Kiva vs. MicroPlace – What’s the Difference?

World Changing: Kiva vs. MicroPlace – What's the Difference?

As P2P Lending News explains, [t]he big difference between MicroPlace and Kiva…is that loans will be securitized (and therefore potentially trade-able), and lenders will earn interest. Unlike Kiva, lenders on MicroPlace invest in microfinance by purchasing securities. Funds generated by these sales are then invested in microfinance institutions around the world. MFIs, in turn, solicit clients, make loans and collect payments – they do their normal day-to-day business.

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First of all, Kiva is a non-profit. As Matt and Jessica Flannery have explained, it's very difficult to become a SEC-registered broker/dealer – even more difficult when you're running Kiva from your living room on the nights and weekends. (See pages 37-38 of the Innovations article for Matt's take on this decision.) MicroPlace, on the other hand, had the institutional and financial backing of EBay, allowing it to go through the complex regulatory application process and to put up the necessary money for the SEC to sign off.

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Secondly, MicroPlace adds a level of intermediation that Kiva doesn't have. With Kiva, lenders provide capital to MFIs, who then lend to clients. MicroPlace is a market for microfinance securities, not just requests for loans. Sure, it takes away some of the intimacy, but for the microfinance industry, it's a big step. Securitizing loans helps diversify risk, and allows microfinance investors to reach into the second and third tier MFIs that are having a hard time raising non-donor money.

Are Kiva and MicroPlace competitors? Yes and no. On the one hand, they compete for lenders and have similar models. (Side note – this competition could get bad if the mainstream media screws up the story here. The differences between Kiva and MicroPlace are important, but subtle. Fingers crossed.)

On the other hand, Kiva is filling an unmet need in terms of providing a direct, peer-to-peer portal on which lenders and borrowers can connect. MicroPlace, meanwhile, is more businesslike – it offers a portal where profit-conscious investors can get involved in microfinance without totally compromising on rate of return.