Kiva [Microlending to the less fortunate]

Rip · Post by **Rip** » Sat Oct 18, 2014 9:53 pm

I kicked my $25 to one of the loans we had already contributed to that still needed funding.

Going to maintain a slight involvement till I figure this out. Love the concept though.

Zaxxon · Post by **Zaxxon** » Sat Oct 18, 2014 9:54 pm

CharityNavigator page.

Drazzil · Post by **Drazzil** » Sat Oct 18, 2014 10:13 pm

Smutly wrote:Most loans listed on Kiva have a disbursed date so you can see if the funds have already been given to the applicant. They explain how post-disbursed loans are handled below. I'm okay with this.

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What is the disbursed date?

Loan disbursal can happen anywhere from 30 days before to 90 days after the loan is posted on the Kiva website. The disbursed date indicates the date that the borrower receives their loan funds from the Field Partner.

Many of Kiva's Field Partners choose to disburse loan funds before the loan request is posted on Kiva. We allow pre-disbursal because it ensures that the funds reach the borrower as soon as they are needed. Loan funds from Kiva lenders then go to backfill that amount and as a lender you assume the risk of the loan. By doing this, our Field Partners assume the risk that, if the loan isn't funded by Kiva lenders, the Field Partner has to fund the loan without any funds from Kiva lenders.

If a loan is not pre-disbursed, it will be listed on Kiva with an expected "post-disbursed" date. If a post-disbursed loan is not funded on Kiva, there is a chance that the borrower may not receive their loan. Some Kiva Field Partners choose to disburse loans with other sources of funding, while other partners do not have the resources available to fund loans without Kiva lenders' support.

I'm not too sure about how it works. My ultimate feeling is that Kiva was invented to sucker first world people with extra cash on their hands into loaning it to impoverished third world people through "intermediaries" that make tons of money off of microlending to the aforementioned people.

With any sort of financing involving this sort of risk someone somewhere is making shitloads of cash, and it ain't me.

Pass.

Zaxxon · Post by **Zaxxon** » Sat Oct 18, 2014 10:14 pm

Odin · Post by **Odin** » Sat Oct 18, 2014 10:19 pm

Zaxxon wrote:OK.

Wait, what? Will it still work if Drazzil doesn't participate?

Zaxxon · Post by **Zaxxon** » Sat Oct 18, 2014 10:19 pm

Unclear. Also, I just approved whoever sent a request about five min ago.

Moat_Man · Post by **Moat_Man** » Sat Oct 18, 2014 10:23 pm

That was me.

Zaxxon · Post by **Zaxxon** » Sat Oct 18, 2014 10:23 pm

Awesome. Welcome.

Rip · Post by **Rip** » Sat Oct 18, 2014 10:26 pm

Face it Draz, everything in the world is designed to separate you from your money and your chair.

But the way I see it the money can either sit in the bank earning me zilch( and no one is using it to make money for themselves

) or I can take a chance that it will do some good while I am not using it.

Moat_Man · Post by **Moat_Man** » Sat Oct 18, 2014 10:44 pm

The avatar might have given it away.

Zaxxon · Post by **Zaxxon** » Sat Oct 18, 2014 10:46 pm

Wow; strong start, sir.

Moat_Man · Post by **Moat_Man** » Sat Oct 18, 2014 10:55 pm

Drazzil · Post by **Drazzil** » Sun Oct 19, 2014 12:19 am

Rip wrote:Face it Draz, everything in the world is designed to separate you from your money and your chair.

But the way I see it the money can either sit in the bank earning me zilch( and no one is using it to make money for themselves ) or I can take a chance that it will do some good while I am not using it.

Yeah but you make nothing if your loan is repaid ooooorrrr if it defaults you lose the whole thing.

noxiousdog · Post by **noxiousdog** » Sun Oct 19, 2014 12:40 am

Drazzil wrote:
Rip wrote:Face it Draz, everything in the world is designed to separate you from your money and your chair.

