[QUOTE=Zahava424]
Thanks for pointing this out-- it is really important. Someone with a better grasp of economics than me: Is there any reason I shouldn’t choose to lend in a country where the field partner has the lowest interest rate, ensuring that the loan is really all going to the person on the site? Does a high interest rate just indicate that the company is more profit-seeking than others, or could it mean they’re taking on business in a more high-risk region that might have people more in need of loans? Should I just not overthink this and loan to the person who seems to need it most, regardless of the stats of the go-between?
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Again, I don’t have any experience with Kiva. But I suspect you have hit on some of the reasons why the rates might be so high, along with the very nature of microloans and why banks generally won’t touch them – they’re expensive to administer.
I noticed that the Kiva site supplies quite a few statistics on the individual (field partners) companies’ records: total amount loaned, over what time period, default rate (several had 0%!) and percentage late. This is useful information, and I suggest you make a decision based on what looks right and best to you. You can start small and see how it works out. You can even diversify and put small amounts into different businesses in different countries. That’s the nice thing about this scheme – it’s your choice, and you can keep track of your personal contributions, unlike charities like United Way, where you pay but never find out exactly where your dollars went.
[QUOTE=Pochacco]
How am I better off? With your plan I’m **guaranteed ** to be $2500 poorer at the end. If I put the money in a Kiva account there’s only a 3% chance of me not getting the money back.
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I believe he meant keep the $2500 and donate the interest you made on it.
[QUOTE=EJsGirl]
I set up a Kiva account for my son’s elementary school class…They have loaned money to three people so far- a farmer in Azerbajian, a fisherwoman in Samoa, and cattlewoman in Kenya. All three are in the process of paying the loans back (the women are both on their second or third loans through Kiva with 100% payback rates).
When these funds become available again, they will be added to by each year’s class. Mrs. Diba’s class could be loaning out thousands of dollars in a few years.
[/quote] EJsGirl, that’s a great idea! I’m going to suggest it to our local school. Would you mind revealing how much the class has invested so far? And how do you select the recipients? By consensus of the students, or does the teacher make the decision?
The kids donated about $125 or so, in three small increments. At the time, our little school didn’t have Internet access in their classroom, so I printed out several candidates off the Kiva website and the class voted on their top 5 people, in order. The needs can change quickly, and someone who was requesting funds this morning might have gotten them by tonight, so we did our best to use the kids’ picks.
The teacher is very excited about it- the kids do all the choosing, and we keep a notebook in the classroom with print outs of their lender page, each of their recipients’ picture and bio, the status of each loan, etc. They even have buttons and t-shirts!
It is great for the kids to be able to “see” their money at work. When they donated to The Heifer Project, all they got was a receipt…
[QUOTE=dbuzman]
I believe he meant keep the $2500 and donate the interest you made on it.
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Then it’s a worse deal for the recipient of the aid. Instead of getting $2500 right now, he gets $375 a year from now. Either way you interpret it, it’s certain not a case of “You would be better off, and so would the third world.”
Speak of the devil! We discuss this on the Sunday, and at 5am on Monday morning, what is on the back page of the FT but a summary of a web discussion on Microlending.