In 2003, Jessica Jackley was a 25-year-old staff member of Stanford Business School’s Public Management Program when a lecture by Muhammad Yunus upturned her life.
Yunus popularized the microfinance solution to global poverty by founding Grameen Bank in Bangladesh. Poor people in low-income countries typically lack the collateral and credit history that most financial institutions require to give them a loan. The microfinance model sought to develop a sustainable, market-driven approach of lending to poor people, especially aspiring entrepreneurs, small amounts of money on friendlier terms than typical moneylenders. Yunus would go on to win the Nobel Peace Prize in 2006 for his efforts.
Jackley decided to quit her job and move to East Africa to experience microfinance firsthand. Her husband, Matt Flannery, a Stanford graduate working as a computer programmer at TiVo, joined her for an extended visit a few months later.
“I wanted to create a way for our friends and family to experience these new stories of entrepreneurship,” Jackley writes in her 2015 autobiography, Clay Water Brick. “And then I wanted to give them a way to respond differently too—for the first time, not with a donation but with a loan.”
The couple returned to San Francisco in 2004 and started working on a website that would connect relatives, friends, and acquaintances to people in East Africa seeking small loans. By April 2005, the couple was ready to launch a pilot to crowdfund seven loans sourced through a contact in Uganda, a pastor and community leader named Moses Onyango. Jackley and Flannery uploaded pictures and stories of people seeking $3,500 total in loans, and sent a fundraising appeal via email to a 300-person list they still had from their wedding invite. The borrowers included Elizabeth Omalla, a widow with seven children. She planned to use the $500 loan she requested to expand her fishmongering business. All seven posted loans got funded within just a few days.
“Over the next six months, a beautiful thing happened,” Jackley recalled in a public lecture. “The entrepreneurs received the money, they were paid; and their businesses, in fact, grew; and they were able to support themselves and change the trajectory of their lives.” The successful experiment encouraged the couple to launch Kiva as a full-blown website open to the public. Premal Shah, who had also been experimenting with his own microfinance project while working at PayPal, joined Jackley and Flannery as a cofounder.