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pasita

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Anyone else bothered by the fact that when we make a "loan", we're not actually loaning to the people, but backing up companies that do the loaning? I.e. essentially taking the risk off the companies, who to my understanding make risk free money by gathering the interests?

Posted over 4 years ago

stanmore

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pasita

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Joined 09/2009

Well, what struck me first was the "invite a friend, get $25 free" ads they have. Where does that money come from if this is a 0EV situation, I asked myself.

Then I noticed, on the individual "loan overview" ("read their story"-> ) pages, there's usually (haven't seen one without, actually) a "Pre-Dispursed: [date]" mention. Which mean the guy "asking" for the loan actually has the money in hand already. When you click that link, it basically says that the Field Partner is taking the risk of not getting the backup from Kiva members.

Below that, FIELD PARTNER section, I'm looking at one that says "Interest & Fees are Charged: Yes". They seem to have a Portfolio Yield of 20.6% (which is their fees and interest combined, though not only through Kiva loans, but other as well, in case of for example a bank). Which seems like a healthy margin to me, considering most of the money the company is lending is backed up by us.

Haven't read deeper in the Kiva web pages, maybe they explain all this better in a concise manner somewhere.

Posted over 4 years ago

stanmore

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pasita

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Joined 09/2009

I've been loaning a lot to Ukraine, which is the closest Kiva-operated country to me. Kind of lolled when I got the following from Kiva just minutes ago.... none of the above posts have nothing to do with the message below.

"Thank you for supporting an entrepreneur in Ukraine.
...
The majority of ACM's borrowers live and work in the now disputed Crimean peninsula region. Due to the political and economic instability in the Crimea, ACM's clients are facing challenges that may make it difficult to repay their loans at this time. Kiva has paused its funding for now, but hopes to continue to support ACM's much-needed development efforts in the future."

Posted over 4 years ago

stanmore

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elorean

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Anyone else bothered by the fact that when we make a "loan", we're not actually loaning to the people, but backing up companies that do the loaning? I.e. essentially taking the risk off the companies, who to my understanding make risk free money by gathering the interests?



What we do by making loans is providing the money to local NGO/NPO's in the country to aid development projects. The loan you provide is paid to the organisation that provides the loan to the group/person in question.

you're correct that we're taking the risk of a loan defaulting in case the people can't pay back. To my knowledge the default rate is somewhere between 0-1% on all loans. For me personal that's an acceptable default rate and it's prolly way better then the default rate of our money on poker sitesSmile.

Posted over 4 years ago

elorean

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Well, what struck me first was the "invite a friend, get $25 free" ads they have. Where does that money come from if this is a 0EV situation, I asked myself.




The $25 free is made possible by several private charity organisations and individuals. For example I believe one of the founders of Google added a couple of million for every loan made in the form of $25 free loans.

Posted over 4 years ago

elorean

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Kiva itself is funding itself by gifts from people who make loans

Posted over 4 years ago

pasita

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Yeah I realize how Kiva itself is funded. But the field partners are charging interest and fees (the one example that I saw was the 20.6%) on mostly risk free (i.e. backed up by us) money. I could understand this better if it was a non-profit organization. This was at least named a "Bank" something. The one Kiva puts me to top of the list right now is "One Acre Fund". Their interest rate is 23%. Not bad for a 1% default rate (which is not even their risk for the most part).

As far as I see, we're not even providing them the money to be loaned, as all the loans I've checked so far have been reimbursed, i.e. the money has been loaned already, even as Kiva is collecting the backup funding.

I guess it's better to back up the financial companies in the developing countries than not do anything, but that's not really what I thought I was doing when signing up. Maybe the people wouldn't get any loans, even at 20% interest, without Kiva. Dunno, maybe I still misunderstand some part of this. Very happy to hear if I got it wrong.

Posted about 4 years ago

TecmoSuperBowl

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Joined 01/2009

My outlook on it is this - are my actions (loaning) helping someone in this world, even indirectly? If so, then it's worth it. It may not be handing John Farmer money or seeds directly, but I do think a greater good is being served. Oftentimes, there will be others benefiting as well, but for me, these loans represent money I would otherwise have sitting in a bank account earning very little interest. It's +LV (life value) for me to make a loan vs earn .000001% interest on said money.

I just made 2 loans. We are closing in on $50,000 as a team!

Posted about 4 years ago

elorean

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couldn't have said it better, same thoughts for me.

Posted about 4 years ago

elorean

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TecmoSuperBowl

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I'm always re-loaning the credit that comes in Smile

Posted almost 4 years ago

soffy

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