Want to be part of an exciting project to harness the power and wisdom of teams called crowdvetting?
Want to learn a due diligence process for social enterprise?
Interested in getting real time exposure to financial statements for social entrepreneurs looking for short-term, working capital funds?
You’re invited to join a team for Crowdvetting at Kiva!
Kiva and Crowdvetting
Building on their experience for crowd wisdom experience gained through crowdfunding micro-loans, Kiva’s newest venture uses crowdvetting to support the underwriting process for their Direct to Social Enterprise.
Crowdvetting works with decision making made better, not through expertise, but through the wisdom of the crowd.
Besides helping the Kiva underwriting team to underwrite and give more loans, team members will gain more familiarity with social enterprise financials and a triple bottom line investment thesis.
The GCP Crowdvetting Team
The Crowdvetting team design and creation for local and values-driven community members is a project developed by Good Capital Projects. The project informally partners with the Kiva crowdvetting program and goes under the project name, The GCP Crowdvetting Team.
As a team, we’ll learn about impact investment ideas, a triple bottom line approach and applied due diligence. The Kiva crowdvetting experience is open to students, community members and impact investors – you do not have to join a team to take part in the program.*
But I hope you will.
Through your participation, I hope to enhance learning due diligence and inspire more engagement through the team commitment.
I believe the experience will:
- improve due diligence skills for team members.
- increase accountability to complete due diligence projects and learn through experience.
- help Team members to develop a more nuanced personal investment thesis.
- Learn faster and better through the collaborative experience
I invite you along to find out if I’m right!
That said, for those most interested in making community investments, there are some drawback to this opportunity. Here are a few:
- This due diligence process is for short term, working capital loans.
The risks and needs for longer term patient capital will be different. Skills we learn for short term investment may not be adequate for other investment structures. Other investment structures might be better for your investment portfolio.
- A due diligence process takes time.
Sure, you can wing it. But to gain experience, you must commit to setting aside some time to complete the vetting process.
As a team, we will share ideas and best practices, we will discover patterns, we will find and consider industry and impact appropriate ratios that make our job easier.
Like any skill, it will get easier in time. As part of a values-aligned team, it should make it easier. It should also make it more fun!
- Your due diligence will likely not culminate in an investment for your portfolio.
It may, but more likely not.
The Kiva Direct to Social Enterprise (DSE) program lends to social enterprise in developing countries. The program makes working capital loans to social enterprise businesses for 18-month (or less) terms at 0%.
Unless your investment thesis includes a place for short term lending and recoverable grants to social enterprise in developing countries, the Return on Investment (ROI) and geography will probably inhibit any significant investment.
Heart over Head?
As for myself, the drawbacks and opportunity to find guidance from the Kiva underwriters is a welcome upside.
Despite years in financial services, I’ve always felt a little inadequate when it came to vetting business financials and, I’ve always wanted to learn more.
And yes, there are some great advantages to be had from simply following your heart, recognizing impact and finding an intuitive way beyond a single bottom line focus.
Over the years, I’ve come to welcome the openness that comes from looking at impact and the level of trust I have for the social entrepreneurs in my community. I never invest more than I can afford to lose, so a certain level of heart-felt spreading money is good!
In fact, many of our experienced, community-investor thought leaders encourage us to keep an open mind. They often council that we rely on the cultivated trust we’ve gained through community and relationship for our values-driven entrepreneurs while saving the time-consuming due diligence when we are really looking at a reason to say, ‘no.’
I think there is room for this heart-centered approach in our community of impact-investment practice.
Practice and Investment Stewardship
But I also feel an obligation to wisely steward my financial resources.
Especially when the dollar amounts are larger.
My experience suggests this wisdom starts with a deeper understanding of the financial statements. And I think the opportunity offered by the Kiva crowdvetting program to get more familiar with social enterprise financial statements is amazing!
To start, the process overcomes a lot of the problems of trying to learn a due diligence process on our own:
- It gets us away from book-study (or computer-study) and into the real world.
- Not only do we get to look at financials for real companies, but we’ll view websites, social media, press and other traces our social entrepreneurs have left us to share their impact and their character!
- It allows us to vet several social enterprise opportunities in rapid succession.
As a team, we will commit to one social enterprise a month. But individuals can do more–in fact, those aspiring to a Kiva Crowdvetting certification will need to do at least two a month over a 3-6- or 12-month period.
- As participants, we get to match wits with the experienced, Kiva underwriting team both during the vetting process, and overtime as the loan performs!
- It gives us quick feedback.
- These are working capital loans, so the term is 18 months or less. We will know whether our social entrepreneurs default and we will receive default rates for our practice portfolios–we may also see the role of patient capital, grace periods as entrepreneurs build their businesses, extended terms etc. and the impact this slow money has on building businesses and inclusive wealth.
Background and the Genesis of the Crowdvetting Team
I first discovered the Kiva project in 2016 when they introduced their Aspen Ideas award winner in a +Acumen Challenge of which I was a part. I joined the Kiva Crowdvetting site after the challenge. I also joined their weekly training chats and took part in a few of the vetting projects. And then…..
… like many commitments that fall by the wayside over time, I only completed a few due diligence reviews before I stopped visiting, checking in to find new postings and completing any new due diligence projects.
Until, I ran into a Medium article arguing for the value of investment as a ‘broke angel.’
Despite addressing folks engaged in business as usual kinds of investments, the ideas around experiential learning and pattern recognition resonated with me.
I remembered the +Acumen Challenge and Kiva Crowdvetting. But this time, I wanted to make certain I stayed the course and completed at least one due diligence project a month. Realizing Kiva’s addition of a certification and opportunity to test my understanding and record against a Kiva underwriter sweetened the deal.
I brought the idea to others in my larger networks and community and, I found interest!
Two Types of Interest
To date, I’ve discovered two levels of interest. One level is to engage as a team member and work to complete about one social enterprise vetting project through the month with GCP Crowdvetting Team members.
The other level of interest is to sit back and observe the process without committing to getting down and dirty with the details of files and financials. Not everyone is ready to get their hands dirty!
Both engagement styles are great!
To honor the team spirit and the Kiva Non Disclosure Agreement we sign before we vet, I formed two groups. One is the GCP Crowdvetting Team and the other is Good Capital Projects.
Both will provide resources and insights for developing your due diligence skills and a values-aligned Investment Policy Statement. But the Team group will focus primarily as chat dedicated to our monthly Kiva supported due diligence projects. The Good Capital Projects group will benefit from the hands on work in the Team with summaries and insights gained from our direct engagement.
If you want to join one of the teams, or find out more about crowdvetting or Good Capital Projects, you can start here:
*Crowdvetting at Kiva is free to join and open to community members regardless of participation in the GCP Crowdvetting Team. Check them out and join the Kiva program on your own if that better suits your needs, but I hope you’ll find value in joining the GCP Crowdvetting Team.