A FW kind of charity

How can you make the biggest impact in the world with the least amount of money? Microlending.

"Kiva is the world's first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs around the globe."

For some people in the world the difference between poverty and success can as little as $100. With Kiva you can lend money to entrepreneurs in poverty stricken areas who only need a little money to start a business or expand one. You can lend as little as $25, and best of all the money will be paid back to your account so you can loan the money out again and help someone else (only 1.7% of these people actually default on their loan). Imagine the impact you can make for so little.

go to www.kiva.org and check it out.

Thanks, Oprah.

seacher1289 said: For some people in the world the difference between poverty and success can as little as $100. With Kiva you can lend money to entrepreneurs in poverty stricken areas who only need a little money to start a business or expand one. You can lend as little as $25, and best of all the money will be paid back to your account so you can loan the money out again and help someone else (only 1.7% of these people actually default on their loan).

Wow, borrowing $100 makes an impoverished person succesful? That's amazing.

Also, if these impoverished borrowers really have a 1.7% default rate, we should put them in charge of the U.S. financial sector.

If they want an interest free loan for an amount roughly equal to their annual income, they should try Citi - that's where I got a loan like that.

hejustlaughs said: I can attest to the low default rates (around 1-1.5% for me). I'm a big believer in Kiva and its mission to provide credit to third world entrepreneurs.

Another Kiva sponsor here and I haven't lost any funds yet. The is a thread in OT about Kiva. Not sure why this is finance related? Because it has to do with money? Doesn't just about everything we do have to do with money?

Swivelguy said: Also, if these impoverished borrowers really have a 1.7% default rate, we should put them in charge of the U.S. financial sector.

Probably more of a societal problem than anything. The people that Kiva lends to in developing countries most likely work hard and don't feel entitled to a 5000-square-foot McMansion and Hummer H2 and 60-inch plasma TV. People like that are a big part of the reason that we are in this big ugly sticky mess to begin with.

scottxmso said: Swivelguy said: Also, if these impoverished borrowers really have a 1.7% default rate, we should put them in charge of the U.S. financial sector.

Probably more of a societal problem than anything. The people that Kiva lends to in developing countries most likely work hard and don't feel entitled to a 5000-square-foot McMansion and Hummer H2 and 60-inch plasma TV. People like that are a big part of the reason that we are in this big ugly sticky mess to begin with.

These are loans for small individual businesses. People genuinely have a desire to lift themselves out of poverty. They aren't looking for a handout, they're borrowing the money and repaying with interest. Just because you're born in a poor underdeveloped country doesn't mean you can't be a capable entrepreneur.

The average loan loan size is around $650.

Join team FW here
Kiva FW Team

Been doing Kiva for a little while now. Just to let you know, some days there are 5 loans to fund and other days 125. So, if you don't see many that day, just come back in a few days and you'll see more.

Edit: I just went to kiva.com since I have $25 in my account due to repayments. There are 688 loans available to fund. When I was showing my Dad a few months ago they only had 5 loans.

I met Premal Shah once... he was a family friend of a girl I went to grad school with. This was a few years ago, and maybe he's learned, but damn he did a pretty terrible salesjob on me... pretty much admitted that a single ethnic conflict or untimely earthquake would ruin the whole project. I think it's a nice idea, but think of it this way... if they offered a micro lending services to FWers, how soon until we strip the carcass bare. Once a system is created... opportunists will dig and dig to find a weakness to exploit, and it's costs a lot of overhead to defend against them. One of the primary safeguards in the system is that each borrower starts out with small loans, then earns higher credit limits over time by paying off previous loans. Eventually, without exceptional vetting and research, you are going to get borrowers (or people controling borrowers) to get larger limits then walk away.

The weakness in the system is that eventually KIVA will not be able to fully monitor as much as they should, which means they will either have to cap their loans, or face more defaults. There is an inavoidable ceiling, and once that is hit, not many other directions to go... and then there is my sneaking suspicion they fund old loans with new investments (aka ponzi). Even if Kiva is keeping immaculate books, you can't escape the fact that straw basket maker B could be borrowing money to pay for basket maker A's old loan... and so on and so forth.

It's a good idea, but I share some of the same concerns that VerbalK does. In addition, I'm a bit leery of donating/investing money to a person I don't know in a different country that in theory is doing the due diligence on a loan...aside from the reputation, there isn't too much different from a Nigerian scam to Kiva. It's obviously a personal decision, but I'd rather give money away to an organization that saves lives from preventable diseases like Doctors Without Borders than participate in Kiva...

sethdallob said: It's a good idea, but I share some of the same concerns that VerbalK does. In addition, I'm a bit leery of donating/investing money to a person I don't know in a different country that in theory is doing the due diligence on a loan...aside from the reputation, there isn't too much different from a Nigerian scam to Kiva. It's obviously a personal decision, but I'd rather give money away to an organization that saves lives from preventable diseases like Doctors Without Borders than participate in Kiva...
There are other non-profit orgs that are doing the due-diligence with these loans, they work with the communities and help the people get their loans with Kiva and write updates for lenders. Sometimes you see that loans are used for things that they were not supposed to be used for, and these are usually defaulted. These are very rare and I believe you get Kiva Credit back for the amount defaulted so that you can lend it out again (someone correct me if I'm wrong, I saw this somewhere). This is VERY different than a Nigerian scam. A Nigerian scam is a SCAM, it promises you money in return for money you give them. Kiva is a non-profit lending platform for people with limited access to good loans, they don't promise you any returns. Even if Kiva were infested with Ponzi scheming third world cons, it's not like you will lose a lot of money because you give $25, you eventually get $25 back, then you lend the same $25 to another person. It's not like you keep investing more and more for more returns, because there are no returns.

