paper, it represents the full circles of my work and I returned to that. I probably write a note in paper about it once it scales just to sort of tie the narrative to complete the narrative which is really, really important thing for me. If you wanna check that out it's that zip.kiva.org. So zip.kiva.org is the testing ground for that model with the mobile phones and we'll probably take it to the mainstream to the million next year.

27:02 Philip Auerswald

Yes. I mean it's kind of cool but now you can -- say we're going to take it for the million so that's different in having _27:07_ in 2006 but you actually will pick it in to the millions that's actually pretty cool. Now, I got one other question for you just short question and then three minutes will go to some of the questions from the class is this actually. What you just actually -- I think answer my question I mean but may be there is something else you wanna bring on or what do you kind a just about right now, what do you sort of thinking that you know you wanted to kind a share with this group of 800 folks from around the world about what Kiva is up to?

27:35 Matt Flannery

Well the main thing I am excited about is I think we live in really, really wonderful times. I mean rather point in history where 2.5 billion people are still left out of the world to financial system, but they run very stable businesses and has very good credit and the opportunity exists to bring all of those people on to a global stage both financially and digitally and so within my life I think this is gonna be the first generation where everything -- maybe since Adam and Eve since where every person can be connected to every other person in the world if they wanna be and I think that we will represent a very exciting opportunity. I hope our work can help make that world a better place. Make that global digital village a place where you gonna live where people are connected for a positive reason with positive intention and you know a lot of bad things can happen when people are connected but there are a lot of good things can happen and I am excited to _28:42_ the good, so as mobile phone spread to a most remote parts of the world I want Kiva to be there as a place for those that were previously left out of the world's financial systems or the economic systems to have a place to go or community to go to, to get support.

29:00 Philip Auerswald

Fantastic! Well, that's a huge new direction and you know and a really great vision. You're not -- you haven't let up I can say that mostly that you're talking about you know that's great. So, I'm gonna -- I'm going to go to a few questions we got from Kiva so from Lorette Madsen, aside from social value what are the tangible returns project profit margins or wild microlending orgs like Kiva? So, how do you define your success you know you've got sort of loan volume and you get number of people but you know how do you sort of think about your success?

29:52 Matt Flannery

Well I would say total impact as the concept so a nonprofit any social change in organization I think any corporation actually should evaluate themselves in terms of their impact not their revenue so for Kiva our impact is the factor of breadth but also depth and so you know the breadth part is easy to measure, the depth part is a lot harder to measure and the great organizations figured it out how to measure depth as well as breadth because our society, our economic system is set up to measure breadth. I mean for us breadth is member of dollars, so we talked about 300 million dollars, number of people, we talked about 800,000 dollars, a million users online, 80,000 numbers, thousands volunteers all that stuff, that stuff is really, really easy to quantify when compresses, but it does not begin to tell the full story. There is so much depth, there is so much richness nor qualitative things going on that are really, really hard to summarize. I mean our office right now next to 30 Kiva fellows to have the scholarship program. We're sending them out in to the fields to leave this weekend, to go to places all over the world to work and they see the depth first hand. They see an organization reaching in to a rural area of the country that was previously unreached. They see a woman in parliament story. They see you know a water and sanitation program being developed that was previously undeveloped. Thanks to our risk tolerant capital that's been sent out to places that undergo feminine and starvation so. It's all about that qualitative that has really been my emphasis in trying to figure out how to measure that and it's not easy.

31:54 Matt Flannery

They have to do a story telling, but -- here's a way to measure it as well but it is you have to sort of to create that on your own it is not handed too.

32:06 Philip Auerswald

Now, I wanna follow that up by asking a question from our student in the Muscat in Oman and I believe it's _32:20_ but you can correct it later on. So, she wanted to -- last week I don't know if you ever saw this piece it was one of the work back by Neel Karnani and it was about -- you know tell a little bit it's microfinance business its mark and everybody read that last week and in part of it there's a point that was that essentially that in early stage of the development we need just to build a lot of factories and give people employment and that in to the whole notion of kind of strengthening societies by providing microloans to small businesses is misguided because you never really get the scale and development that way. So when you encounter those kinds of objections and by the way, I am not bringing that up to some sort of _33:10_ I think that Karnani is totally off mark and we just need to depict the whole thing down, but I mean I am just wondering how you think about that critique?

