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.
Interesting. The "featured" loan when I loaded it up was a grocery store in paraguay. Requested amount was 500 USD. According to their statistics, the delinquincy rate for the "field partner" that is I guess sponsoring this loan, was 1.1% and a default rate of 0.0%. Of course, if they just started out, then the default rate is pretty meaningless. What is more interesting to me is that the average annual income is ~760 USD, and they want a interest free loan for almost a whole years salary to get some more groceries in their store?
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.
pthor1231 said: What is more interesting to me is that the average annual income is ~760 USD, and they want a interest free loan for almost a whole years salary to get some more groceries in their store? How much inventory does your local corner grocery have? Probably several times the average persons salary.
Kiva is about helping others, not making money per se. And yes, their default rate is very low.
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.
Message edited by: hejustlaughs on 2009-06-02 14:38:58 CDT
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: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.
These loans are not interest-free to the individuals. You are lending money to a field partner that does the legwork on the ground (screens borrowers, collects repayments, etc.).
Since you are subsidizing the loan and assuming the risk of default the interest rate the individuals pay on these loans are considerably less than what they would pay if they had to go to another local moneylender.
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.
First of all: I think the whole micro-lending concept is great. In fact, the Nobel Peace Prize 2006 was awarded to the inventor. It provides a suitable framework for entrepreneurs, just what these countries need. It's the most efficient (and "capitalist") form of development aid I can think of.
The FWF angle to Kiva is: Kiva gets your money through paypal, at no cost to them (paypal struck them a sweetheart deal) --> you get credit card CB / rewards. Once your loan is repaid, you can withdraw your money to a checking account. So, Kiva offers another way to essentially buy cash and to get rewarded for that. This is essentially the same thing as the presidential dollar deal, or the Current Teen Card by Discover. Except, you don't have access to your cash for a few months. But then, you do good at no cost to you. CB should more than take care of the loan default risk. There are relatively short loans out there, three months or so, so your opportunity cost (no interest for the duration of the loan) is low.
I would think a FW kind of charity would be the sort of group that flies a plane over the Capitol, GM Headquarters, Citigroup, etc. It would be pulling a giant banner that said "Pay your bills, deadbeat!"
Either that, or the FWF charity would provide hookers and blow to those who had shown fiscal responsibility.
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.
Message edited by: robstrash on 2009-06-02 17:54:50 CDT
Done KIVA multiple times.... was feeling generous a couple christmases ago, and dropped 50 bucks in (funded 2 microloans). Have recycled it MANY times over now..... no defaults, and have the good feeling that I helped more than 2 handfuls of people (13+ or so)...
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.
VerbalK may be right, I didn't take the time to think about it. For now, I can afford to put my Fatwallet Cash Back to something that seems worthwhile. I joined when I saw the thread in FWOT.
There are several FW members who support Kiva but are not a part of the FW team. Maybe if we can increase our presence at Kiva we can get Tim to match some Fat Cash contributions.
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