Micro-Lending with Kiva

Kiva woman

She looks like a good risk to me.

For the past few months I’ve had $1500 burning a hole in my pocket.

Back in August I was working on a project helping a friend with her business. I had forgotten we had agreed on a $1500 fee until, as I was headed to the airport, she pressed a check into my hand. Perhaps this is why I’ve considered it “found” money ever since.

As such, and not having any other plans for it, I set to figure out something interesting to do with it.

I considered squandering it on something absolutely frivolous. But this goes against my nature and so I lack imagination along these lines.

I considered buying something we want and/or need. But, truth be told, we don’t want or need much and we are more interested in getting rid of stuff than acquiring more.

I considered giving it away, but we have a funded system already in place for that.

I considered, this being the Christmas season, converting it into 75 twenty-dollar bills and handing them out at the local shelter or soup kitchen. That could be interesting and fun, but would likely land me on the local evening TV news. Bleech.

So I gradually forgot about it. Floating about in our checking account, it seemed destined for covering the most pedestrian of expenses.

Then a bit of fortunate serendipity brought an old post David had written last December on The New York Budget about his experience with Kiva and micro-finance lending.

Micro-finance lending is a concept I came across a few years back and it has always intrigued me.


In many parts of the world, one of the key obstacles to rising out of poverty is the lack of access to affordable capital. This makes it extraordinarily difficult to start and/or grow a business.

Those of us living in the developed world tend to think of the key to financial success as a job. Indeed, we have come to think of access to jobs as a right. But in the developing world, not only is there no such right, such jobs are few and far between. Livings are made not by paychecks, but by hustle. You buy a box and some polish and shine shoes. You buy a cow and sell milk, or a chicken and sell eggs.

Of course, this takes capital. But not much, and this is where Kiva comes in. Using Field Partners around the world, Kiva connects lenders with borrowers. Their website provides profiles of the people looking to borrow and the amount they need. As a lender, you can provide as much or as little of any given loan as you choose. It only takes $25 to start.

In the comments on David’s post, I asked if he was still enthusiastic about his participation with Kiva a year on. He confirmed that he was. I then turned to Charity Navigator: Kiva for a bit of due diligence. Very impressive scores:

  • Overall: 98.76 (out of 100) for a top rating of 4-stars
  • Financial: 98.26 (out of 100)
  • Accountability: 100 (out of 100)

The next step was a fun tour around the world looking at the profiles and in the process getting a brief and fascinating insight into many lives. When the dust settled, we had made 16 loans, two for $50 each that completed the fund raising for those borrowers and the rest in $100 chunks. Here’s a sample:

  • In Palestine: To Kahadejeh to help repair her tractor.
  • In Tanzania: To Beatrice to help her buy used clothing for resale.
  • In Mongolia: To Bayarsaikhan to help him buy two cows.
  • In Tajikistan: To Sitora to help her pay for tuition.
  • In Philippines: To Cirila for organic fertilizer to help restore the soil she farms.
  • In Sierra Leone: To Hawanatu to help her buy stock for her grocery store.
  • In Nigeria: To Philibus Maigemu so he can afford to store the maize he grows for better prices later.

As you can see, we were fairly eclectic in our choice of country, gender and loan need. But you can sort your own search however you please.

Now here’s what I think is really cool about all this. Since these are loans, the money gets paid back. Kiva maintains a status report of all your loans and their payment schedule. As payments are made you can choose to have your money returned or you can re-lend it. Your money can help make the world a better place over and over and over again. That’s our plan.

If you have a financial mind like I do, you are probably wondering about default rates and currency risk. Here you go:

  • Default rate: ~1.11%
  • Loss to currency exchange risk: ~0.09%

Plus, according to Charity Navigator, the IRS accepts donations to Kiva as tax-deductible. But, as Greg points out in the comments below, this refers to donations made to Kiva to cover their operating expenses and not any micro-loans you make thru the site.

So if you’ve got some extra dough burning a hole in you pocket, and you know you do, click on this Kiva link and sign up.

Yep, this is an affiliate link, but not for jlcollinsnh. I figure since David brought this all to my attention, he deserves the link. When you sign up he’ll get a $25 credit in his Kiva account, which he has pledged to promptly lend out. It will help him reach his goal of having a loan in every country they offer.

If it went to me, my imagination just might kick in and the next thing you know I’d be squandering it on…

ice ball molds japan-ice-565

…a nice $1800 set of Japanese Ice Ball Molds

Update: February, 17 2015

Withdrawing your money

Periodically, since making our loans totaling $1500, I’ve been getting emails from Kiva reporting on repayments. As of today, $201.33 has been repaid.

As your money is repaid, you have three options:

  • Re-lend it
  • Donate it to Kiva
  • Have it paid back

Obviously, Kiva would prefer you to chose one of the first two. But I was interested in how easy the process would be to get it back. So I went on-line and pulled $100. My plan going forward is to reinvest the rest and the outstanding balances as they get repaid.

The process is very easy, but you must have a PayPal account. If you don’t they provide a link to set one up. From there it is a matter of entering your PayPal info and with a few clicks you’re done.

At one point an option to donate to them appeared with a suggested amount of $15 of my $100. So my guess is that 15% is the programed in request. I found this a bit off-putting, but then I’m cranky.

They say it will take 1 to 2 weeks for the money to show up in my account. This seemed a bit long, but all is well. Almost instantly I received this nice confirmation email:

Hi James,

This email confirms your withdrawal request of $100.00.

Withdrawals are processed manually, so sending funds to PayPal takes
longer than accepting funds. Kiva typically processes withdrawals
weekly, so you can expect to see your funds deposited into your PayPal
account within 1 to 2 weeks.

We hope you’ve enjoyed your experience lending on Kiva. Thank you for
your support!