But the way I see it the money can either sit in the bank earning me zilch( and no one is using it to make money for themselves ) or I can take a chance that it will do some good while I am not using it.
Yeah but you make nothing if your loan is repaid ooooorrrr if it defaults you lose the whole thing.

Right. It's a donation, not a loan.

Coincidently, I think Drazzil is more right than wrong, but that's not going to stop me from using it.

Drazzil · Post by **Drazzil** » Sun Oct 19, 2014 2:18 am

noxiousdog wrote:
Drazzil wrote:
Rip wrote:Face it Draz, everything in the world is designed to separate you from your money and your chair.

But the way I see it the money can either sit in the bank earning me zilch( and no one is using it to make money for themselves ) or I can take a chance that it will do some good while I am not using it.
Yeah but you make nothing if your loan is repaid ooooorrrr if it defaults you lose the whole thing.
Right. It's a donation, not a loan.

Coincidently, I think Drazzil is more right than wrong, but that's not going to stop me from using it.

Playing devils advocate here, wouldn't you do more good investing that money at a good rate of return somewhere like Prosper? You can increase your pot by casting your net into many many different worthy borrowers over the course of years instead of watching your "donation" dwindle over time and finally disappear?

Drazzil · Post by **Drazzil** » Sun Oct 19, 2014 2:31 am

noxiousdog wrote:
Drazzil wrote:
Rip wrote:Face it Draz, everything in the world is designed to separate you from your money and your chair.

But the way I see it the money can either sit in the bank earning me zilch( and no one is using it to make money for themselves ) or I can take a chance that it will do some good while I am not using it.
Yeah but you make nothing if your loan is repaid ooooorrrr if it defaults you lose the whole thing.
Right. It's a donation, not a loan.

Coincidently, I think Drazzil is more right than wrong, but that's not going to stop me from using it.

Granted prosper may lack some of the feel good vibes associated with "I just invested in a herd of goats in Burundi" but I like the idea of investing in small business right here in the US. I think people here think far too little of the people that can be helped right here, rather then the rest of the world. You don't have to invest in some Nepalese artisan cabinetmaker to feel good about yourself, you can invest in that former auto worker in Buckman Minnesota who is trying to start his own body shop.

TheMix · Post by **TheMix** » Sun Oct 19, 2014 2:32 am

I finally got my lazy butt in gear. I'd gotten an email that for 36 hours loans were being matched. So I kicked off a few more. I'd let far too much build back up in my account.

gilraen · Post by **gilraen** » Sun Oct 19, 2014 2:34 am

I've made dozens of loans through Kiva, not a single one has defaulted yet. If I want to make a profit, I'll invest in Lending Club. This is for charity, and it's making someone's life better. I can live with that.

Drazzil · Post by **Drazzil** » Sun Oct 19, 2014 2:34 am

Odin wrote:
Zaxxon wrote:OK.
Wait, what? Will it still work if Drazzil doesn't participate?

Drazzil · Post by **Drazzil** » Sun Oct 19, 2014 2:36 am

gilraen wrote:I've made dozens of loans through Kiva, not a single one has defaulted yet. If I want to make a profit, I'll invest in Lending Club. This is for charity, and it's making someone's life better. I can live with that.

Yeah but I am arguing that you can make more money and help more people at prosper and at the end of it maybe you can watch that $500 you initially invested become sort of a nest egg for something you may want later on.

Moat_Man · Post by **Moat_Man** » Sun Oct 19, 2014 2:53 am

We aren't interested in making money Draz. Please remove that from the equation. We are interested in helping people help themselves. It's not pure charity as the people are expected to pay the money back but it has nothing to do with profit.

As to your "charity begins at home comment", $25 or $50 can do more good in impoverished countries than it can in first world countries. Also, people here already have access to a lot more help and opportunity. If you want to win hearts and minds then exporting charity and education is your greatest asset.

noxiousdog · Post by **noxiousdog** » Sun Oct 19, 2014 5:18 am

I used prosper too and had a default rate of 50%. It was on allegedly good credit risks. Of course, if they were truly good credit risks, they wouldn't have needed prosper.

