I began micro-loaning with Kiva in 2008 and have written various articles on the subject. I’ve now given 24 loans in 17 countries. In one case, the local lending organization failed, impacting the loan repayment. In another, there was a small loss due to currency exchange values. But the rest of the loans have been doing fine – farmers, students, grocers, groups, and more. A small infusion has kept the process going and slightly expanded the number of loans I can make. The cost for me has been tiny compared to the impact. As the funds are repaid, I reloan them.
Kiva has recently released a video showing their history. It also gives a sense of it’s impact. This is a better repayment rate than in the west.
I’ve written before about how microloans can allow the average person to easily help someone fund a project. I’ve also mentioned the powerful book The International Bank of Bob, on one guys experience with Kiva.
My own original loan through Kiva has now been repaid and reloaned 17 times in 13 different countries – to students, grocers, suppliers, and makers; to single mom’s, young families, groups, and more. Making a loan takes just a few minutes, unless you choose to browse the many opportunities.
Kiva has recently released a video on how simple the process is. How to turn a dozen toonies* into real value.
*a “toonie” is a nickname for a Canadian $2 coin. The $1 coin has a Loon on the back, hence a “loonie”. The nickname of the $2 coin followed suit although personally I liked “doubloon” better.
If you’ve ever looked at Kiva (microloans) but were uncertain about investing, here is a chance to try it out for free. You can make a free $25 loan contribution and see the process in action.
Bob is the author of a book about Kiva. During a journalists tour of outrageously expensive hotels around the world, he saw the poverty of the people nearby, some of whom helped build the palaces. He took his pay and invested it in Kiva. Then he went on another world tour to see the loans in action. The resulting book, The International Bank of Bob, is a funny and moving story of the ensuing adventure. And a profound look at real life in some of the more challenging spots on earth.
Kiva is an online tool for making microloans to entrepreneurs in second and third world countries. Funds are raised from a group of small lenders and compiled and sent to the field partner, who in turn gets the money to the Entrepreneur.
I started using Kiva from a gift. I’ve gone on to reloan the funds several times after they’ve been repaid. Currently, the number of lenders is exceeding demand. Loans are being funded within minutes of landing on the site. Indeed, I had to try 3 times over several hours to find a loan that was not funded and had moments to decide between a family grocery store in Peru and young mother in Ghana.
The microloan implementation we know today originated with Mohammed Younus, who won the Nobel Peace prize for his inception of the Grameen Bank in his native Bangladesh. As some have observed, they don’t make a macro difference on poverty but they certainly can help improve the lot of some. And they’re certainly better than institutional handouts.
They’re now showing up in first world countries as well.
When I first started using Kiva, the loan information did not state the interest rates but did talk about payments. Now they don’t mention that either and the diversity of field partners has expanded. The email updates do mention recent payments but if you add them up, they equal the loan, not the total cost to the borrower. The field partners do charge interest. I had to fish around a little to find out the rate. You have to click on the field partners logo to see their details. Down near the bottom is the interest rates, as compared to other lenders.
The rates are a pretty sobering size. If you consider our local interest rates, it gives you an idea of the challenge these entrepreneurs face. For example, one loan I have that’s half repaid has a rate of 24%. The Kiva average is 22.95%. This is not the field partners sharking – the average interest rate in the loaning country is 120%. The average in Kiva’s operating countries is over 85%.
Thus, that is the profit margin you need to make just to pay for the loan let alone take a salary and grow the business. This means local cost of goods are dramatically inflated by the simple cost of funding inventory. Given that money is supposed to be a medium of exchange, its a curious testament to humanity that we charge so much for it’s availability. More so, given the near perfect repayment rates most lenders have. Ironically, better than the ‘low risk’ North American market.
People that complain about missing macro solutions to poverty don’t need to look far.
The Nobel Peace Prize for 2006 was awarded to Muhammed Yunus and the Grameen Bank for helping large population groups find ways to break out of poverty through the concept of Micro-credit.
A recent PBS show on Frontline featured an organization that has taken Micro-credit and made it accessible on the web. http://www.kiva.org/ This organization takes the money directly to the people with ideas.
You can choose the business and the loan amount online. You can view the loaning partners repayment history. (they use the same network as Grameen) And you get updates on the progress of the project and loan. When the loans are repaid, you can get the money back or reinvest in another loan.