Best wishes,

The Kiva Team

Addendum 1:

Several concerns about Kiva have been raised in the comments below. There are basically four:

1. Does the money you lend actually go to the individuals you chose?

2. Why is 34% the average of fees and interest charged by Kiva’s Field Partners?

3. Is Kiva, and micro-lending, charity?

4. Given the high rates of inflation in many of the countries where money is lent, how is it that lenders typically see their dollar-based loans paid back in full in dollars?

In the comments below you’ll find some lively discussion regarding these, including responses from Kiva and my take.

Addendum 2: 

Also in the comments, with an excellent Executive Summary, reader Gerrald introduces us to a micro-lending alternative: Zidisha

LA meet-ups: 

Looks like we’ll have two reader meet-ups and I’ll be visiting a group at Dreamworks:

  • Reader Meeting 1: Garden Grove lunch December 27, 2014
  • Reader Meeting 2: Glendale lunch January 3, 2015
  • Dreamworks: January 2, 2015

The Dreamworks event is private, but if you’d like to join either of the other two let me know and I’ll put you in touch with the organizers.

Hope to see you in Ecuador or California or someplace else down the road a piece!

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  1. Greg says

    I think that donations to Kiva are for their operating expenses and are different than Kiva loans. Such a donation should be tax deductible, but I don’t think the loans are tax deductible because you are repaid.

  2. Kiva Lender says

    I have been lending and relending on Kiva for a few years. I am somewhat conflicted about the process. On the one hand I do see merit in the microlending process, on the other hand the actual charges to the borrower by the local affiliate (not Kiva) may be in the area of 20%. That seems almost predatory to me but the affiliates do have to eat as well. I think this aspect of the Kiva process is not well known. I would prefer a focus on somehow limiting those charges in connection with the loans, possibly smaller loans and a fee to the affiliates from the Kiva funding pool?

    • jlcollinsnh says

      Hi KL…

      While doing my due diligence on them, I was looking for exactly that. But I couldn’t find anything. Can you point me to it?


      • Kiva Lender says

        I originally researched this in 2008 and had correspondence with Kiva support. At that time they had a partners page that showed the rates–10% to 30%. That link no longer works so the info may have been moved or deleted. Kiva did point out that the local lenders do have extra expenses in dealing with Kiva. I still have my loans and relend as they become due.

      • jlcollinsnh says

        Thanks again, KL…

        I’m sure administrating these loans on the ground is an expensive and labor intensive business, so some costs are to be expected.

        Hopefully Kiva will respond to my request for more info.

    • jlcollinsnh says

      I just sent Kiva a note asking about this and inviting them to respond here. If they choose to respond instead to me by email, I’ll share it.

  3. bluenote says

    I did the same thing with some “found” money and recycled it through Kiva for about 5 years. Eventually I just gave all the principle directly to Kiva, as a charitable donation, to cover their operating costs. Micro-Lending is a such a great idea! I used to have a huge Kiva bumper sticker on my binder in University, thanks for reminding me of them I should do another 5 year cycle.

  4. Tran says

    Hi – Just want to share my positive experience with Kiva. Although I deposited only $400 since 2007, I was able to make 81 $25 loans ($2,025 total), because I used the repaid money to fund additional loans. I like this “compounding” effect! Out of the 81 loans, I had 2 defaults (2%) and 1 delinquent (1%). My borrowers come from 32 countries, including 3 borrowers from the United States. Interestingly, the 2 defaults are borrowers in the U.S.

    • jlcollinsnh says

      Thanks Lianna…

      The article you linked to is from 2009, five years ago. Hopefully things have changed.

      My understanding from reading the website is that loans are frequently “pre-dispersed” so that the borrower doesn’t have to wait for the money. Then, loans like mine are used to back fill the amount lent. I’m OK with this approach.

      With each profile they state: “Your funds will be used to backfill this loan.”

      This says to me the money is funding the loan to the person I selected. But it could be clearer.

      I’ll reach out and ask them.

      • Lianna says

        Thanks! I’ve been a Kiva user since 2007, though less active since the kerfuffle back in 2009. Would definitely loan more if I could choose the recipient.

    • jlcollinsnh says

      OK, here is the response from Kiva:

      Hi James,

      At Kiva we allow our Field Partners the option to disburse loan funds before they’re posted to the Kiva website.

      We allow this because, if we required the Field Partners to wait for the loan to fully fundraise on Kiva, it would result in up to a minimum 45 day delay in the delivery of the funds to the borrower.

      Our Field Partners are contractually obligated to use funds from Kiva lenders to fund Kiva borrowers. In the case that a loan has been pre-disbursed, those funds are used to backfill what the Field Partner has already laid out.

      Loan disbursal can happen anywhere from 30 days before to 90 days after the loan is posted on the Kiva website and most of Kiva’s Field Partners choose to disburse the loan before the loan request is posted on Kiva.

      Even if a loan you support is pre-disbursed, as a Kiva lender you assume the risk for the loans you select and your repayments are directly tied to the repayments made by the borrower you choose. This means that if the borrower is unable to repay their loan, you as the lender won’t be repaid.

      To read more about this, please check out this blog post written by our Co-Founder, Matt Flannery, on this issue: http://blog.kiva.org/kivablog/2009/12/09/clarifying-how-kiva-worksYou can also check out this extensive Q&A which also talks a bit more about disbursal dates for Kiva loans: http://blog.kiva.org/faqs/direct-loans-qa

      Here’s what we want to make clear:

      Although your loan may be pre-disbursed, there is a direct 1:1 relationship between you and a borrower. If you lend money to Tarek in Lebanon, for example, to purchase seeds for his farm, those funds are going to cover the pre-disbursed loan to Tarek.

