Kiva.org is an online crowdfunding platform to extend financial services to poor and financially excluded people around the world. Kiva lenders have provided over $1 billion dollars in loans to over 2 million people. To set investment priorities, help inform lenders, and understand their target communities, knowing the level of poverty of each borrower is critical. However, this requires inference based on a limited set of information for each borrower.
Problem Statement
In this project, we work with a dataset with 671,205 loans distributed in 15 sectors across 102 countries. With this data, it is possible to answer many interesting questions. Examples include:
- Poverty Index Score: Using the Global Multidimensional Poverty Index (MPI) to quantify poverty levels.
Pros: This will provide a holistic view, allowing Kiva to rank borrowers’ poverty levels effectively.
Cons: The complexities in constructing the index require subjective weighting of factors, leading to potential biases.
- Loan Repayment Rate by Region: Analyze the repayment rate in different regions to infer the economic stability of those areas.
Pros: This reflects the financial health of regions based on borrowers’ ability to repay loans.
Cons: This might oversimplify poverty assessment, as repayment rate might not solely correlate with poverty but also with economic activities and borrowing habits.
- Loan Purpose Analysis: Evaluate the types of loans (e.g., for agriculture, business, housing, food etc) and offer insights into the diverse purposes for which loans are being utilized in different countries.
Pros: This offers insights into the intended use of loans and their reflection on the economic activities and priorities in different countries.
Cons: While loan purposes provide insights into spending patterns, they might not be a direct measure of poverty. Some borrowers may take loans for business expansion rather than basic needs, potentially skewing the assessment of poverty levels.
Additionally, to these concrete questions, the possibilities for exploration and data analysis are nearly limitless. Here, for the locations in which Kiva has active loans, we will focus on loan purpose analysis.
Explanatory Data Analysis
Analysis of Loan Purpose Across Regions
In this examination, we explore the reasons behind loans in various countries, industries/sectors, and activities within the Kiva Loans dataset. Unveiling how borrowers allocate funds provides valuable insights into their needs and economic activities.
A. Country-Specific Loan Distribution
PHILIPPINES
1. RETAIL
2. FOOD
3. AGRICULTURE
KENYA
1. AGRICULTURE
2. FOOD
3. RETAIL
EL SALVADOR
1. AGRICULTURE
2. FOOD
3. HOUSING
B. Loan Issued by KIVA (Country-Specific)
COTE D'IVOIRE
MAURITANIA
BHUTAN
C. Loan Types by Sector
SECTOR
D. Loan Types by Activity
ACTIVITY
Geographical Poverty Index Score
LOCATION DATA
Geographical Rural Percentage
Summary of Analysis
- Country-Specific Loan Distribution:
- The Philippines predominantly focuses on Retail/Business loans, showcasing an emphasis on entrepreneurship, followed by interests in Food and Agriculture.
- Kenya exhibits a strong focus on Agricultural loans, indicating a potential emphasis on agricultural development, with additional interests in Food and Retail.
- El Salvador shows a dominance of Agriculture loans, particularly emphasizing animal farming, and secondary interests in Food and Housing, highlighting a significant focus on food production and construction.
Conclusion: Each country tailors its loan distribution to align with its unique socio-economic landscape and priorities.
- Loan Costs by Country:
- In Cote D’Ivoire, a focus on agricultural loans suggests support for the agricultural sector, specifically cashew nut production.
- Mauritania directs service loans toward enhancing clean water access infrastructure through power generator replacement in solar plants.
- Bhutan’s emphasis on an art loan for income generation reflects a unique approach to economic diversification, emphasizing creativity and traditional crafts.
Conclusion: Loan purposes align with specific economic priorities and challenges unique to each country, reflecting a tailored approach to addressing local needs.
- Geographical Patterns of Loan Types:
- Agricultural loans are prevalent in agrarian economies (e.g., Philippines, Kenya, and El Salvador), supporting farming and rural livelihoods.
- Retail loans are widespread in developing countries, fostering small business growth.
- Food loans are common in developing regions, supporting the establishment or expansion of small businesses in food production and sale.
Conclusion: Loan types align with the specific needs and economic structures of different regions.
- Country-Specific Loan Allocation:
- In the Philippines, a high percentage of loans target existing general stores, with Business loans dominating, driving economic self-sufficiency.
- Kenya shows a prominent focus on Farming loans for agricultural purposes, including purchasing seeds, fertilizers, or equipment related to food production.
- El Salvador utilizes Agricultural loans for livestock farming, acquiring animals for food production, or expanding existing farming equipment.
Conclusion: Countries allocate loans based on specific economic activities, contributing to self-sufficiency and economic development in targeted sectors.
In summary, the analysis highlights the nuanced nature of loan distribution, costs, and types, showcasing a strategic alignment with the socio-economic context and unique challenges of each country.
Recommendations
Based on the conclusions drawn from the analysis of loan purposes across regions, here are three recommendations for Kiva:
- Customized Loan Products: Kiva should continue developing and promoting tailored loan products that align with the specific socio-economic landscapes and priorities of each country. Understanding the unique needs and economic structures allows Kiva to provide more targeted and impactful financial support.
Example: In the Philippines, where there is a predominant focus on retail and business loans, Kiva could develop specialized loan products that cater specifically to emerging entrepreneurs. This could involve mentorship programs, business training, and tailored financial products to support the growth of small retail businesses, aligning with the country’s entrepreneurial landscape
- Diversification of Loan Types: Consider introducing a diversified range of loan types to accommodate the distinct economic activities prevalent in different regions. This could involve creating specialized loan products that address specific challenges or opportunities identified in the analysis.
Example: Considering the prevalence of agricultural loans in Kenya, Kiva might explore introducing a specialized loan type that addresses the unique needs of small-scale farmers. This could involve creating a “Farm Innovation Fund” to provide loans for acquiring advanced farming equipment, implementing sustainable agricultural practices, or investing in technology to enhance agricultural productivity. Additionally, considering the emphasis on art-related loans in Bhutan, Kiva could explore innovative financial products to support creative industries in other regions.
- Enhanced Regional Engagement: Strengthen engagement with local communities and partners to gain deeper insights into regional challenges and opportunities. This could involve collaborating with local organizations, conducting surveys, and actively seeking feedback to ensure Kiva’s financial support is well-informed and responsive to the evolving needs of borrowers.
Example: In El Salvador, where agricultural loans dominate and indicate a significant interest in real estate investments, Kiva could collaborate closely with local farming communities and agricultural associations. Engaging in dialogues, conducting field visits, and actively involving local stakeholders would provide Kiva with deeper insights into the challenges and opportunities within the agricultural sector, enabling more informed decision-making and targeted support.
By adopting these recommendations, Kiva can strengthen its commitment to providing targeted financial assistance, fostering sustainable development, and maximizing the positive impact of its loan programs across diverse regions.