Its a one to one relationship made possible by the Internet.
A one time donation that keeps giving, directly…
83% of Americans received unwanted gifts in the ’06 holiday season. Some will languish, wasted on a shelf. Some may be regifted. Some will go to a charity bin. But for the most part, such gifting can produce enormous amounts of outright waste.
What if you could help someone build their dream instead?
Here’s a new concept developed locally. It’s kind of like a gift registry, only it’s focused on one goal and builds like Kiva donations. It can be used for any sort of goal that requires funding, from trips to school, furniture to pets, events to technology.
“DreamBank is also built as a community so you can connect and communicate with fellow Dreamers to: follow their progress, share ideas and resources, or just cheer them on.”
Additionally, 10% of transactions support a charity of the Dreamers choice. You’ll see the charity noted under the Dream.
Meaningful gifting, supporting charities and fulfilling dreams. Nice.
One of the things that’s appalled me for a long time is the interest rates many organizations charge. And how many people carry balances on same and accept those rates. In many cases the rates are not fixed but are more about your willingness to pay. If you ask and have met your end of the bargain (paid on time), they’ll often cut your rate in half. But if you get behind, they often crank the rates way up making it more difficult to repay. They’re not trying to help you, they’re assigning you a risk factor. Yet their own actions contribute to the perceived risk.
In our legal structure, a corporation is a “person” yet it’s notable how most such “persons” come to treat actual persons like a number. This is typical enough that we accept it, even taking it personally. Plus, we attach a stigma to getting caught by fine print or getting a little behind and thus don’t seek the free help that’s available across North America. Schools teach us how to balance weights but not a budget. We’re inundated with advertising telling us what we need. The system has evolved to get us in debt and keep us there. The government too. Why make profit on just the sale when you can get ’em to keep paying for it. The problem with such a system is that when enough people play the game, the system starts running on debt rather than production. And that’s a house of cards with an end game.
Personally, I try to boycott companies who behave this way but it’s so prevalent that it can be more about avoiding the worst offenders or the ‘financial’ services of the others.
I’ve taken to using Interac rather than credit as it’s a much more viable way to run a budget. Interac is also non-profit, although the banks are lobbying to change that. We’ll see who’s side the legislators are on. While Interac marginally increases the cost of purchases, it’s much lower than credit, pays the vendor immediately, and gives me a running tally of spending. It also sets what you can actually afford to your current cash balance. Simple.
In the early ’80’s, the prime rate soared and lenders pushed their rates up with it. When interest rates settled lower, many lenders came down only a little. Some stayed up close to 30%. Many charge rates like a sales flyer, such as 19.97%. Sounds better than 20%. I find it useful to round up prices and rates to give a better sense of the actual cost, but suppliers will correct you on the .03% (laughs)
When prime rates hit their lowest, bank rates dropped accordingly but not many other loaners like credit cards. Certainly, some of them have higher money costs, but not by the margins they were asking.
Low rates created a quandary for banks. With lower margins, they needed to find new sources of income to maintain their profit. Especially when their credit card divisions were doing so well. Thus came all the fees while their costs were going down. And thus they ventured into ever higher risk scenarios. And thus arose the mortgage crisis in the US. And the investment scheme failures. And some of the other scams. Of course, it also took consumers and brokers willing to ignore the viability of the transactions.
Recently I read an article in a local rag (not on-line as it was apparently not deemed important enough) that obtained some documentation through Freedom of Information legislation. Canadian federal government legislation sets interest rates over 60% as criminal usury. Payday loan companies have become aware that they could be subject to class action lawsuits because of the way they charge interest. They have lobbied the provincial government (BC) to table legislation bypassing this, allowing charges of up to 600%!
And I was sobered by the rates micro-loans go for.
Not sure which is worse – the corporate greed that prays on the poor or that people are willing to consider such terms legal and acceptable. The loan companies argument was that they provide jobs. The question I would ask is why those jobs have to be at the expense of the people they are supposed to serve. And why the government even entertains this.
As long as we place the corporate person first, the real person will suffer. What’s the point of business and government if it doesn’t serve real people? Naive? I call it keeping things in perspective.