      In addition, your repayment is 100% tied to his repayment. If Tarek makes his monthly loan payment toward your loan, you get that money back. If he doesn’t make his monthly payment, we direct our Field Partners to let us know and you won’t get repaid. This establishes a true financial link between you and the borrower you choose to support.

      I hope that helps to clarify things. If you have any additional questions, please let me know.

      Best wishes,
      Dima Litvak
      Community Support Intern

      Loans that change lives

  5. Dave @ The New York says

    Thanks so much for the affiliate link!

    I absolutely promise to lend out the money promptly and get it flowing to more people!

    I think a lot of the “issues” that people brought up in the comments are quite interesting and ones that I wasn’t aware of, but nothing that would sour me on the process and make not want to lend through Kiva.

    One Christmas, my gift to each family member was a Kiva gift card. They LOVED it (of course, not every family would love this type of gift). I highly recommend gift cards for the people in your life who would appreciate such a gesture, though.

  6. Joe (arebelspy) says

    Just FYI, many of us have ethical problems with Kiva. I would never recommend it to someone. Certainly not as a charitable thing.

    Lots of discussion/reading for you here on the ethics of Kiva (and other similar things):





    (We’ll ignore the silliness of “found money” – there’s no such thing. Your money from this is the same as your dividend checks received. Money is fungible. 🙂 )

    • jlcollinsnh says

      Of course there is “found money,” Joe…

      …it’s all in your attitude. Next you’ll be telling me you don’t believe in Santa Claus! 😉

      Thanks for the links. Some interesting discussions.

    • tony says

      I saw a $20 bill getting blown across the road one day. So I stopped and picked it up. I believe this to LITERALLY be “found money”.

      • Joe (arebelspy) says

        An awesome retreat Seattle/Portland people put together last year as a less expensive Chautauqua-type event, since there’s a big group up in the Pacific Northwest that wanted something like that, but couldn’t necessarily justify the thousands of dollars going to the real thing would take.

        Here is the post about last year’s Camp Mustache:

        More info on this year’s event:

        At least a few of the participants (besides JD and Pete) you know from previous Ecuador Chautauquas (Marla and Ariane), and there’s probably some other overlap too.

        It’d be awesome if you went! 😀

        • jlcollinsnh says

          Interestingly, Mr. MM sent me an email yesterday inviting me to join. Something you put him up to? 😉

          Anyway, thanks for the links. Sounds very cool and I’d love to come. It would be fun to have Mrs. jlcollinsnh and our daughter come along as well.

          The folks who read these blogs really are an incredible group and I’ve always enjoyed the times I’ve been able to meet them.

          Plus, unlike the Chautauqua, I won’t have to prepare a talk!

          Is there any kind of itinerary, or is it just hanging out and seeing what develops?

          Mmmm. Seattle….

          • Joe (arebelspy) says

            Hah, I did not put him up to that, though I would have if I had thought of it! 🙂

            That one can be attributed to great minds thinking alike. 😉

            It does have an itinerary, but it’s pretty loose. The sessions were informal discussions, rather than presentations. I’ll email you last year’s schedule.

          • FiveSigmas says

            Sorry for the necro-post.

            +1 on Joe’s suggestion. As a reader of both MMM and your blog, I’d love to meet you at the next retreat.

          • jlcollinsnh says

            No worries, FS…

            I love necros!

            I’ve been invited and hope to be at the Seattle MMM meetup next Spring. Intoduce yourself!

  7. Alex says


    I have used Kiva in the past, but like others I am unsure about the high interest rates the local organization charge the business owners. Through some research I found a Zidisha.org. They are a much smaller micro lending organization, but they try to work directly with the individuals to drive lower rates. I have found that their costs are higher and so some of your money becomes a donation, but I’m hoping the lower rates are more helpful to the business owners.

    Also I’m a Southern Californian and would like to join your Glendale Meetup in January if there is still capacity. Please let me know.

  8. Dave @ NY Budget says

    In Defense of Kiva.

    I am hearing a lot of these arguments against Kiva, and I am really not hearing a lot that would dissuade me from lending via Kiva.

    – Yes, these borrowers pay fees to local lenders. I don’t mind subsidizing the local economy in more than one way. In fact, I LIKE the fact that the borrowers are accountable for actually using that money to generate income so that they can pay off the loan plus interest. It keeps the incentive structure there, which is one of the reasons I like Kiva in the first place.

    – It also feels like an excuse. “I am only helping these people with 80% of my money instead of 100% of my money. Therefore, I will choose to help them with 0% by not donating at all” – that’s not a great solution.

    – I LIKE donating to Kiva the organization as well, with their suggested donation amount. If I can help an organization like Kiva keep the lights on so that I can continue to support the micro loans, then I will.

    At the end of the day, do I think I am making a difference with my Kiva loans? Yes. Have I found another avenue that makes MORE of a difference with the money I lend? No.

    • Joe (arebelspy) says

      ” ‘I am only helping these people with 80% of my money instead of 100% of my money. Therefore, I will choose to help them with 0% by not donating at all’ – that’s not a great solution.”

      What we are saying is that you are not helping with 80% of your money. You are not helping at all. You are hurting.

      Would you feel okay “lending” money to the local loan shark, or payday loan place?

      That’s essentially what you’re doing. Imagine going down to your local payday loan place, lending them money at 0%, having the borrower get charged ridiculous interest rates, and then getting your money back when it’s paid back. I wouldn’t feel good about that, or delude myself into thinking I was “helping” those people who took the loans, even if they did it voluntarily.

      (Or you could donate directly to the payday loan company (not a loan), and they can keep it.)

      Kiva’s local lenders are predatory lenders. Full stop. Giving money to support that is not helping anyone.

      If you want to help people, donate time or money and actually help them. Predatory lending practices to pretend to be helping and feel good about yourself isn’t the way to go.

