Author Topic: Kiva.org Loans (Read 30869 times)

madelaide · « **on:** February 13, 2008, 19:51 »

I decided to create this new thread, as our group is supporting Kiva.org.

Today I received US$50 from Canstock and I have just lent this to two projects in Kiva, one in Peru and one in Uganda.

It's amazing how this works, the first one had no loans and when I checked out there were 3 loans. Before I picked it, I had seen one that needed $50 and when I searched it was gone!

If anyone is interested in helping the same groups:
http://www.kiva.org/app.php?page=businesses&action=about&id=35904
http://www.kiva.org/app.php?page=businesses&action=about&id=32256

Maybe we could find one person/group to be fully sponsored by us?

Regards,
Adelaide

kosmikkreeper · « **Reply #1 on:** February 13, 2008, 22:49 »

HI Madelaide

Since Leaf posted it here , I'm now an avid Kiva fan! I have now lent $200 and I plan on lending another $200 this year. I even added a Kiva link on my http://www.touchphotography.com/shop/ site!

Here's my profile page: http://www.kiva.org/lender/yanik3104

If each stock photographer would contribute just 1% of his profits, what a change that would make!

leaf · « **Reply #2 on:** February 14, 2008, 04:21 »

here is the microstockgroup kiva page
http://www.kiva.org/lender/microstockgroup

yeah, that would be pretty fun to sponsor one person totally by us!

It seems that when the person gets on the first page of 'who needs a loan' they get their loan filled within a day or a couple hours. All the ones i started for microstock group filled up pretty fast.

phildate · « **Reply #3 on:** February 14, 2008, 04:33 »

I have lent money to 8 people now, having seen the thread here. It's a great way to lend money directly to people who need it. So much Aid from the West gets mis-used and I think the microloans method is the best way of helping people help themselves out of poverty.

The first three families I lent to are already paying back their loans.

josh_crestock · « **Reply #4 on:** February 14, 2008, 04:49 »

Yeah, I tried this out after reading about it here, first. Its a fantastic concept. One woman i loaned to seems to be doing very well and paying back ahead of time. Does anyone have some recommendations for further loans?

The idea of sponsoring together seems good, can microstockgroup work together and sponsor a few people completely?

digiology · « **Reply #5 on:** February 14, 2008, 09:26 »

Adelaide,

I just donated $50 to your second link (first one was filled already).

Thanks for posting.
Lora

ljooc · « **Reply #6 on:** February 14, 2008, 10:05 »

Thanks, Adelaide for the posting and bringing Kiva to my attention. It is awesome what Kiva is doing and a great way to help others in need directly

I have just joined as a member and will make the loans soon.

http://pinkjava.blogspot.com/
http://www.kiva.org/lender/jc5355

JC

leaf · « **Reply #7 on:** February 14, 2008, 10:09 »

maybe at the end of the month - pay day- we can organize ourselves to sponser a collective loan.

I have allready emptied my paypal account from last months earnings, but would be willing to do start a loan, say 10 March

leaf · « **Reply #8 on:** February 14, 2008, 11:13 »

well there was another member registration, so the microstockgroup portfolio has joined you on this one madelaide

http://www.kiva.org/app.php?page=businesses&action=about&id=32256

cool how they work the group loan - where they are responsible if the others in the group don't pay. It would make them more accountable to eachother.

madelaide · « **Reply #9 on:** February 14, 2008, 16:12 »

The Ugandan ladies group has also filled its quota - how exciting!

Leaf: great idea for the group loan, we could all transfer the money to your PP account so you can lend in the name of the group, plus those who may still join the site membership. The only problem however is that I see loans basically starting from US$500 - would we be able to raise that ammount?

The loans fill up quite quickly really. The oldest still in fundraising stage is from Feb 5th.

It would be nice to sponsor someone in Tajikistan and being able to visit him when I finally go there!

Regards,
Adelaide

leaf · « **Reply #10 on:** February 14, 2008, 17:16 »

well i think that would get confusing if everyone sent $$ to me.. how to get the $$ back to everyone once the loan was done.