Loaned $50 in the form of two $25 loans and going to see what happens.

My economics class showed how aid can be counterproductive and investment and education offer the best hopes.

They pay interest to Kiva? Is that to create a reservoir for defaults?

I decided to give this a try. Loaned $50 in Paraguay and Nicaragua. This is actually a really cool idea.

Why doesnt Kiva service poor Americans? Also how do they choose these people to be listed for loans?

VerbalK said: FuzzyWombat said: sethdallob said: It's a good idea, but I share some of the same concerns that VerbalK does. In addition, I'm a bit leery of donating/investing money to a person I don't know in a different country that in theory is doing the due diligence on a loan...aside from the reputation, there isn't too much different from a Nigerian scam to Kiva. It's obviously a personal decision, but I'd rather give money away to an organization that saves lives from preventable diseases like Doctors Without Borders than participate in Kiva...
There are other non-profit orgs that are doing the due-diligence with these loans, they work with the communities and help the people get their loans with Kiva and write updates for lenders. Sometimes you see that loans are used for things that they were not supposed to be used for, and these are usually defaulted. These are very rare and I believe you get Kiva Credit back for the amount defaulted so that you can lend it out again (someone correct me if I'm wrong, I saw this somewhere). This is VERY different than a Nigerian scam. A Nigerian scam is a SCAM, it promises you money in return for money you give them. Kiva is a non-profit lending platform for people with limited access to good loans, they don't promise you any returns. Even if Kiva were infested with Ponzi scheming third world cons, it's not like you will lose a lot of money because you give $25, you eventually get $25 back, then you lend the same $25 to another person. It's not like you keep investing more and more for more returns, because there are no returns.

I agree, it's no Nigerian scam... but describing a system were bad investments are refunded (presumably by new investments) is pretty much the definiton of a Ponzi. True, this isn't a "profit" game... but the internals are the same.

I think microlending is a great idea for 3rd World development. It addresses tremendous disparities and inefficiencies that exist in such economies. But, in order to do it successfully, you need to have extensive "boots on the ground" to make it work. All localities have endemic levels of what we would call corruption... though in many parts of the world, it would just be called "respect". Talk to an NGO worker anywhere in Africa about having to deal with the parallel tribal and municipal systems. These are all expenses that need to be dealt with, and requires intense knowlege of the region to make any charitable organization run. The potential problem with Kiva is that they seem to be very good at using social networking to increase the supply of funding, but I fear that will drastically outpace the demand side of legitamate ventures. Pressures will build to keep lending though, and then I'd fear the temptation will exist to loosen what safeguards they have in place.

It seems a couple of you guys have already made up your minds as to how Kiva works but I might as well try to dispel the disinformation.

Bad investments (defaults) are not refunded. If they default you lose the money. The historic default rate has been less than 3%. Kiva has been in operation over 3+ years.

Kiva does not have any boots on the ground. The operation is run out of San Francisco. Kiva partners up with micro finance institutions (field partners) that are already lend in their respective regions.

You are choosing to subsidize certain loans by supply part of the funds and taking the risk of default. Since the micro finance institution no longer assumes the risk of default on these loans, they are able to charge substantially less interest on the loans.

Demand has outpaced the supply of loans. Towards the end of the month it's very slim pickings on loans that are available. This is a big change from when I started lending on Kiva about a year ago.

7890 said: Why doesnt Kiva service poor Americans? Also how do they choose these people to be listed for loans?

...because people in this country don't have enough credit already? Credit is one of the most easily accessible resources in this country.

7890 said: hejustlaughs said: 7890 said: Why doesnt Kiva service poor Americans? Also how do they choose these people to be listed for loans?

...because people in this country don't have enough credit already? Credit is one of the most easily accessible resources in this country.

For many people, especially people that would be on FW, thats true. For others its not.

I believe it's not only people on FW. The housing mess was due in great part to people who should not have had access to that much credit in the first place.

7890 said: You are right. Like I said, "many people". But certainly not everyone.The average American has considerably more resources available to them than the recipients of Kiva loans. More credit, more education, more upward mobility, more employment opportunities, more, more, more. In the third world communities in which the program operates, many people cannot obtain any traditional credit whatsoever - no bank loans, no credit cards, nothing - other than from the local moneylenders who are in essence loan sharks, often charging in excess of 100% interest per year or even month. Most are grateful for the unprecedented opportunity to better their lives and use the money constructively as a sustainable investment in their future. On the other hand, a "poor" American would take the loan and buy a new iPod...

thats actually not an exaggeration for a lot of poor americans receiving ga

Section 8 vouchers and a new escalade parked outside is not uncommon in the ghetto

SegaRob said: The funny thing is that with the shorter repayment loans, you end up making more money per dollar from the 2% CC CashBack than you would get from interest even in a high-yield bank account. Obviously there's a lot more risk loaning money to some indigent people in the third-world than having money in an FDIC account. But assuming they pay their loans back, subsidizing these loans doesn't cost us a cent. It's all subsidized by PayPal/eBay (for as long as their partnership lasts). I think that's pretty cool. Charity work that doesn't cost you anything in time or money.

At the same, I wonder if the FW effect will force eBay to start charging processing fees.

Trying to do this to make money is like rolling $10 a time at video roulette in vegas to get a $20 buffet.