Kiva.org - Micro-Lending

[schild]

Make your own intelligent post or go back to the wow subforum.

Wow, getting kinda snippy about your chosen "charity," aren't ya hoss?

Anyway, you're afraid of being bilked out of 25 bucks?

Do you need ANYONE on f13 to answer that? Being a negligible amount of money isn't a reason to start handing it out, otherwise it wouldn't come down to the wire for f13s visitors to help fund the server every year.

Should I put a big banner at the top saying "Please give $5 a month so you have somewhere to talk on the internets?" And yes, I'm going to keep comparing it to me (and f13) just to drive you up the wall. If every active poster here gave $5 a month, I could live *well.* And pursue any sort of dream I wanted.

Edit: Hmmm, I should look into an optional $5 a month donation to f13 system that's automatic. I wonder if paypal allows that sort of subscription thing.

[Viin]

If I was actually receiving the interest and it was a reasonable rate, I would be interested in this. Not because I'm greedy, but at least then I could have some say in the rate.

http://www.prosper.com/

Edit: nvrmnd, apparently they aren't accepting more lenders right now - haha!

[Viin]

Edit: Hmmm, I should look into an optional $5 a month donation to f13 system that's automatic. I wonder if paypal allows that sort of subscription thing.

Looking around, I ran into this: http://tipjoy.com/

Interesting concept.

[schild]

Edit: Hmmm, I should look into an optional $5 a month donation to f13 system that's automatic. I wonder if paypal allows that sort of subscription thing.

Looking around, I ran into this: http://tipjoy.com/

Interesting concept.

Neat, but no more useful than paypal unfortunately.

Edit: I should charge for POTENTIAL access to other betas and in-game Bat Country stuff and Guarantee NOTHING! 0%!  I mean, what's $5!

Edit 2: OH HO, Paypal does do subscriptions now! Ookii, this entire line of thought is your fault.

[Oban]

... Damaschin always had a dream, and his dream is to procure a BMW car, but this car is not cheap.     ...he needs a loan because he does not have enough money. He hopes that this loan from Microinvest will make his dream a reality and the car will belong to him, and hopefully his future will get better.

Awesome.

[schild]

... Damaschin always had a dream, and his dream is to procure a BMW car, but this car is not cheap.     ...he needs a loan because he does not have enough money. He hopes that this loan from Microinvest will make his dream a reality and the car will belong to him, and hopefully his future will get better.

Awesome.

I like Hussein who wants to buy more music CDs for his CD store because the ones he has - despite success - are not selling well.

[Abagadro]

This.

Make your own intelligent post or go back to the wow subforum.

If I was actually receiving the interest and it was a reasonable rate, I would be interested in this. Not because I'm greedy, but at least then I could have some say in the rate.  From what I can tell, the lenders are merely providing capital for local lenders, who then lend it out at pretty high rates (flat-fees wildly inflate the interest rate). Call me crazy, but this thing looks like good-hearted people essentially subsidizing local usury.

Anyway if you're concerned about the interest rates there is a pretty in-depth discussion over here:

http://www.kivafriends.org/index.php/topic,368.0.html

Not all of the MFIs are the same, some have a high flat while others have a lower or normal interest rate.  If you're concerned you should find an MFI that fits your standards, a bad apple or two shouldn't get in the way of you helping someone out.  It really just seems as if you looked at it for a minute and dismissed the idea without doing the research.

Anyway, you're afraid of being bilked out of 25 bucks?  If you don't want to do it that's fine, just say you don't want to do it.  You don't have to justify it first.

I'm not worried about losing 25 bucks. I'm worried about vulnerable populations being taken advantage of. Usurious lending is severely damaging and counterproductive to the stated goal you are trying to achieve. I'm not trying to piss all over your idea (which is how you are interpreting it and taking it way to personally), but rather trying to understand. If my interpretation can be refuted I'd gladly be interested in joining. Jumping into something merely because it sounds good is never a good idea. Far from just taking a minute I poked around on the site for 30 minutes or so last night trying to find out how exactly it worked as it was not particularly clear. I discovered the payback provisions by looking at individual loan terms. The disclosures wouldn't even pass Truth in Lending Act requirements.