33:32 Matt Flannery

Let's say it's neither true nor false. He pointed out something that resonates with me a lot which is the overselling of any humanitarian efforts or the promotion of any charitable endeavor. You have to be very careful about the frame. Unfortunately, micro credit has been framed in terms of charity. It's has been framed in terms of a miracle, has been framed often by people trying to raise money quite frankly and so when you are trying to raise money for something that's very good you might exaggerate or you might have to speak in you know very, very excited terms about the best cases of something, and not described it sort of been a more measured way. And so because of that things get over sought and I think the story with micro credit the headlines that a journalist might most want to write about back in 2003 or the late 90s. The headlines that journalist made one of most them quite is a miracle story. So they'll find the one miracle of a woman that had a chicken cube and then the chicken cube went to five chickens and eventually 20 chicken cubes and pretty since she is running a chicken factory. That's story is the one I could seen in the headlines and then it creates the impression in the casual observer that that's a typical story and that microfinance should always play that role. Now, I didn't know if that was true or false when I started, I was certainly excited about story. What I encountered though was something potentially even better, certainly more grounded in reality and richer and wonderful of the questions for the last six years which is less instant, less exciting, less sensationalistic but certainly, certainly wonderful in it's own way.

35:26 Matt Flannery

To me it's more of the story about people struggling to improve their lives. Generation after generation, year after year, building a business every year, increasing the size of their harvest, buying something like a freezer to start fishing, buying a lock so that they can lock up their business at night but putting a roof over their head sending up one kid to school of this year instead of zero. It's incremental stage of progress. Microfinance served set the stage for that but it didn't caused that and I think as you know if you are sitting over here and your housing tenant is going and you only five minutes to spend during some -- you want sort of a shortcut or a quick round out or something that's a miracle and so the microfinance story can really tap in to that desire. Unfortunately, the world hasn't worked that way but, the world can be better than that actually. It's the stories of people working really, really hard and a savings account and the credit line can enable their success but I wouldn't say it causes their success, it enables their success. Another way to say it is microfinance increases opportunity but it doesn't necessarily cause wealth creation. It set the stage for wealth creation but it doesn't cause wealth creation and that certainly isn't the only or even the primary factor for somebody to increase their standard of living, it is just one of many factors. If you are in a place like rural Uganda where we stared Kiva, here in a place where there might not be access to clean water, there might not be access to education, there might not be access to housing. All of those things are critically important for somebody that wants to improve their life. A bank account, a line of credit is also important. It's a valid intervention. It's a wonderful thing, but it certainly in and out of self doesn't transform a person.

37:38 Philip Auerswald

Yeah, I think that's a great response. So, you know the idea is even if what's you are doing or what others are doing isn't the solution to everything it doesn't mean that it's not a worthwhile thing to do?

37:52 Matt Flannery

Yes.

37:55 Philip Auerswald

Yeah. I think -- a dearly stages when you were trying to figure out how to organize this is from Pearl in New Delhi and you kind of figure it out these low in amounts sort of a basic model, would this all driven from the borrowers, or did you kind of calibrate that according to what you think was gonna be viable in your end? How did you think about the sort of original scale of the loans and what you are providing?

38:28 Matt Flannery

Originally?

38:30 Philip Auerswald

Yes originally then how that's evolved. Because I saw that you've just posted the biggest loan ever in Kiva of $50,000. So - and you know we have got now _38:38_ in a different scale and so in terms of these issue and scale and you know other kind of services that coming in that are offering you know generally speaking more than what Kiva bar is where asking for. How do you see this intersection of different services that are operating in different scales?

38:59 Matt Flannery

Yeah, I've been blown away like things like kick server and it's really open-minded in the last -- I would say a year and a half to think bigger. Kiva is currently in the process of what I would call opening up its platform to all types of good causes and different sizes of projects and loans in whole around the world. So, we recently funded a $15,000 loan to a student to go to university in Kenya. So I wrenched in and providing tuition loan any way that we can help address the social cause for people that are under privilege or left out in some way. So it's not just for people in poverty, it's for a wide variety of social causes that might contribute to poverty alleviation. The biggest loan ever was, I think two weeks ago, we funded a $50,000 loan for solar distributor in Tanzania. So, bottom of the pyramid products SMEs, water and sanitation loan and all that kind of stuff weren't just sit in to see if our capital can further those causes.