Zaxxon · Post by **Zaxxon** » Sun Oct 19, 2014 9:11 am

Drazzil wrote:Playing devils advocate here, wouldn't you do more good investing that money at a good rate of return somewhere like Prosper? You can increase your pot by casting your net into many many different worthy borrowers over the course of years instead of watching your "donation" dwindle over time and finally disappear?

That is exactly what I've done over 7.5 years on Kiva. I've made 63 loans, totaling $1575 out of < $500 put into the system. I've lost a total of $2 out of that $1575 lent (or out of the <$500 paid in, if you prefer to look at it that way). I could put $0 in for the rest of my life and continue making more than ten loans per year including the expected loss rate. My 'donation' would dwindle and disappear sometime during my great-great grandchildren's lives.

To what I think is your main point, that Kiva and its partners are making money off of these loans: you're right. That is a valid point to consider, and I would sure love it if a Bill Gates came in and covered all those expenses so that these borrowers were offered better (or no) interest rates. I'd also love it if our loan funds went directly to the borrowers at the moment we made the funding decision. But no Bill Gates has come along to make this happen, and it's just not a feasible model without a major benefactor. Kiva's not perfect, but it's the best we've got (to my knowledge). I don't have the means to travel the world seeking worthy borrowers to help out.

noxiousdog · Post by **noxiousdog** » Sun Oct 19, 2014 3:09 pm

Zaxxon wrote:
Drazzil wrote:Playing devils advocate here, wouldn't you do more good investing that money at a good rate of return somewhere like Prosper? You can increase your pot by casting your net into many many different worthy borrowers over the course of years instead of watching your "donation" dwindle over time and finally disappear?
That is exactly what I've done over 7.5 years on Kiva. I've made 63 loans, totaling $1575 out of < $500 put into the system. I've lost a total of $2 out of that $1575 lent (or out of the <$500 paid in, if you prefer to look at it that way). I could put $0 in for the rest of my life and continue making more than ten loans per year including the expected loss rate. My 'donation' would dwindle and disappear sometime during my great-great grandchildren's lives.

To what I think is your main point, that Kiva and its partners are making money off of these loans: you're right. That is a valid point to consider, and I would sure love it if a Bill Gates came in and covered all those expenses so that these borrowers were offered better (or no) interest rates. I'd also love it if our loan funds went directly to the borrowers at the moment we made the funding decision. But no Bill Gates has come along to make this happen, and it's just not a feasible model without a major benefactor. Kiva's not perfect, but it's the best we've got (to my knowledge). I don't have the means to travel the world seeking worthy borrowers to help out.

I think it's pretty obvious in comparing Kiva and Prosper that the banks are doing an essential service here. They are clearly doing an excellent job vetting the loans, and they are loans they wouldn't be making with their own capital.

It's good for everyone all around, but not perfect. There's nothing wrong with that.

Grundbegriff · Post by **Grundbegriff** » Sun Oct 19, 2014 6:07 pm

The interest rates charged to borrowers range from 30-100%. Borrowers who are unable to repay, or to repay on schedule, probably end up worse off in the medium- and long-run than if they had never taken a loan.

Meanwhile, the local microlenders have a great deal; the terms of repayment are steep, the pool of desperate high-risk borrowers is huge, and Kiva subsidies mitigate the actual risk.

In effect, Kiva is a pipeline for charitably enabling loan sharks.

Masking or distorting that central fact is the main reason for weaving the illusion that there's a non-fictional connection between particular Kiva donors and particular borrowers. (An important secondary reason for all the stagecraft is to gather data on which fictional prompts induce donations or affect their intensity.)

DD* · Post by DD* » Sun Oct 19, 2014 6:31 pm

Grundbegriff wrote:The interest rates charged to borrowers range from 30-100%. Borrowers who are unable to repay, or to repay on schedule, probably end up worse off in the medium- and long-run than if they had never taken a loan.

Meanwhile, the local microlenders have a great deal; the terms of repayment are steep, the pool of desperate high-risk borrowers is huge, and Kiva subsidies mitigate the actual risk.