I think it would be better, to simply agree on which person to sponser, then all sponser that person at the same time. If we agreed which day we would donate, then that person wouldn´t be filled up before we all got a chance to sponser them.

Karimala · « **Reply #11 on:** February 14, 2008, 20:40 »

I love the concept of Kiva and started loaning $$$ last month. It reminds me so much of some of us microstockers...small-time entrepreneurs who sometimes need small loans for our gear or photo shoots.

yingyang0 · « **Reply #12 on:** February 14, 2008, 21:04 »

The website doesn't say what interest rate you earn on the loans. Can anyone fill me in?

madelaide · « **Reply #13 on:** February 14, 2008, 21:18 »

yingyang,

You don't get an interest, you only receive your money back (most of the cases in monthly payments).

Regards,
Adelaide

yingyang0 · « **Reply #14 on:** February 14, 2008, 21:59 »

Quote from: madelaide on February 14, 2008, 21:18

You don't get an interest, you only receive your money back (most of the cases in monthly payments).

Then I'll just stick with donating money. I've never liked what most of the micro loan groups do because of the loan shark interest rates they charge for the loans (25-36%).

After reading Kiva's "about Microfinance" page I'd be vary hesitant to lend through them. If you read question 6 "Why are microcredit interest rates so high?" They claim that there are three types of costs, yet the two don't exist for them. For kiva there is no cost for the money it lends (you're lending at a 0% interest rate to them) yet their example uses 10%. They also use a 1% default risk premium, yet I don't think they pay the lenders (you) if the borrower defaults so that's not an actual cost. Really the only fees they should be charging are related to transaction costs and shouldn't amount to 36% interest on the loans.

Just my opinion, but you'd be doing much more good by lending through a site like prosper.com if you want to lend money to people. At Prosper the lenders compete for borrowers and actually lower the interest rate for the borrowers. Or if you're in the mood to donate rather than lend, but still like the microcredit idea you could donate to groups like villagebanking.org They actually setup microloan banks that make loans at reasonable rates in poorer countries. They also have low program expenses, which puts more of the money where it belongs.

leaf · « **Reply #15 on:** February 15, 2008, 05:08 »

I think that paragraph is just showing why microfinance in general has a high interest rate and how it works and why it is important to give cheaper loans - or why cheaper loans were not available for this people group originally.

If you check out this field partner for example
http://www.kiva.org/about/aboutPartner?id=7
they charge for customers 14%, where the average kiva loan is 22%

considering the 14% interest i think kiva is still a good thing.

ParisEye · « **Reply #16 on:** February 15, 2008, 07:58 »

Quote from: yingyang0 on February 14, 2008, 21:59

Quote from: madelaide on February 14, 2008, 21:18
You don't get an interest, you only receive your money back (most of the cases in monthly payments).
Then I'll just stick with donating money. I've never liked what most of the micro loan groups do because of the loan shark interest rates they charge for the loans (25-36%).

After reading Kiva's "about Microfinance" page I'd be vary hesitant to lend through them. If you read question 6 "Why are microcredit interest rates so high?" They claim that there are three types of costs, yet the two don't exist for them. For kiva there is no cost for the money it lends (you're lending at a 0% interest rate to them) yet their example uses 10%. They also use a 1% default risk premium, yet I don't think they pay the lenders (you) if the borrower defaults so that's not an actual cost. Really the only fees they should be charging are related to transaction costs and shouldn't amount to 36% interest on the loans.

Just my opinion, but you'd be doing much more good by lending through a site like prosper.com if you want to lend money to people. At Prosper the lenders compete for borrowers and actually lower the interest rate for the borrowers. Or if you're in the mood to donate rather than lend, but still like the microcredit idea you could donate to groups like villagebanking.org They actually setup microloan banks that make loans at reasonable rates in poorer countries. They also have low program expenses, which puts more of the money where it belongs.