[lamaros]

I think the loose principle is that loans promote independance, whereas charity promotes dependance. This isn't an indictment of charity; but I think you need to not see these individual as charity cases. Take the guy I linked in the OP, he seems to have his own business and is looking to expand. Giving him $700 of microfinance loans means that he has capital to expand his business, and thereby improve his life and the life of his family, but he's driven to work harder perhaps, as he knows the money will need to be repaid in time. Giving him $700 worth of charity does not provide the same effect. I imagine further that some of these people are proud of what they have made, and would be insulted by charity, but are willing to be treated like serious businessmen, albeit with more forgiving terms than usual for loans. Charity helps people get out of a hole, but it's not going to help them any further really. I think that's the (rough) difference.

Yeah, I remember reading a fair bit about this a year or so back. This is a pretty good summation of the idea.

[Johny Cee]

If I was actually receiving the interest and it was a reasonable rate, I would be interested in this. Not because I'm greedy, but at least then I could have some say in the rate.  From what I can tell, the lenders are merely providing capital for local lenders, who then lend it out at pretty high rates (flat-fees wildly inflate the interest rate). Call me crazy, but this thing looks like good-hearted people essentially subsidizing local usury.

I can't comment on the legitimacy of any of the organizations making the loans, but...

The issues with microcredit is that you're providing a chance for marginal types in Less Developed countries who have poor ownership rights to actually get credit.  In most cases, at least when I studied microcredit in the late '90's, these programs were aimed at people living on government or communal land (or squatting in marginal private land) and primarily involved in informal markets.

Essentially there is no option for these people to get credit from any other source.  No collateral to get formal market loans, and loan sharks won't really touch them.

The major means of establishing the potential for repayment (used to be, at least...  last time I looked at any of this was a decade ago and the field was still young, dominated by NGOs) attempts to tie traditional social structures in a manner to engage moral hazard.  Basically, your loan (and continued loans) were tied into the local social structure, and the other folks in your village/community had.  Basically, either joint liability on loans or a rate of return such that the diligent payers subsidized those failing to repay.

From what I've scanned, seems like there was a move into more tailored personal loans for larger amounts by for-profit enterprises developed as well.

Interesting link here on the experience in Bolivia: http://arrow.hunter.cuny.edu/research/papers/HunterEconWP213.pdf

(I grabbed this one purely because it was written by the econ prof I covered microcredit with)

[Ookii]

This.

Make your own intelligent post or go back to the wow subforum.

If I was actually receiving the interest and it was a reasonable rate, I would be interested in this. Not because I'm greedy, but at least then I could have some say in the rate.  From what I can tell, the lenders are merely providing capital for local lenders, who then lend it out at pretty high rates (flat-fees wildly inflate the interest rate). Call me crazy, but this thing looks like good-hearted people essentially subsidizing local usury.

Anyway if you're concerned about the interest rates there is a pretty in-depth discussion over here:

http://www.kivafriends.org/index.php/topic,368.0.html

Not all of the MFIs are the same, some have a high flat while others have a lower or normal interest rate.  If you're concerned you should find an MFI that fits your standards, a bad apple or two shouldn't get in the way of you helping someone out.  It really just seems as if you looked at it for a minute and dismissed the idea without doing the research.

Anyway, you're afraid of being bilked out of 25 bucks?  If you don't want to do it that's fine, just say you don't want to do it.  You don't have to justify it first.

I'm not worried about losing 25 bucks. I'm worried about vulnerable populations being taken advantage of. Usurious lending is severely damaging and counterproductive to the stated goal you are trying to achieve. I'm not trying to piss all over your idea (which is how you are interpreting it and taking it way to personally), but rather trying to understand. If my interpretation can be refuted I'd gladly be interested in joining. Jumping into something merely because it sounds good is never a good idea. Far from just taking a minute I poked around on the site for 30 minutes or so last night trying to find out how exactly it worked as it was not particularly clear. I discovered the payback provisions by looking at individual loan terms. The disclosures wouldn't even pass Truth in Lending Act requirements.