In effect, Kiva is a pipeline for charitably enabling loan sharks.

Masking or distorting that central fact is the main reason for weaving the illusion that there's a non-fictional connection between particular Kiva donors and particular borrowers. (An important secondary reason for all the stagecraft is to gather data on which fictional prompts induce donations or affect their intensity.)

Source, please (not that I doubt you Grund, I just like to look at this sort of thing myself) - if this is truly the business model, I may need to rethink my participation.

Zaxxon · Post by **Zaxxon** » Sun Oct 19, 2014 6:33 pm

The average PY of the relevant partner is listed on each loan.

Moat_Man · Post by **Moat_Man** » Sun Oct 19, 2014 7:20 pm

Grundbegriff wrote:The interest rates charged to borrowers range from 30-100%. Borrowers who are unable to repay, or to repay on schedule, probably end up worse off in the medium- and long-run than if they had never taken a loan.

Meanwhile, the local microlenders have a great deal; the terms of repayment are steep, the pool of desperate high-risk borrowers is huge, and Kiva subsidies mitigate the actual risk.

In effect, Kiva is a pipeline for charitably enabling loan sharks.

Masking or distorting that central fact is the main reason for weaving the illusion that there's a non-fictional connection between particular Kiva donors and particular borrowers. (An important secondary reason for all the stagecraft is to gather data on which fictional prompts induce donations or affect their intensity.)

Grund, you are taking some statistics and distorting them with a horribly negative connotation. You do realize that in some countries the central bank's interest rate is higher than 0% right? Brazil's rate alone is 11% and it is a major world economy. (Source)

Kiva monitors their partners are based on all the partner reports I've read I am confident that what I am doing is enabling people in disadvantaged countries to better their lives.

Do you have any sources for anything that you've stated?

Grundbegriff · Post by **Grundbegriff** » Sun Oct 19, 2014 8:15 pm

A; The controversy: http://nextbillion.net/blogpost.aspx?blogid=3726
B; The controversy summarized: http://www.dailykos.com/story/2014/02/1 ... Kiva-Story
C: Kiva's reply to A: http://nextbillion.net/blogpost.aspx?blogid=3731

Not that there's anything wrong with that. Making money by further impoverishing the desperate poor has a noble heritage.

By way of comparison, consider Zidisha's middleman-free approach.

Moat_Man · Post by **Moat_Man** » Mon Oct 20, 2014 1:32 am

It's a very different thing to assert that Kiva's method's are inefficient as opposed to saying that, "In effect, Kiva is a pipeline for charitably enabling loan sharks." You are in essence saying that we are supporting usury and loan sharking which is not true.

Based on the group's 98.5% repayment rate, the ability to remove your money when you want to, and the fact that some loanee's have come back multiple times to continue to try improve their lot in life, I believe that good is being done.

Honestly, for all the charities that I support I know for certain that somewhere along the line there is waste, inefficiency and the occasional outright theft. However, you cannot let you stop that from trying to improve peoples lives that are disadvantaged. Charitable giving is like the portfolio analysis, if you do your research and spread the risk around you get the safest returns.

hitbyambulance · Post by **hitbyambulance** » Mon Oct 20, 2014 1:38 am

i did have a look at Zidisha, and i like what i see.

if anyone wants a $25 lending credit there, you can use my referral link:

https://www.zidisha.org/i/26903

Moat_Man · Post by **Moat_Man** » Mon Oct 20, 2014 1:57 am

BTW, I want to clarify my comments above by saying that I know Kiva is not charity. It is attempting to facilitate poor people getting credit they might not otherwise get. Does it work? There are studies being done but based on my research I believe it does.

This post and discussion raises some good points on both sides. It also highlights the need to do your homework by looking at the PY and reading about the microfinance institute when you are selecting a loanee.

em2nought · Post by **em2nought** » Mon Oct 20, 2014 3:08 am

Moat_Man wrote:Honestly, for all the charities that I support I know for certain that somewhere along the line there is waste, inefficiency and the occasional outright theft. However, you cannot let you stop that from trying to improve peoples lives that are disadvantaged.

