I think it would be an interesting way to help entrepreneurs with various projects and I have read a lot that this type of finance has been reasonably effective. But there is something that I don’t quite get.
The website says that they do net transfers to handle repayments. That makes sense since it might end up being an administrative nightmare to send thousands of timy payments every month. But I read that when the net payments come through the local agency that coordinates loans may use their own cash reserves to repay the Kiva loan.
So in reality who am I lending to? The local agency or the actual individual? If the agency uses their own funds to repay the debt if the entrepreneur cannot pay it, how do I know if my borrower actually repaid the debt?
I don’t mind making a small loan and taking the risk that it doesn’t come back to me. That’s lending. Sometimes people don’t pay you back. It just feels a little strange to get your money even if the borrower doesn’t repay. Is there any way to know whether funds are coming from the borrowers or out of the agency’s reserve?
There are a lot of different types of businesses to lend money to: groceries, cafes, taxi services. If I lend to a couple of cafes and the money isn’t paid back, well I might consider lending to a shop the next time around. I would prefer to direct my cash to businesses and individuals that seem to be doing a good job, not continuously lending to businesses that aren’t working and then getting paid back out of donations that the agency receives.
There are a couple Kiva threads around. I’m a lender since 2005. and have 34 loans out. It’s my favourite charity, and the site is really good. Recommended.
You can’t lend more then 25 bucks to any one individual, so the risk is spread out thinly. The default percentage on average is less then one percent. So the scenario you’re describing isn’t going to happen.
I’ve been a lender for a couple of years now, too. We’re on our second loan now - the first one was repaid in months, and we just rolled it over into a loan again. I can’t really say anything negative about it at all - they send an email every so often to let us know how re-payment is going, and that’s about it. I think we put $25 into the system - big whoop, for us wealthy Canadians. We spend more on a dinner out on Friday.
Mrs. Number and I have 12 Kiva loans out and 24 completed. They do report when each payment is made and the delinquent/defaulted statistics (1.84%/0.00% for us) are included on your Portfolio page. I don’t know how best to verify these figures. You might want to send an inquiry using their contact form.
This was true for a while when they were getting a lot of publicity and had more cash coming in than they could loan out. They’ve caught up though, and the $25 limit has been lifted.
From what I can see, the field partners have the choice to cover any losses themselves.
I love Kiva. I was lucky to get a $50 gift certificate from my sister one Christmas that I loaned to two different women in Africa - one had a soft drink business and the other ran a small store. Both loans were paid back within a year, and I’ve since re-invested that original $50 five more times. And I’ll probably just keep re-investing it for as long as I can
Perhaps it is now possible to make several loans to the same lender, so in effect lending more, as you say. But I went there yesterday, and the default was still 25 USD.
I use KIVA as a pick me up. I have a couple hundred dollars out, and the borrowers pay back so fast that I can re-loan every couple weeks. So, when I feel down and need something to make me feel good, I go to Kiva and extend a loan. It beats shopping, in that afterwards you don’t have any stuff cluttering up your home.
The default is $25, but there’s a drop-down menu next to the Lend Now button where you can select amounts up to $500 for a single loan.
Yes, it was a big improvement when they started making funds available after each payment, rather than when the entire loan was complete. Now the rewarding feelings come much more frequently.
For another nice reminder, I’ve downloaded the pictures from all of our completed loan recipients, added short captions to them, and put them in a directory for the My Pictures Screensaver in Windows. The one drawback is that we have a couple of Samoan banana farms in there, and reading the captions always gets that stupid Banana Phone song stuck in my head.
Crap, now I’ve done it again. Ring ring ring ring ring ring ring…
Kiva’s loans are interest free, as far as I’m concerned, right? I mean, if I were to loan money out using Kiva, the best I can hope for is the return of my original investment. Is that correct?
That is correct. What’s more, Kiva asks, with every loan, if you want to make a voluntary donation of 15 % or less to cover their overhead costs. However, those voluntary gifts are tax deductible, they e-mail you a recept and everything.
Reading this thread, and knowing about Kiva for years, I am thinking that it might be an excellent ‘gift’ to give to someone who has everything already.
Are there any microlending sites like Kiva that do pay interest? I think what groups like that are doing is great, and I’d rather invest in a group like them than in some big company.
That is a great idea. The gift certificates interface is very friendly. In a way they’re better than giving store gift cards, since once the loan is completed the person receives cash which they can spend anywhere they want.
Unfortunately I think they have to have a PayPal account to make a withdrawal.
That was about my only problem with getting started was that I had to open a PayPal account to invest. I would have preferred to just use my online credit card.
I should start using gift certificates for gifts for my nieces who have 25 of everything and value nothing.
I often suggest Kiva gift certificates to people looking for gifts for younger relatives because, like Number already mentioned, they can withdraw the money and use if for whatever they want if they’re not interested. They potentially learn many valuable lessons, but it’s not a total “groan” gift since the money is ultimately theirs in the end anyway. And I’m thinking quite a few of them will end up enjoying it much more than they expected, and might keep the money invested for much longer than they originally planned. It’s pretty addictive!
Shirley Ujest, depending on the person, of course, it really is a great gift for the person who has everything. The reason I ended up with one is because I had been begging my family for YEARS to stop buying me Christmas presents since I already have more than enough “stuff,” and while they never quite accepted that idea, my sister at least came close when she got me the Kiva gift certificate
I have one, but it is a Dutch bank in the Netherlands, (ASN Oxfam/Novib fund) where I live. They don’t give more then 2 to 3 percent interest, which is less then inflation. Still, that bank/type of account is declared a charity by our government, so I can deduct that interest from my taxes, which makes the effective interest 4 %, which is slightly above average.
Perhaps in the USA, Grameen bank would be a starting point.