Johnny Cee beat me to it and did a better job than I could.  From what I understand these people don't have any other options, so take that as you will.

I was more commenting on how the majority of people look for an excuse to disregard something as opposed to just admitting they didn't care for it in the first place..  If you truly feel that third world country lenders aren't being held up to stringent Western banking laws (although that statement is somewhat of an oxymoron now) feel free not to donate.

I just thought some F13ers might like this kind of "charity", so I thought I'd make a post about it.  No harm nor foul if it isn't anyone's cup of tea.

[schild]

I was more commenting on how the majority of people look for an excuse to disregard something as opposed to just admitting they didn't care for it in the first place.

I don't think anyone here has a problem admitting they don't care for something in the first place.

[Abagadro]

From what I understand these people don't have any other options, so take that as you will.

And getting a bad loan is worse than getting no loan.  I live in a state with no usury laws and the "payday lenders" breed like weeds. They are a menace and put people into serious financial straights by charging outrageous interest mostly in the form of flat fees. These people can't get regular loans either. Doesn't make usurious loans a good idea. Some of the loans through Kiva have hundreds of percent in annual interest attached to them as they have short maturity dates and high fees, just like payday lenders.

To me this looks no different from payday lenders only they are to people with even less capacity to deal with the negative ramifications of getting into a debt spiral.  Getting a poor third-world merchant into a 36% per annum loan (or 70, or 80, or 200) frankly isn't doing him any favors.  I also don't see why I should capitalize a usurious local banks to make large returns for itself (as this has been going on for decades with these companies making good money as the entire conclusion of that paper linked was that it was a profitable business) with no return on my investment. According to that paper linked, just in Boliva these banks were carrying 6.5 billion dollars in microcredit portfolio ten years ago. They don't need my freaking 25 bucks for free.  Essentially you are helping BANKS, not people. If you dig into those individual loans you will notice that the banks ALREADY LOANED THE MONEY OUT most of the time. They aren't undercapitalized, they just want to use your money to cover their own portfolio. It's risk management for them. They essentially have an insurance policy: YOU. Neither the borrower (as they are paying sky-high interest) nor you (as you get no return on the risk that you are incurring as a backer) are getting the benefit of that reduced risk, just the bank that is fully capable of operating profitably on its own.

I'm not opposed to micro-credit, but a bad implementation of a good idea is still a bad thing.  I'm also not going to just let people get recruited into something that I see as a bad idea without expressing my opinion. People are free to disregard it but if you are going to put it out there to try to recruit people you have to take the criticism along with it. I'm not critiquing your motives but the entire attitude of "don't criticize it, just don't do it" is pretty lame when you are trying to openly recruit people into a program. It can either stand up to scrutiny or it can't.

[nurtsi]

I'm still on the fence with this. Part of me wants to participate and the other part is sceptical. I don't really care about the money and it would make me feel all fluffy inside because I did a good deed and helped some poor soul. Then again, I'm sure the company is very aware of this tries to appeal to those feelings deliberately.

I did donate a bag full of my old clothes on Sunday to charity that distributes them to Africa. That is a lot easier decision though. I want to get rid of the clothes and don't really care if someone steals them. I don't want to just throw them away, they are perfectly good clothes but just don't fit me anymore or they are not anymore.

Donating stuff is a lot easier than just giving away plain money. When it's money, I get a lot more suspicious.

[Oban]

Wait until you find out what sort of damage second hand clothing has done to African commerce... 
As for Kiva, Abagadro is correct.  The money has already been paid out to the target and Kiva is a way for the lender to reduce his risk. 

However, on the loan interest part I disagree.  Each of the micro finance partners has a different loan rate, but it is always substantially less than the local rate the target would normally incur.

For instance, Tujijenge Tanzania Ltd:                        This Field Partner   All Kiva Partners

Average Interest Rate Borrower Pays To Kiva Field Partner    24.00%                   23.17%

Average Local Money Lender Interest Rate                    60.00%                   86.82%

[Salamok]

Justifying interest rates of 23% by pointing at the next guy charging 60% is pretty faulty logic.  Is 23% the flat rate?  Somehow I think it may be the APR and compounded daily/monthly.  I'm thinking a few people are making very decent money off of this site, if they have a default rate of under 2% and on top of that their risk is spread out in the form of a bunch of micro transactions then the operators are doing quite well.  Also one wonders what kind of established lender you are using to distribute the funds, easiest way to achieve a 2% default rate is using the local equivalent of "Guido".  2nd easiest way to acheive a 2% default rate is to just cook the books and continually renegotiate loan terms so nothing defaults. 