      • Dave @ NY Budget says

        I know that microlenders can be predatory and do more harm then good.

        However, it has been my understanding that Kiva does due diligence on its field partners – see this response to a NY Times article:


        Interesting notes from the article:

        80% of it’s field partners are non-profits as well

        The other 20% are vetted to insure that they have “a strong social mission” (true, we are not clear on exactly what that means, but if 80% are non-profit, I trust Kiva is attempting to do the right thing with the other 20%)

        Of course, if for some reason Kiva is lying to us or not portraying the situation honestly, I would be open to moving away from them, but I still haven’t seen any specific evidence that this is the case. Most references are about Kiva, and then about predatory microlenders, and never actually link the two.

        Again, I am open to seeing articles that I haven’t come across before that refute that claim. Let me know.

    • Raakesh says

      I use something very similar to Kiva in India, RangDe.org. Yes there are higher charges for the borrower. Comes to about 17.5% real rates or 10% flat rates. This covers operating expenses of both the field partner as also the Rang De. One had the choice of taking a token interest or contributing the same towards a curious for further loans & operational expenses.

      And all loans can be recycled (manually or automatically) or withdrawn. I make it a point to contribute monthly & keep rolling the repayments back into further contributions.

      The interest rates charged by micro finance firms may seem large, and some of them do have predatory pricing. But when you compare them to the usurious rates charged by local money lenders & loan sharks, as also their strong seem tactics, this is definitely better.

  9. jlcollinsnh says

    Hi All…

    As promised, I’ve reached out to Kiva and invited them to post here in response to some of these concerns. Unfortunately, “…we don’t typically post on outside blogs.”

    However, they did provide a detailed response in an email to me. With their permission, I am reproducing it here. My analysis and thoughts follow it.

    Hi James,

    Thanks so much for your email.

    The average interest rate and fees charged by our Field Partners is about 34%. This helps to defray the high operational cost of facilitating microloans. Because our Field Partners don’t have to pay interest to Kiva for the loans that they administer, Kiva loans help Field Partners reach communities and populations that may not otherwise be served. Most of Kiva Field Partners charge interest, however Kiva will not partner with an organization that charges exorbitant interest rates, and we require Field Partners to fully disclose their interest rates. Kiva partners only with microfinance institutions that have a social mission to serve the poor, unbanked, and underserved and you can read more about the great work our partners are doing on the ground with borrowers on our website here: http://www.kiva.org/about/socialperformance

    The interest and fees charged by our Field Partners seem high based on what most of us are accustomed to seeing, but those rates are necessary to maintain sustainable institutions. Self-sustainability is critical to creating long-term solutions to poverty, and charging interest to borrowers enables our Field Partners to bear costs and achieve self-sustainability.

    As many of our Field Partners serve communities in rural areas, the labor of distributing and collecting loan payments adds to the organization’s operational costs. To read more on this, you should check out the following articles, written by our Kiva Fellows: http://www.kiva.org/updates/fellows/2010/01/07/bad-roads-interest-rates-and-mfi-sustainability and http://www.kiva.org/updates/fellows/2011/01/07/the-last-mile

    It is also important to remember that comparisons of interest rates charged by commercial banks in underdeveloped countries, and with rates charged in developed countries are not good comparisons. A developed banking system can provide funds at lower rates, and when a bank facilitates larger loans, a lower proportion of costs are needed to cover transactional expenses. Microfinance is an expensive business, which is essentially the reason small loans are not provided by large banks.

    Developing countries also typically have high inflation rates which need to be factored into the interest rates that financial institutions charge. For example, an interest rate of 20% per annum in a country where inflation was 22% per annum would not cover costs. The interest rate charged by the institution would need to be greater than 22% in order to simply cover the cost of inflation, let alone other operational costs.

    We list our Field Partners’ return on assets (ROA) for each of our Field Partners on their Field Partner pages (http://www.kiva.org/partners) along with the interest rates charged so that you can see how much money the Field Partner is making based on the loans they’re disbursing. ROA is a measure of profitability, and currently, our Field Partners average a -0.62% ROA.

    Additional information on microfinance in general can be found here: http://www.kiva.org/about/microfinance and for more information on interest rates in the microfinance industry, check out: http://www.mftransparency.org

    Please let me know if you have any further questions!

    Best wishes,
    Dima Litvak
    Community Support Intern

    Loans that change lives

    My thoughts:

    I confess I almost choked reading: “The average interest rate and fees charged by our Field Partners is about 34%.” I’m not sure leading with this is the best strategy, but I give them props for being so up-front.

    This then shortly followed with the assertion, “Kiva will not partner with an organization that charges exorbitant interest rates…”

    For those of us living in a world of ~1% returns on savings accounts and ~4% mortgages, this is going to require some explaination. And it might require us to open our minds a bit.

    Basically, there are three mitigating factors.

    1. These are expensive loans to administer. These borrowers aren’t sending in checks or arranging to have their payments automatically deducted from their bank account. The Field Partners are sending people out, literally, in the field to pick up the payments.

    2. These are small loans and so even a modest cost to issue and collect them can be a big percentage. Let’s say it costs $200 to qualify a borrower, issue the money and then collect it over the loan term. For a loan of $10,000 that’s 2%. If it is for $1000, it’s suddenly 20%.

    3. High inflation = high interest rates. The low cost of borrowing in the US is directly related to the low inflation rate. Back in the inflationary days of the late1970s/early 1980s mortgage rates here were around 18%.

    I am always a bit amused when I travel to undeveloped countries and meet expats who crow about the 10% interest they are getting in the local banks. Unless you take into account the local inflation rate, you have no idea whether that 10% is making or losing you money.

    Still, 34%. Holy cow.

    Even considering those three mitigating factors, how can we determine whether the Field Partners are providing a cost-efficient service or are simply predatory? Well the best way is to look at their profitability and, in fact, it appears that Kiva does.