As I have some banking knowledge, I must agree with YingYang. When I read this thread I found the idea exciting and was ready to jump in. But I don't understand why they charge interest to these poor people ! The money cost nothing, they don't incure losses... The maximum they could ask for would be a management fee (a once a time few percent of the credit, or a flat fee say a few tens of $) for the processing of the operation.

But even at a "low" 14% for money which cost nothing, that does look rather strange to me and it doesn't seem the poor guy at the end of the chain is the one who really profits from that scheme.

The idea is good, but I'll look elsewhere to see how it is implemented.

leaf · « **Reply #17 on:** February 15, 2008, 08:20 »

well thanks guys for looking more into this... or making me question their 'ethics' .. but more indepth research and my part and I am just as sold on kiva.

check out this Field Partner
http://www.kiva.org/app.php?page=about&action=aboutPartner&id=13
They are only taking 3% interest whereas the Average Local Money Lender Interest Rate is 125%

Also, check out this thread for some good info on interest rates
http://www.kivafriends.org/index.php/topic,368.0.html

And lastly
Here is a radio interview that gives a good view of the microfinance world, with a lot of emphasis on interest rates (toward the end). Matt from Kiva is on there too:

http://www.kuow.org/mp3high/m3u/WeekdayA/weekdaya20060717.m3u

yingyang0 · « **Reply #18 on:** February 15, 2008, 10:16 »

Quote from: leaf on February 15, 2008, 08:20

check out this Field Partner
http://www.kiva.org/app.php?page=about&action=aboutPartner&id=13
They are only taking 3% interest whereas the Average Local Money Lender Interest Rate is 125%

Also, check out this thread for some good info on interest rates
http://www.kivafriends.org/index.php/topic,368.0.html

Not to "rain on the parade" but when looking at that particular field partner you'll see that the average kiva loan is 22% and the avg. local money lender rate is 82%. That does look impressive, except that when they refer to "local money lender rate" they mean loan sharks, not banking institutions. The argument that "look we're cheaper than the local loan sharks" doesn't fly with me. They should be comparable with local banking rates, not local loan sharks because their cost of money is zero.

As for the origination costs, they're way offbase if they're saying (as they do in the thread you pointed to) that origination costs would be $50 on a $500 loan.

You picked one foundation that has made a total of 3 loans and has no currently on going loans. It may be just me but I'd much rather donate to the individual organizations rather than go through kiva where they take money off the top for their costs.

leaf · « **Reply #19 on:** February 15, 2008, 10:34 »

Quote from: yingyang0 on February 15, 2008, 10:16

Quote from: leaf on February 15, 2008, 08:20
check out this Field Partner
http://www.kiva.org/app.php?page=about&action=aboutPartner&id=13
They are only taking 3% interest whereas the Average Local Money Lender Interest Rate is 125%

Also, check out this thread for some good info on interest rates
http://www.kivafriends.org/index.php/topic,368.0.html

Not to "rain on the parade" but when looking at that particular field partner you'll see that the average kiva loan is 22% and the avg. local money lender rate is 82%. That does look impressive, except that when they refer to "local money lender rate" they mean loan sharks, not banking institutions. The argument that "look we're cheaper than the local loan sharks" doesn't fly with me. They should be comparable with local banking rates, not local loan sharks because their cost of money is zero.

As for the origination costs, they're way offbase if they're saying (as they do in the thread you pointed to) that origination costs would be $50 on a $500 loan.

You picked one foundation that has made a total of 3 loans and has no currently on going loans. It may be just me but I'd much rather donate to the individual organizations rather than go through kiva where they take money off the top for their costs.

but the point is, is that they can't get loans from a local banking institution. It is only they loan sharks that are willing to give them a loan.