Their site also states that they are a registered 501(c)(3) charity but the IRS does not have a listing for Kiva Friends at all and the listing they have for Kiva Microfunds (website owner) is not tagged a c3 but is unclassified.  Yes I realize that there is a "these aren't the droids you are looking for" disclaimer on the kiva friends website saying they are not Kiva Microfunds, LLC but still they don't exactly go out of their way to state what their legal business name is.

They advertise 60+ million has been loaned out at an average IR of 23% this makes for 14 million or so of interest collected (assuming loan terms in excess of a year), I'm sure that "Guido the Lender" is getting a cut but as with many other charitable endeavors I wouldn't doubt that there is some douchebag at the top paying himself 500k+ a year while calling himself a non profit.

[Ookii]

How about this:

So let's just take a simple example.  Let's say it cost $50 to originate a loan.  If that loan is for $10,000 and lasts for 5 years (like an auto loan for instance).  The origination adds .1% (one tenth of one percent) to the carrying interest rate, e.g. 8.0% becomes 8.1%.  So we dismiss it.  But apply the same math to a $500 loan that will be repaid in 6 months.  The origination of $50 will add 20% to the base interest rate.  So even if Kiva loans are provided interest free, the origination in this example would require the MFI to charge 20% just to break even.

[Righ]

Reading this thread made me decide to give an unconditional gift to the International Rescue Committee. I'm convinced that the better aid agencies can spend the money more efficiently.

[nurtsi]

Wait until you find out what sort of damage second hand clothing has done to African commerce...

Well, I may have taken the bread from the mouth of some tailor, but I'd like to think someone else can get clothes real cheap. There must be more people needing clothes than there are tailors in Africa.

Donating stuff has suddenly become really complicated 

[Signe]

Wait until you find out what sort of damage second hand clothing has done to African commerce...

Well, I may have taken the bread from the mouth of some tailor, but I'd like to think someone else can get clothes real cheap. There must be more people needing clothes than there are tailors in Africa.

Donating stuff has suddenly become really complicated 

What are the alternatives?  You might have deprived someone in the area of making a buck, but I'm pretty certain there are more people needing donations of any sort than there are people who will lose a job over your donation.  I think the odds are in your favour that you've done more good than harm.  Which ever way you choose to give it's probably better than doing nothing at all, no?

[schild]

Wait until you find out what sort of damage second hand clothing has done to African commerce...

Well, I may have taken the bread from the mouth of some tailor, but I'd like to think someone else can get clothes real cheap. There must be more people needing clothes than there are tailors in Africa.

Donating stuff has suddenly become really complicated 

What are the alternatives?  You might have deprived someone in the area of making a buck, but I'm pretty certain there are more people needing donations of any sort than there are people who will lose a job over your donation.  I think the odds are in your favour that you've done more good than harm.  Which ever way you choose to give it's probably better than doing nothing at all, no?

I want a cage match between Kiva.org and chaos theory. And I want it televised.

[Tale]

This will be Abdulmagid’s third loan from Tujijenge Tanzania. He used the previous loans to buy four welding machines which were stolen on the same day. Adbulmagid (leave alone the disaster) has repaid the loans successfully. He hopes for a third loan to buy a new welding machine.

I was thinking about this: having it all stolen on day one, and being able to repay regardless, and being on his third loan.

Abdulmagid is 21. Perhaps an NGO will give him a discount on welding machines. Perhaps he is under pressure to obtain them to resell at full price. Hence he gets two loans, buys welding machines and they are "stolen" on the same day. They are resold at a profit and Abdulmagid receives the principal to repay the loan, plus commission. It's a great scam and worth applying again.

