Last month, David Roodman, a research fellow at the Center for Global Development, set off a storm with a post on Kiva’s model. His post received tons of comments, a reply blog post from Matt Flannery (Kiva CEO), and a revision of the Kiva website. Couple of days ago, even the New York Times published an article about this issue. We have receivedÂ lots ofÂ emails from our supporters asking us what is our response to this public discussion.
Before I get into our thoughts, here is some background info:
- Original post published by Mr. Roodman
- Reply postÂ from Matt Flannery (Kiva CEO)
- Follow up post from Mr. Roodman
- Sampling of the tweets around this topic
- New York Times article on this issue
Transparency has been a problem in the nonprofit sector for years. We have tried different approachesÂ to tackle this problem. For example, World Vision provides photo of the childÂ a donor is supporting. Charity Navigator givesÂ the donorÂ information about the financial efficiency of an organization. However, donors still feel that they don’t have a true grasp of exactly how their gifts are being utilized. This is especially true for donors who give small amounts of money.
With the technological advances of the past decade and rise in popularity of social media (Facebook, Twitter, etc.) smaller donors are now demanding more transparency. Â If you add the current economic conditions, there isÂ increasing pressure on non-profits to show how every dollar is being spent. It is not easy for non-profits to change their models overnight to meet this new demand. It requires significant investment in building an infrastructure and requires more manpower – something that is hard for many organizations to justify. So, what you have are these organizations (non-profits and MFIs) with very good intentions building make-shift solutions that never quite meet the donors’ needs. This leads to the inconsistencies that Mr. Roodman pointed out in his blog post.
Before I continue, it is important, to make couple of observations here:
- Organizations like Kiva and GlobalGiving have been real pioneers in this field. They have shown that there is a really highÂ demand from the everyday donor to feel connected to the change that their small donations are making. For the recent criticisms facing these organizations, we can’t forget the tremendous impact they have had so far.
- There isn’t a perfect system and it is impossible to devise one. There will always be people who will try to find the loopholes and abuse the system. However, we shouldn’t let perfect get in the way of the good. We should try to explore as many of these models as possible and try to take them forward as much as possible.
The challenge facing all of us in the nonprofit sector is how do we effectively provide transparency to donors without burdening the organizations excessively? To meet the donor demand for high-impact and high transparency, we believe the following conditions have to be met:
- Make donors feel like he/she is a Changemaker by showing the impact for their every donation, including the small ones. Every dollar truly does count.
- Give donor choices. Not every person wants to give a loan or feed a child. However, most people want to make a difference. Give them as many choices as possible.
- Measure the impact so that everyone involved feels like we are making progress. No one wants to see money being thrown into a black hole.
- Connect with the smaller donors. Individually, they do not have a lot of money to donate, but, as a group they can provide critical support to a cause. Nowhere was this more evident than last year’s US presidential elections.
- Provide affordable tools to nonprofit organizations so that they can engage the donors in an efficient, cost-effective way and more importantly, learn from each other and knowledge share best practices.
I founded Jolkona Foundation with the goal of meeting the conditions outlined above.Â Jolkona Foundation seeks to inspire a new generation of philanthropists to make high-impact changes through low-cost solutions. The key differences between Jolkona Foundation and Kiva or Global Giving is that we provide donation level feedback – i.e. every donation gets a unique feedback. We work with our non-profit partners to develop rich, meaningful feedback for the donors. For example, with $40, a donor can provide year-long accelerated education to a girl in Afghanistan. In exchange, the donor receives a photo and background info about the girl at the time of donation and a report card at the end of the year. We spend a significant amount of time working with each of our partners to create the feedback type that would be cost-effective for them, compelling for the donor, and not be detrimental to security and privacy of the beneficiary. It is important to noteÂ that our partners’ implement the donations in 1 of 2 ways:
- Once the donation is received, the partner actually goes and implements the gift. For example, if you provide books in tibet, our partner actually goes to the local market and buys books once the donation is received.
- The donations are used to release “locked” funds for the partners so that they can go and use those funds for other purposes.Â Let’s sayÂ our partner already has plans to educateÂ 100 girls for a cost ofÂ $40 per girl in Afghanistan this year. That means they have $4,000 dedicated for thisÂ purpose this year.Â If they receive donations for educating 10 girls, then, that would free up $400 from their allocated funds for other purposes.
Rich feedback for donors is not our only focus.Â We are also building the infrastructure that other nonprofits (i.e. our partners) can leverage, thereby, allowing them to focus more on the job that they are good at – making a difference on the ground. For example, our partners are able to connect with each other through a private discussion group and share best practices with each other.
We are still a very young organization and we still have a long way to go. However, we are encouraged by the trends in the philanthropic sector. We will see an increasing number of non-profit organizations embrace tranparency and provide donors with an experience that is richer than anything we have ever seen before. Jolkona Foundation will continue to do our best to meet the needs of both the donors and the partner organizations.
I invite your comments and thoughts on this post as part of the ongoing dialogue. We are eager to learn from people who are passionate about this topic.