Sure you can.

I've just recently reminded myself how $tupid it is to try and help "some" people.

Drazzil · Post by **Drazzil** » Mon Oct 20, 2014 9:37 am

Do they have a Kiva like option where you direct lend and make interest? I love the idea of loaning to impoverished people and would vastly prefer to make the interest myself. A way to cut out the middleman and the pseudo dogooding?

I'm going to sound like an asshole here but there's got to be a better way. I mean you are doing good by loaning money but at the same time I want interest, and to be paid back, and maybe a way to enforce loans... Say an option to hire local loan enforcement if the money doesn't come back? I know it's unsavory but it would keep the borrowers honest to know that the lenders have a way to reach out and touch them if they are not repaid.

Isgrimnur · Post by **Isgrimnur** » Mon Oct 20, 2014 10:01 am

Drazzil wrote:I'm going to sound like an asshole here but there's got to be a better way. I mean you are doing good by loaning money but at the same time I want interest, and to be paid back, and maybe a way to enforce loans... Say an option to hire local loan enforcement if the money doesn't come back? I know it's unsavory but it would keep the borrowers honest to know that the lenders have a way to reach out and touch them if they are not repaid.

Rip · Post by **Rip** » Mon Oct 20, 2014 10:03 am

Is it just me or does Drazzil sound as though he isn't so much against the strong armed loanshark thugs, just that if there is one he wants to be it?

LawBeefaroni · Post by **LawBeefaroni** » Mon Oct 20, 2014 10:04 am

Drazzil wrote: Do they have a Kiva like option where you direct lend and make interest? I love the idea of loaning to impoverished people and would vastly prefer to make the interest myself. A way to cut out the middleman and the pseudo dogooding?

Prosper, I think. The problem with Prosper is that the borrowers aren't really vetted. That leads to risk which leads to the necessity to charge higher rates to compensate.

Drazzil wrote:
I'm going to sound like an asshole here but there's got to be a better way. I mean you are doing good by loaning money but at the same time I want interest, and to be paid back, and maybe a way to enforce loans... Say an option to hire local loan enforcement if the money doesn't come back? I know it's unsavory but it would keep the borrowers honest to know that the lenders have a way to reach out and touch them if they are not repaid.

How much would it cost to hire someone to enforce the repayment?

If you offer favorable terms to borrowers, you're going to get a ton of scammers. If you try to weed out the scammers, you're going to increase your costs. If you increase your costs, it's harder to offer favorable terms.

The better way: be a bank.

Drazzil · Post by **Drazzil** » Mon Oct 20, 2014 10:05 am

LawBeefaroni wrote:
Drazzil wrote: Do they have a Kiva like option where you direct lend and make interest? I love the idea of loaning to impoverished people and would vastly prefer to make the interest myself. A way to cut out the middleman and the pseudo dogooding?
Prosper, I think. The problem with Prosper is that the borrowers aren't really vetted. That leads to risk which leads to the necessity to charge higher rates to compensate.

Drazzil wrote:
I'm going to sound like an asshole here but there's got to be a better way. I mean you are doing good by loaning money but at the same time I want interest, and to be paid back, and maybe a way to enforce loans... Say an option to hire local loan enforcement if the money doesn't come back? I know it's unsavory but it would keep the borrowers honest to know that the lenders have a way to reach out and touch them if they are not repaid.
How much would it cost to hire someone to enforce the repayment?

If you offer favorable terms to borrowers, you're going to get a ton of scammers. If you try to weed out the scammers, you're going to increase your costs. If you increase your costs, it's harder to offer favorable terms.

The better way: be a bank.

Ahh well my dreams of being a third world loan shark are thus shattered....

Rip · Post by **Rip** » Mon Oct 20, 2014 10:06 am

Welcome to The Bank of Drazzil, how may I help you?

Isgrimnur · Post by **Isgrimnur** » Mon Oct 20, 2014 10:06 am

LawBeefaroni wrote:The better way: be a bank.

The easier way: start a credit union.