    Kiva reports that their Field Partners’ return on assets (ROA) is on average ~0.62%.

    To put that into perspective, looking at the 13 key business sectors, these days the average ROA runs to:

    1. Technology = 10.59%
    13. Financial = 0.87%

    Source: http://csimarket.com/screening/index.php?s=roa&pageS=3&fis=

    So, yes, the Field Partners are making money, but to me it is looking less predatory and more like dealing with the realities on the local ground.

    But, is Kiva right in their ROA assessments? Well, it is hard to know for sure, but given their top-notch rating with Charity Navigator (as discussed in the post) I’m inclined to accept their assessment.

    Still the reality is that if you lend $100, ~$64 is going to the borrower you hope to help and ~$34 of that is going into the operation of the Field Partner. Whether that is acceptable to you will be a very personal decision.

    Personally, I’m inclined to agree with Dave@NYBudget: “I don’t mind subsidizing the local economy in more than one way.”

    That’s my take so far, but I’m still wrestling with it and am very interested to hear what others think. Once the dust settles I’ll likely put a version of this under the post as an addendum.

    • Joe (arebelspy) says

      “Still the reality is that if you lend $100, ~$64 is going to the borrower you hope to help and ~$34 of that is going into the operation of the Field Partner. Whether that is acceptable to you will be a very personal decision.

      Personally, I’m inclined to agree with Dave@NYBudget: ‘I don’t mind subsidizing the local economy in more than one way.’ ”

      I don’t want to be subsidizing payday loan places though, I don’t think that’s subsidizing the “local economy.”

      Kiva is a great idea. In practice, not so much. Very similar to the Merry-Go-Round Pumps: http://www.newrepublic.com/article/120178/problem-international-development-and-plan-fix-it

      (That’s a very good article on the problem with something like Kiva, without mentioning Kiva specifically, but just the idea of trying to apply blanket solutions to disparate areas.)

      But you aren’t sending $100 over, and having $66 get to the local person and $34 go to Vinnie the loan shark as in your example; what you’re doing is sending $100 over, getting your $100 back, and the $34 Vinnie is getting comes not from you, but from the poor farmer (who pays back $134 – 100 to you, 34 to Vinnie).

      No charity occurred at all, and no help was done.

      It’s not just an inefficient way to send your dollars, because they come back. It’s the farmer that’s paying usurious rates, not you.

      In the end, if you want to help a person or place, straight up help. Donate time or money. That’s why I admire what Cheryl does at the Chautauqua – it directly helps people. That’s the type of support people need. Not a loan that makes someone just feel like they’re helping.

    • jlcollinsnh says

      Hi Joe…

      It’s nice to see I finally published something that caught your attention. 🙂

      While I understand your concerns, I’m not sure I share them.

      1. Given the factors I mentioned above and a ROA that is on average ~0.62%, it is very difficult for me to tar Kiva’s Field Partners as “payday loan places” charging “usurious rates.”

      2. The article you linked to is very interesting, but I think it actually, unintentionally, makes the case for a mirco-loan approach. It takes to task the concept of charities conceiving of grand schemes, testing them on too limited a basis and then implementing them in sweeping fashion with too little regard for local needs and culture. I agree.

      What appeals to me about Kiva and micro-lending is that it is small scale and driven by the needs and wants of the individuals. Be it buying a cow, fixing a tractor or acquiring goods to resell, they decide decide how much to borrow and how to spend it. Because it is a loan, presumably these choices are made with care.

      This is the very opposite of the Merry Go Round Pumps.

      3. Your point about the $100 going entirely to the loan and thus being entirely repaid if all goes well, is very well taken. It really becomes a ~$134 deal. If I make this into an addendum, I’ll make this correction. Thanks!

      4. But I’m not so sure your suggestion that “no help was done” holds up.

      One of the most striking things we noticed in reviewing borrowers is how many had done business with the Field Partner before. Many were on their 6th, 7th or 8th loan. Since the loans must be paid back before new ones are issued, this seems a system that many find helpful and worth the cost.

      In fact, so common were these repeat customers, we even made a game of looking for first-timers. Our thinking being that perhaps other lenders would be more drawn to borrowers with proven track records and we could provide an opportunity to those just starting.

      Finally, I absolutely share your enthusiasm for Cheryl’s personal charity: http://www.abovethecloudsretreats.com/charity.html

      Because she does this on her own, there is absolutely no overhead and every penny goes to those in need. But this only works because it is very small scale.

      Were she to suddenly be inundated with donated money, it would begin to take more and more of her time. At some point it might interfere with her work needed to make a living.

      Of course, she could decide then to take a salary and make it her job. It could even grow to requiring staff. Now you have overhead and the challenge of accountability.

      Very likely, especially in the beginning with even modest fixed costs and relatively low contributions, you might see administrative costs at a far higher percentage than those of large established charities.

      And, at that point, she is suddenly and unfairly open to charges of exploiting for her own benefit the poor she seeks to help.

      Bringing this back to Kiva, 34% is a shocking number. But I’m not willing to condemn them without understanding the reasons behind it.

      There may well be things I’m missing but, so far, as I said above, while the Field Partners are making money, to me it looks less predatory and more like dealing with the realities on the local ground.

      • Dave @ NY Budget says

        Agreed completely here.

        The fact that the person has to pay back $134 ($100 to me and $34 to the field partner) is exactly what I like about it.

        Borrower X uses the borrows $100. Since he knows he has to pay it back with interest, he is motivated to use that money to buy something that will make him money. He buys a chicken. The chicken produces eggs at a rate that allow him to pay off the $130. Now, Borrower X has a chicken that will produce eggs in the future, the field partner has $34 that allows them to continue creating these loans AND creates local jobs, and I have my $100 back that I can lend out to someone else and start that process over again.