40:13 Philip Auerswald

I think from the class -- this is a question from Elizabeth who is actually a student here, at Mason part of the in person class. How are -- you guys are all that peer-to-peer and you're all that kind of building those relationships, virtual relationships between people. You're big enough now. Do you have any interactions with the government? Do you have any actions with other kind of sole society or organizations and sort of start to think strategically to coordinate with any other organizations, aside from providing them a venue to raise money as just what you were saying, but in a kind of a larger scale?

41:03 Matt Flannery

Not really. To be honest, we've been pretty devoted to partnering with smallish organizations all around the world, sending money across the border directly to them or eventually directly to the people that are the recipients of the loans. Kiva is all about this intermediation so the closer we can get to connecting borrower and lender, we feel the better. So, over the course of the next decade, we'll just be trying to strengthen our connection and make it more and more closer. So, we don't see a big need to work with governments unless they can enable our growth or if they might potentially disable that from happening as well, so over the course of the years, it's been primarily a regulatory discussion, different country have different regulations about internet commerce, territory restrictions. We just launched in India -- we haven't launched in India, sorry. We will launch in India soon, but we just got the approvals from the Indian government to work in India so that was a big multiyear effort that's gonna come to pass pretty soon, where we can actually fund borrowers and we're gonna start I think in Orissa some of the poorest people on earth out there, but for years, the Indian government was holding us back from doing that because of all the approvals they need regarding currency transactions and cross border financial transaction.

42:35 Philip Auerswald

You kind of alluded to this, but how -- actually this is also a question that just came in because we're moving it. Your tweets strangely moving so quickly. Yeah, from Jack, so how much of your work now and your future do you see being in the United States and in fact this question of loans, some loans now going from other parts of the world to the US. You could tell us a little bit about that? Actually, I think we're gonna tweet you guys your animated thing that went viral a little while back about your loans, but anyway, I'll let you answer that question I just post and we'll tweet that out.

43:26 Matt Flannery

Okay. Yeah, so we were talking about the USA.

43:31 Philip Auerswald

Yeah.

43:32 Matt Flannery

I started working in the USA in 2009 and when we did I was just blown away by the reaction. It was the number one customer service question we had received up until that point in time that was on a topical issue area which was why are you working in the US? I see so much need in my backyard. I'm in New Orleans and there is so much need here, why can't you work with us? Why do we only talk about funny people in Kenya? So that really wade on my heart quite a bit and give it a regulatory discussion. Again, we were able to get the approvals and the US has got a lot more advanced legal system with regard to lending and internet lending so...

44:13 Philip Auerswald

Are you sure you wanna use the word advance?

44:16 Matt Flannery

Well, cumbersome, maybe another word, but it was a lot more complicated and as well my lawyer is here so they use a lot more people to ask basically with more opinions. So I figured it out and we started working in the US and to be honest, it's been a very inspiring. So it's been one of the most inspiring chapters in my career at Kiva just talking to the borrowers in the US seem a need for this, seeing how underserved it is just shocking how underserved small businesses are in the US more than I -- you would ever experienced when you talk to this small business people and underserved communities whether that being in Detroit and New Orleans, quite frankly in San Francisco or in Oakland. The need is great. They're completely left out. Our financial system is for the rich in this country more so than in many other places in the earth interestingly enough and so we have been trying to work here. The scale hasn't been as big as I had hoped. I don't think the pipelines who get to know the people are well developed and so I think -- we worked with thousands of borrowers in the US maybe or a thousand, but certainly hasn't taken off and that's because we haven't figured out to get to scale and certainly the will and the inspiration is there, but just to connect these people to other people, the right people to the right people has been a challenge. So we're taking our second swing at the plate basically with this project called Kiva Zip and it's really, really inspiring. We got to go in both in the US and in Kenya. Both markets are really, really interesting. I'm super inspired by the work here in US.

46:13 Matt Flannery

The borrowers are doing amazing work. They can repay back the loans. They just need a little bit more grace, a little bit more grace period, a little bit more flexibility, a little bit more of a human touch and our financial system here for poor people has been predicated on the idea of trying to get people not to repay on time. Credit cards, they dishonored that and they make -- they incentivize people not to repay on time, which has created the whole perverse view toward that, that we're trying to figure out if we can correct at least in a small way in our community.