Or maybe it's all true and legit. Maybe he's terrified and the local standover man is making him do it. Maybe I'd be helping Abdulmagid survive either way. I'll never know.

[Salamok]

Back to charity begins at home, I'd rather donate directly to the local homeless shelter.  Shit my roofer is a helluva a guy and should be booming right now with the hail-out but he can't afford to finance 40 roof projects at the same time.  If I had it i'd loan him money knowing it at least is going to trickle through the local economy.

[K9]

Justifying interest rates of 23% by pointing at the next guy charging 60% is pretty faulty logic.  Is 23% the flat rate? 

I acknowledge your points, I just feel that you and Righ and some others are slightly missing the point. This isn't about charity, it's about providing a needed service that is otherwise lacking in most of the undeveloped world. African entrepreneurs do not have any access to the financial systems that individuals in the UK, US and Europe have. If these guys ever hope to be self-sufficient, and build real economies, they need capital. However, in an environment where the only capital is available from loan-sharks charging 120% interest (Nigeria) this is never going to happen. Now I can understand that the organisations disbursing the loans are not charities in the conventional sense, and so may need to cover their costs through charging interest. Whether this justifies 24% interest I cannot say without more data. I would guess that microfinance companies in Sub-Saharan Africa incur fairly high overheads due to needing to establish a broad network in areas where there may be no pre-existing resources (buildings, communications, trained staff, security). There is also the possibility that because there is no competition, they set some interest rate that becomes the competition for loan sharks, with a view that over time interest rates will fall. This is all rather speculative.

My feeling is that if you want to establish serious economies, you need to treat money seriously. You cannot develop a culture of serious endeavour and trade based on charity, and in this sense, making loans which charge interest is treating the individuals in this economy seriously. Patronage and coddling will only cripple and insult them in the long-term; teaching them to manage businesses in a serious manner will stand them in far better stead.

I'm enjoying reading the suggested criticisms, because there are many that I would never spot, and I'm learning stuff. However, I'm still inclined to believe that the motives are good, and the practicalities of lending in some of the poorest, most violent and least regulated areas of the world poses challenges which normal high-street banks never even have to think about, and some of these may not be being given full consideration. I also feel that microfinance initiatives and charity both have their place, but they serve very very different ends, and mixing the two is a mistake.

[Salamok]

Yes I get it but investing capital in an economy that can't protect it is like pissing into the wind (specifically refering to the stolen welders incident).  Assuming the story isn't a total load of crap (big assumption) do you really think putting 3 welders guy on the hook for a 23% loan against property he never had a chance to use is doing him a favor?  I don't think you can even legally charge someone 23% in texas (inclusive of origination fee even), you start nailing people rates like that (usery) and they quickly become in debt for life.

My other main point is that when someone has a great charitable idea (which this may be) it is just a matter of time before some douchebag appoints himself overseer of poor box and starts paying himself rediculous amounts of money.  Looks like the IRS doesn't have them classified as a 501c3 (even though Kiva says they are) and if they lost that status it most likely has to do with % of funds going to operating costs and such (ie the douchebag is present).

[Ookii]

A percentage of funds do not go to Kiva.org directly.  When you send a donation they ask you if you would also like to donate to kiva.org, typically they suggest 10% of what you're donating.  So yes I donate 2.50 to Kiva and 25 to some lady.

Once again we're talking about American tax laws and how someone gets the feeling that there is some hanky-panky going on.  The reason the interests rates are high are because of the cost of originating the loan and also the cost of doing business in those parts of the world.  There is also a rigorous interview system which makes sure that anyone who signs up for a loan can pay it back, they're not in it to put people in debt for the rest of their life.  They also don't deal with MFIs going around trying to rip people off.

We're going around in circles here, four people have signed up now.  If you would like to sign up then by all means do.  If you would not like to sign up feel free to donate money to your favorite charity (or f13).  Just stop with the nonsense about how these guys are ripping people off, you really don't have any ground to stand on.

[Viin]

I logged in to Kiva today to relend my funds, and I have to say, the f13 team is *weak*.

http://www.kiva.org/team/f13net

[Abagadro]

Microfinance is the new subprime.

With the added benefits of lots of suicides!