        Help was done.

        • Joe (arebelspy) says

          …what? You’re going to argue that charging someone high interest motivates them to achieve more?

          Why not charge them 50% on average then, or 100%?

          Are the people who take out payday loans extra motivated to pay that off and do much better? Would you feel ethical lending your money, at no profit, to a payday loan center?

          Do you think when someone poor takes out a loan from a payday loan place and pays a high interest rate it helps them succeed? Because that’s what you’re arguing here.

          These people need HELP. They need money, yes, to bootstrap their way up. But giving them a loan where they have to pay 34% interest doesn’t accomplish that.

          Your comment about them being more motivated because of the interest, and Jim’s, above:
          “they [the person taking out the loan] decide decide how much to borrow and how to spend it. Because it is a loan, presumably these choices are made with care.”

          Makes me think that neither of you have much experience with poverty traps via payday loan places. People aren’t making rational decisions at that point, they’re making the decision they need to in order to survive.

          They are certainly motivated to change their life. To make it better for them and their family. You’re going to tell me that charging 34% means they’ll work harder and try to make their life better MORE than if you charged them, say, 10%? I find that ludacris.

          We should help give them the tools to change. In some cases, that may be a loan for money. But it’s not a blanket solution, and the fact that Kiva partners with people making a profit off these people (however small) while charging these people usurious rates is not charity. Full stop.

          • Dave @ NY Budget says

            I think you missed my point, completely. I am not arguing that the more interest you charge, the more motivation it brings. I am arguing that having to pay the money back with interest at all brings motivation to use it to purchase income-producing assets. I make this point because in your last point, you were arguing against micro-loans in general (as opposed to actually just gifting the $100 to the person).

            As far as the actual percentages, I think you are looking at the situation through very Western goggles. As has been mentioned, different cultures have vastly different inflation rates and situations, dictating the necessity for different interest rates. This isn’t necessarily a predatory situation.

            You can call it charity or not, as you like, but is it helpful? Plenty of studies on micro-loans have said that yes, in fact, they are. Label it how you see fit, but I have definitely not been dissuaded from thinking that this is helpful.

            The fact of the matter is that if these field partners charged 10% on their loans, they would very quickly go out of business and no longer be able to make the loans. Again, you are getting hung up on numbers because of your frame of reference.

          • Joe (arebelspy) says

            No, the specific numbers aren’t based on a Western viewpoint, but on history – what has been shown to be able to be paid back, and what hasn’t, over thousands of years.

            “The fact of the matter is that if these field partners charged 10% on their loans, they would very quickly go out of business and no longer be able to make the loans.”

            1) Not necessarily, because for an average of 34%, there’s likely some that can get by charging less without going out of business. Kiva could focus on working with those ones, and cutting out the higher expense ones.

            2) Even if they needed 15-20% but only charged 10%, that doesn’t mean they’d go out of business. They’d be operating at a loss. That loss would be made up by people donating. This is how charities work.

            The people donating wouldn’t be getting all of their money back, no, but they’d be helping someone, and giving them a chance to succeed. In the drive to have people get their money back, you offload the operating costs instead of on the donors but onto the people borrowing the money.

            That’s terrible.

            If Kiva were more selective with who they parnered with, and tried to do this on a smaller scale, it could work. It’s a nice idea, in theory. The way it works in practice, with a 34% average loan rate, is not admirable in any way.

            The other thing not mentioned yet is that I’ve seen it do terrible things to people actually being willing to help others (i.e. donate real money), especially in the personal finance community. We tend to be on the more frugal side, so when we can “loan” money, feel like we’re helping people, but get all that money back, it can take over people’s charity budgets and then people don’t actually donate.

            If you want to start investing in Kiva without reducing your other charitable contributions, okay, fine. But I’ve seen a lot of people decide their charity budget is now going into Kiva loans, and what that means is that no money is actually being donated to help anyone. It’s lent at huge rates, and the operating costs go onto the person being “helped”. And that’s a shame.

            See, for example, Done by Forty, who posted in this comment section they started realizing maybe they should help people because they have so much while others have so little. YES! That’s so awesome. And then to see them think Kiva is the solution.. what a shame.

            What if the operating costs of making these loans was 30% (as they are now), so we loaned the people the money at 10%, and ate the 20% difference as charitable giving? I could get behind that. But getting all your money back and having the borrower eat those costs? The person we’re wanting to help? That’s not charity. And people like Done by Forty, who think this is a good solution for the feelings they’re having when seeing others with so little, think that it is a solution to that, is just a shame.

          • Dave @ NY Budget says

            It’s becoming abundantly clear that you did not go into this discussion with an open mind. You are simply coming up with arguments that hold less and less water to try to defend your position.

            That is fine, I will let you have your opinion, but this will be my last post as this has become a debate where no minds will be swayed in either direction.

            I don’t think your solution of relying on donations to a lender are at all viable, but again, will let you have those theories.

            If you do have evidence supporting the very simple fact that these loans are NOT helpful (let’s not get bogged down by semantics of what you consider charity or not), then I am happy to review that. Otherwise, this is a fruitless pursuit for me and I will sign off.

          • Joe (arebelspy) says

            I was going to say the same thing. 🙂

            I don’t know that it’s viable either, but it’s at least morally defensible.

            I don’t think the burden of proof is on the person objecting to giving a 34% loan, but on the people lending and trying to get people to donate to show that it’s helpful, especially if you’re going to take money from other charities via people donating less to them.

            Endorsing something like that would take a high bar, IMO, and nothing Kiva has done warrants that. Extraordinary claims (“Loaning people money at a 34% interest rate helps them”) require extraordinary evidence. If anything it should be a cautious “it may help, but we don’t know” rather than a strong endorsement.

            Have a great day.