46:54 Philip Auerswald

That's -- yeah. No, I mean it sounds like a natural thing to be working on in and not need to be in the pull off. I'm gonna combine two questions, one from Danny DeGrave and another one from my high school running body, Tony Daniels, who had signed up for his class which is great. So essentially, Tony is asking are there any regulatory changes that would facilitate Kiva's growth?

47:21 Matt Flannery

Yeah.

47:22 Philip Auerswald

If Kiva remained a non-profit and then Danny kind of extends that and says what if Bank of America wants to acquire Kiva, what would you do? What if it was the Red Cross? What if you saw a path -- Tenax what Kiva is through an acquisition. But we're going to start with regulatory changes and Kiva remaining a non-profit?

47:44 Matt Flannery

Right, yeah. There are a lot of regulatory hurdles that you can imagine Tony that hold back our efforts with internet lending, person-to-person lending in general. It's not just Kiva's. Anyone getting in to this work. We have an investment regulation framework that was created in the 40s and the 50s really which basically continues on today which really not suited for the internet and prevent us from primarily charging interest or offering interest to our user base because of that we became a non-profit. We got 0% interest loan only on the website which is fine. We've been able to do a lot within that constraint, but imagine if that constraint wasn't there, I'm sure our borrowers in Oakland would mind paying, one, two, three, four, five and six percent interest some fair interest rate and potentially we could tap into a so much more capital from people willing to do it. So I look forward to the laws opening up because I think communities can regulate themselves now in a way that governments could never regulate us.

49:07 Philip Auerswald

Through social medial and through its other mechanisms?

49:11 Matt Flannery

Through chat networks to -- on identities through diversification. All the wonderful mechanisms in tools as the internet has created to protect people's identity, their fine identity, diversify risks, lower transaction costs, create real human exchanges between people that would never otherwise exchange. All those two can be use to self regulate the community in a way that the SCC could never hope to regulate our community.

49:46 Philip Auerswald

But I wanted the kind of -- update, I mean you're giving a case that talks about sort of really you kind of interesting story about wanting to charge interest and then kind of getting some counsel on that and ending up with the model that you ended up with, but you know with the prosper.com and their cross funding and we've had the JOBS act and __50:08__ coming through and so the whole terrain around constraints to lending fuse to be shifting so -- it gets the public _50.23_ question so one more kind of followup on that -- in words that we can all understand. I know it's like really complicated. Where is that conversation and what it does mean for the future of Kiva in terms of things that are already happening right now in the regulatory domain?

50:39 Matt Flannery

Yeah, I was really excited about the JOBS act. I thought it could unlock something that we've been wanting to be able to do for a long time. So when I was wearing about it, it sounds wonderful. Unfortunately, I think it sounds a lot better than it actually is so as I started to look into it, it's -- and appear like it would change much. I think it represents a good direction for the country to go which is enabling crowdfunding, enabling person-to-person investments and I think the US should be on the forefront of that discussion globally because it's gonna happen and it sort of like civil rights. I think it's going to happen over the course of our lifetime, it's just a matter of government letting it happen and it appears like the JOBS act where I thought it was a hugely forwarded, it seems like a baby step right now to me as they get into it, and it also seems like it might be a baby step that will never gonna happen or won't happen now because it was so ill-defined or so vaguely defined in the legislation. It has to be defined by the SCC right now and it's in the hand of SCC and who knows what they're gonna do with it. They'll probably just try to kill it.

51:58 Philip Auerswald

Right. So it's actually not really open the door the way some us hope that it would to a different attitude towards lending at smaller scales.

52:09 Matt Flannery

Not yet. I think it enables us for a nice applause moment on stage for politicians to get together and cross their hands, but the substance really isn't there yet.

52:22 Philip Auerswald

So, I actually want to end up by not talking about Kiva. I wanna just talk about stuff that you see when you circulate around obviously a school awardee and -- you have other environments. What do you see elsewhere that other people are doing that's been exciting you lately and why of course?