One more reason why interest rates are not always so low is because field partners (people giving the loans) don't get all their funding 'free'. They also get loans themselves to support loans to give out. Kiva doesn't take any percent of the interest rate from the loan. Kiva is non profit. The ones who are taking the interest rate income is the one giving out the loan.

and no - please do rain on the parade

It is good to make an informed decision. I have a feeling we are going to disagree in the end, but it is nice to hear both sides.
If the other option however is not to help in any way and let them use the loan sharks... i don't think that is a good option.
Otherwise if you want to donate money to a worthy organization - well then that is another discussion.

madelaide · « **Reply #20 on:** February 15, 2008, 11:27 »

I didn't know that there were local interests involved, but it makes sense. Remember that NGOs (Kiva included) don't necessarily mean voluntary work. They have employees and bills to pay.

I agree with Leaf that these "enterpreneurs" would never get money from a bank. What would be the choice, the NGO taking the bank loan to lend it to them? It would still be expensive.

You may have no idea how bank interests are high in the 3rd world. Here in Brazil, even with the low inflation rate we currently have, it may cost 7% a month. That's what my bank charges me (a client for over 20 years with investment funds) if my balance goes negative. Gladly it never does.

Now imagine someone who doesn't have a regular income.

Regards,
Adelaide

leaf · « **Reply #21 on:** February 15, 2008, 11:34 »

The interest doesn't go to support kiva though. Kiva gets their $$ to operate from donations.

If an 'investor' on kiva wants to make sure their field agent isn't taking too much interest, you can easily research the individual field agents and pick one which takes a low interest rate - or perhaps one that is non profit as well. I believe part of the point of all this is to make it self sufficient, so that microfinance banks can be established and operate independently. On that radio show they talked about how micro finance institutions would generally have to get $$ from other banks as well as the kiva $$ to find the loans they offer.

yingyang0 · « **Reply #22 on:** February 15, 2008, 13:28 »

Quote from: madelaide on February 15, 2008, 11:27

You may have no idea how bank interests are high in the 3rd world. Here in Brazil, even with the low inflation rate we currently have, it may cost 7% a month. That's what my bank charges me (a client for over 20 years with investment funds) if my balance goes negative. Gladly it never does. Now imagine someone who doesn't have a regular income.

That's an overdraft charge, which is typically the highest rate a bank charges other than on credit cards (though that one is pretty high if it's truly 7% a month rather 7% APR that is compound monthly). Overdraft charges aren't a typical loan like the ones kiva is giving.

Yes I'm familiar with what banks charge in "3rd world" countries (I don't consider Brazil to be 3rd world anymore), my grandfather is a banker in Uruguay.

Quote from: leaf on February 15, 2008, 10:34

It is good to make an informed decision. I have a feeling we are going to disagree in the end, but it is nice to hear both sides.

I completely agree. Though it's not the only option. My favorite microloan setup are the ones that act like credit unions. They pool money (typically from people in a local block or village) and lend it out at reasonable rates. It's not just a choice between no money and a loan shark, the other options just take more effort on the part of the people.
Anyway it is nice to see people trying to make a difference.

maunger · « **Reply #23 on:** February 16, 2008, 07:57 »

Quote from: leaf on February 15, 2008, 08:20

Also, check out this thread for some good info on interest rates
http://www.kivafriends.org/index.php/topic,368.0.html

And lastly
Here is a radio interview that gives a good view of the microfinance world, with a lot of emphasis on interest rates (toward the end). Matt from Kiva is on there too:

http://www.kuow.org/mp3high/m3u/WeekdayA/weekdaya20060717.m3u

Thanks leaf - very interesting info in there! I had no idea it was so difficult to get money in other countries (naive American here). Listened to most of that show and was very impressed with the information provided. I understand now how kiva works and why the interest rates seem high to us - but seem low to the borrowers. Thanks for the links.

madelaide · « **Reply #24 on:** February 17, 2008, 19:20 »

I have just read an article about the bank earnings in 2007 here in Brazil, and one of the reasons given for their amazing results are interests in loans, which range between 35-40% a year, while the average cost for this money ranged from 10-13% a year and a spread of 22-28% a year. Roughly speaking, for every $1 they paid for me in my funds, they got $2 from people to whom they lent MY money.

On a side note... Don't you get mad at how poor some of the enterpreneur photos are?

Regards,
Adelaide