          • Raakesh says

            I entirely agree with your point here. And one can’t look at the interest rates in isolation. The local rate of inflation also needs to be factored in.

            Like the micro lending organisation I use charges interest rates of 17.5%. But when you factor in inflation of around 6% in India, that drops to 11.5% real rate of interest.

      • Joe (arebelspy) says

        “It’s nice to see I finally published something that caught your attention. :)”

        All of your posts catch my attention, it’s just that I normally agree 100% with what you say, so don’t have much to add. 🙂

        Addressing your points:

        1. What ultimately matters to the poor person on the ground is what they are paying, and studies have shown how hard it is to pay rates that high and get out of any sort of bad financial position. Whether or not the ROA is particularly high, the fact of the matter is the borrower is having to pay 34% on average. What about the times when it’s higher than that average, and they’re paying 50%, or 100%? Most charities are just that – charities. They operate at a “loss” (the money being given away). Kiva’s partners are acting at a profit. A profit! Kiva is a feel good solution that isn’t charity in any sense of the word.

        2. I can see how you would argue that Kiva is on a small local level, but I would argue the opposite: it’s a blanket solution trying to be applied to multiple places where it may not fit. Instead of trying to make their solution of “give loans to poor people to help boost them” work everywhere so that some places that charge 80% interest are included and some places that charge 10% interest are included, why not actually make it on a smaller scale in the locations where it makes sense? If there are places where it’s too hard to implement without charging ridiculous rates… don’t lend there! If Kiva went to a smaller scale based on if their model worked in an individual location, they could choose the places where it would be feasible for the person to pay those interest rates and bootstrap, instead of getting trapped into a cycle of even worse poverty. But they, like nearly all charities, want to grow and grow, and apply their loan solution in places where it may not make sense to do so, and in doing so, are willing to partner with people charging a very high interest rate, which ultimately undermines their goal of helping people.

        3. Sure!

        4. The fact that people have taken out multiple loans doesn’t make it good in my mind. Read this, replacing “Field Partner” with “Payday Loans”:
        “One of the most striking things we noticed in reviewing borrowers is how many had done business with the [Payday Loans] before. Many were on their 6th, 7th or 8th loan. Since the loans must be paid back before new ones are issued, this seems a system that many find helpful and worth the cost.

        In fact, so common were these repeat customers, we even made a game of looking for first-timers.”

        Of course they’d love to have new borrowers! As would payday loan places. Of course people sucked into the trap of paying these loans often take out more, borrowing elsewhere to pay off the first one, then being able to take a second to pay off that, etc.

        I don’t see people getting sucked into a cycle of high interest loans as a good thing, nor the fact that they’re looking for more people to prey on as a good thing.

        “Bringing this back to Kiva, 34% is a shocking number. But I’m not willing to condemn them without understanding the reasons behind it.”

        Fair enough, and that’s a reasonable approach.

        But if you aren’t willing to condemn them without understanding what’s going on, I would argue that nor should you endorse them (with an affiliate link, no less, even if not your own – that $25 referral they pay out has to come from somewhere) on a popular blog that many link to without qualms or having to give caveats because of your reasonable, measured advice. (As opposed to having to say “His stock series is great, but…”)

        There’s a big difference between being unsure of how well something works and endorsing it (even with a disclaimer).

        • jlcollinsnh says

          Well, I’m beginning to be glad you don’t disagree often. 🙂

          Pretty clearly we are not going to agree on this and very shortly we risk falling into the trap of talking in circles.

          Let me respond to your last points and then, if you want it, I’ll give you the last word.

          By then we should have this pretty well covered and we’ll leave to readers to draw their own conclusions.

          1. I don’t recall suggesting that micro-lending is a charity. Kiva itself is a non-profit recognized by the IRS and, as Greg points out in the first comment, only contributions to Kiva’s operations are deductible. The loans are not, precisely because they are something other than charity.

          But this doesn’t mean they are not helpful. Providing capital to markets that wouldn’t likely have it otherwise is very helpful in my view. And should these markets develop the point of being more attractive to other, cheaper capital sources, it might well be this seed money that gets the ball rolling.

          As I say in the post, we already give to charity. What made Kiva attractive is the very fact it is a different approach.

          I don’t have a problem with the lenders making a profit and ROA, especially one as modest as ~0.62%. And I like the idea that the borrowers can invest in productive assets and also earn a profit. Profit is what makes ventures sustainable and it is what keeps people motivated to continue their efforts.

          Helping facilitate this does feel good. So does giving to charity. Perhaps this is a moral failing and I would be more noble in my contributions without it. But overall we should be grateful that it is a common human trait. There would be a lot less giving and helping going on without it.

          2. In fact, Kiva doesn’t go everywhere. There are many countries in which they don’t operate. I won’t presume to know why in each case, but in his reply to my inquiry above, their spokesman said: “Kiva partners only with microfinance institutions that have a social mission to serve the poor, unbanked, and underserved…” Now of course this could be so much hooy, but their exceptionally high rating with Charity Navigator makes me inclined to believe them.

          3. Well. Yeah. Sure. 🙂

          4. Again, I don’t see conflating the Field Partners with Payday Loan places as being fair or accurate for the reasons I’ve already cited.

          I also think you are making a huge assumption that the reason for repeat loans is that the borrowers have been sucked into trap. I see no evidence for this. Moreover, for those for whom it doesn’t work, I suspect it is much more likely that they just walk away from the debt.

          It seems to me the more reasonable assumption is that like most businesses, they have a reoccurring need for operating capital. Nothing wrong or even surprising in this.

          Finally, regarding my endorsement.

          When I put up this post I had no idea of these two basic concerns raised in the comments. This one that we’ve been discussing, and whether the loans actually go to the person chosen. (They do. See the conversation with Lianna above.)