52:44 Matt Flannery

Well, I don't know. I mentioned a whole bunch of things. I guess if I had to answer that question really fast I would say kind of like I've been talking about all the tools around mobile payments. I think every African country has some sort of mobile pain and competition that's heating up and I was really exciting to watch because I think it enables -- it's gonna spread fast to the microfinance so the man of "bank account" that heat low-income communities, is going to happen through the mechanism of mobile payments much faster than it will the microfinance in the coming two years and so. That is fascinating, all the cool things that are gonna happen as that spreads -- that's really exciting. Over here in San Francisco, I'm really interested in crowdfunding -- I mentioned crowdfunding on minor things that kick starter a really fascinating and whatever happens after the crowdfunding bill which is -- just a crap load of different start up to try and take a swing at it so I'm watching them with eager eyes. Personally, I'm really into ridesharing and crowd source the transportation staff which is -- I gave up driving a little while ago so getting around San Francisco and all the new tools, iPhone apps and Zipcar and all that kind of stuff I think represents a really exciting trend closer to home for me

54:23 Philip Auerswald

Yeah. Well, I mean -- obviously this entire classes sort of predicated on the notion that there is just an amazing amount of open playing field to do -- new projects scale of Kiva -- it is similar time frame and I certainly agree with you about mobile. Now, one other kind of followup looking back -- what you were talking about in terms of mobile financial services, I mean you have now an amazing global community, 800,000 people mobilized -- across the world and -- this course as you know we announced this three weeks before it launched and we have I think 800 both signed up from around the world. Do you see kind of a pathway for Kiva to start to offer other types of resources to support the 800,000 entrepreneurs in your network through -- kind of education or other types of services that you can offer and another also ways to kind of coordinate, convene, collaborate within the Kiva City really it's even more than a community?

55:44 Matt Flannery

Yeah. I have a few ideas that I love everyone's thoughts if you can share them over Twitter. I'm sure the imaginations of you all are much more power full than just my single imagination, so I love to hear it. I think a few things we'll be doing in the next 12 months are enabling much more direct conversations between borrower and lender on our site. We just connected -- our Kenyan borrowers to the website so that you can send them a message and I'll get it via text. They can text back and you'll get it via email so it's a two-way connection between rural Kenyans and internet users on Kiva Zip. So you can imagine that when something like that happens offers a business transfer or communication can transfer two ways and people can give business advice or trades, ideas, eventually marketing can happen that way so our borrowers in the US are using Kiva as a marketing platform too, so they are trying to engage a community as financiers, but also consumers. So in addition to funding my loan, come to my café and I also you'll have a cup of coffee. So do you think as a platforms or it is a little bit like group on but more for a good cause and our lenders just really want to support the businesses and active lenders someone you sort of have your -- you have some skin in the game so you feel more than affinity towards them. So those are of the few ideas. I'm sure there is a lot more to explore.

57:23 Philip Auerswald

__57:23__. This has been just a great conversation that -- I appreciate you have taken the time to do this. I know there was a lot of energy last week after the class and with a lot of tweets went out even from the folks. We are up in two, three or four in the morning if you are now tuning in. So if you have a chance to take a look at your Twitter screen and to track the #AshokaUOnline. In the next 24 hours I'm sure that they would be excited if you have some answers to the followup questions. But as it is thanks a lot for taking the time to do this and I think you covered a lot of interesting grounds. So I appreciate it.

58:10 Matt Flannery

Yeah, I'm blown away by how many people are on this call and also tweeting. You've got -- you on to something really powerful. You got a lot of people engaged. That is really, really cool.

58:20 Philip Auerswald

Well, yeah. I mean coming from YouTube that is a couple of it, but yeah this is early day that I think not just for this activity but we are planning it in a show for you. I am excited. I am in George Mason obviously but it's an external partner working with Aaron Crumpets and Marina Kamen, her team at a show at Utah to rule this out over the next year and have at least 10 courses next summer and with this kind of region and may be more. So I think there is something. I agree to you. I think it's really exciting and I've been totally blown away by the response and we're part of it. So, thanks for joining us. I want to tell the -- as we close out, we got about 60 seconds left here. I just want to remind everybody to get on the Bookneto platform, that's where we are kind of having our community interactions so everybody on there creating your profile, putting in you initial statement and ultimately your involvement in the class it's going to be tracked through that platform, so make sure to do that. Make sure to contribute and that is kind of our mechanism for keeping up with you all. Matt, I kind of build the couple of things so that I can go back to the school world forum one year as not just the journal editor guy but somebody within actual activities so may be do something like play. I don't know. But it isn't it has been fun until now.

59:57 Matt Flannery

Are you on to something? It's hard to get a signal.

59:59 Philip Auerswald

Yeah. But thanks a lot now. We're shutting down right now. Okay.

1:00:02 Matt Flannery

Okay. Bye-bye.

1:00:03 Philip Auerswald

Right.

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