Mobile,Machine Learning,Microfinance

In 2005, working with entrepreneurs in Uganda, I co-founded Kiva. For ten years I was the CEO. During that time, I witnessed the power of microfinance in over 80 countries. I attended countless borrower group meetings in some very remote places. I was amazed at how loan officers were able to cross mountain and stream to deliver small amounts of cash to those who needed it. I was thankful that I was able to play a small role in getting the money to them.

But I would often struggle to explain where the money came from. Imagine describing the Internet to someone who has never used a computer. I’d bring pictures of the Kiva lenders to the meetings. I’d say something like “Your loan came from this lady in Seattle!!” while pointing down at a picture. People were usually a bit confused…

However, a few years ago, a funny thing happened. Borrowers started to use phones and mobile money systems. Borrowers would friend me on Facebook. I wondered if we could reach them more directly than with cash and loan officers. So, we started experimenting with sending loans via mobile money. We would have the borrowers endorse each other on their phones. We could do the due diligence remotely through trust networks. The results were spectacular. It was one of the best things I ever did at Kiva.

I started to realize that mobile (money + phones) is the next big thing in microfinance. The combination of money and phones will introduce the greatest period of change in the industry since Dr. Yunus invented group borrowing in the 1970s. However, I don’t think banks, or non-profits are well set up to make the change. Banks are slow moving and poor at customer service. Non-profits are chronically under-resourced.

Startups will make the biggest difference. Entrepreneurs will transform an industry that is all about entrepreneurship.

After leaving my job at Kiva last year, I spent 6 months researching how to create an entirely branchless microfinance institution. I gathered a small team. I also spent a lot of time getting back into the code. Along the way, I met some like-minded individuals and institutions right here in the Bay Area.

In particular, Formation 8 and Khosla Impact have been incredibly helpful. The two funds have teamed up to invest in a seed round for our new startup, Branch. They bring the perfect combination of data science and emerging market expertise.

Branch is a bank branch in your pocket. Our mission is to offer world class financial services to the mobile generation. We use machine learning to make credit decisions delivered in seconds. We ask borrowers to trust each other through an app to encourage and guarantee timely repayment.

The big question: Can we automate the mind of the loan officer with machine learning and digital trust networks? Time will tell…

One thing is clear. The need for modern, digital financial services is overwhelming in emerging markets. A digital MFI is unconstrained by geographic boundaries. A digital MFI can extend extremely small loans, vetting millions of people at low cost. A digital MFI does not require costly collections visits by loan officers — costs which inevitably get passed on to borrowers.

We recently launched our service in Kenya and already have thousands of users. I wake up every morning to face a long line of customer service messages. It’s invigorating.

So, I’d like to thank Formation 8 and Khosla Impact for believing in this vision. Together we can apply the learnings of the tech industry to places often neglected by Silicon Valley. More importantly, we can change the world once again.



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