          In both cases I went back to the Kiva site and reached out directly to Kiva seeking more insights. I’ve also listened carefully to the pros and cons expressed by you and other readers here. I even went to the Forum threads you linked to and did some reading.

          Had this persuaded me that my endorsement was in error, the link would come down and I would be announcing it as I did in this post: https://jlcollinsnh.com/2013/06/28/stocks-part-viii-b-should-you-avoid-your-companys-401k/ And this one: https://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/

          But it hasn’t.

          Certainly Kiva and micro-lending are not perfect. Neither, I’m sure, are the charities I support. Whenever it comes time to contribute more, I review them with an eye towards whether my money is still well placed. I’ll do the same when the time comes to re-lend my money at Kiva.

          For now, I am comfortable in providing my financial support to each and my endorsement stands. And, shame on me, I feel pretty good about doing it. 😉

  10. Done by Forty says

    I recently wrote about the weird feelings I’m getting as we move through our personal finance journey, while others are still so poor. I think this Kiva thing might be just what the doctor ordered.

    • jlcollinsnh says

      Hey DbyF…

      I just hopped over and read that post. Great stuff, and you can’t miss embedding a little Louis CK. I was laughing out loud. Here’s the link for anybody else who’s curious: http://www.donebyforty.com/2014/12/an-embarrassment-of-riches.html

      I do however, with great respect, disagree with Mrs DbyF on the need to clarify your satire. There will always be those for whom it zips right over their little pin heads. But they’re not your audience. Maybe, if you absolutely must, with a little * and a note at the bottom.

      You don’t see Louis clarifying his more outrageous comments as satire. Then again, maybe in his case, they’re not. 😉

  11. Joe (arebelspy) says

    Ah, so I think I see where our fundamental difference lies.

    I think we actually agree on nearly everything. EXCEPT I see Kiva as mostly being viewed as a charity by others. And it very much fails at that.

    When they advertise things like their “Charity Navigator” rating, it helps push that image. When in actuality there is “charity” and the corresponding charitable deduction when directly donating to Kiva the nonprofit, and then there is the the loaning on Kiva, which is not charity. When they push the idea that they are a nonprofit/charity though, people conflate that with making the loans.

    So then people feel like they’re donating to charity when making the loans, even though they are not.

    If you’re in favor of microloans in a capitalistic idea, okay. I’m fine with that, and I think it could actually be a really good thing.

    This article is an interesting read:

    And the title encapsulates what I’m talking about “The joys of pretending to help the poor” – When people think they’re helping the poor by doing Kiva, they get that satisfaction and then don’t tend to donate elsewhere where it’s needed.

    It’s awesome that you donate elsewhere and do Kiva as well. But I think many view Kiva’s “help” as all they need to do (and have seen that over and over again in the personal finance community), and it’s not helping the poor in what they actually might need, just making privileged people feel good. And that’s not something I support.

    If we’re not talking about Kiva as a charity, and someone doesn’t view it as a charitable thing, but keeps their charity budget the same and donates to Kiva, okay. I’m still not convinced that’s amazing, but it’s fine. But I just don’t think that’s the case.

    And my not explaining that very well is what caused all this back and forth – you and NYB viewing it as a straight lending thing, while I’m viewing it as what I’ve seen it be in the real world – an excuse for people to think they’re helping the poor (while getting their money back, a great way for a frugal/cheap person to “help”!) without actually having the impact that a real charity has.

    Thanks for explaining your position.

    • Matt H says

      Hi Joe (and Jim and Dave @NYBudget),

      I’ve been following your discussion and it sure has been interesting! Regarding the charity aspect of it, do some people who consider it giving to charity actually withdraw their money once it’s been repaid? If so, that’s clearly far from charity. But if once it’s repaid they continually loan it out to other borrowers, then I could see where they’re coming from. Does that make sense?

      I have to say I’m not sure where I land on Kiva at this point, and the Merry-Go-Round Pumps was a very interesting essay. One point where I would lean towards Joe’s side of things is the repeat borrowers. As I understand it, part of the philosophy behind micro-financing is to give people a hand on the way to becoming self-sustaining. If someone’s on their 8th loan, and then their 12th, and then their 30th, then I don’t really think it’s helping that person. Part of that logic comes from my work experience though. I work at a Food Bank, and in our area I’d say the majority of people have been using food pantries and soup kitchens for over a year. The mission of food banks, as was told to me, is to eliminate hunger, not feed the hungry. But we’re doing more of the latter. If we’re creating a reliance on food assistance programs, then I don’t think we’re doing people a service. I think the parallel to Kiva is similar. If 90% of the borrowers that Kiva helps are first time borrowers who need a hand up, and then create a self-sustaining life, then I would be singing their praises to everyone. But if instead 90% of the borrowers are repeat borrowers who are reliant on Kiva loans, then those people need help in some other way.

      I know you guys were just dying to have somebody else share their thoughts so there you go!

      • Joy says


        I too have followed the discussion. Your thoughts prompt me to add my own. I am thinking that repeat loans by borrowers could very well be a great sign. Perhaps his/her first loan was for a chicken. Great. Paid the loan off. Now, he/she might like a cow. Great. Paid the cow off. Now, how about a bull? A rooster? Some seed? A tractor?

        I know we have had multiple loans in our 30 years of marriage. All have been paid in full. All, have added to the value of our lives.

        Ok, not wanting to debate this. Just my thoughts.

    • jlcollinsnh says

      Hi Matt…

      Thanks for joining in!

      I think conversations like this illustrate just how tricky it is to help people using money.

      We’d all like to have every penny go directly to those in need. But, other than with very small scale personal efforts like Cheryl’s, that’s not possible without infrastructure to deliver it.

      But how much is enough and how much is too little? Too much and the delivering organization soon is the main beneficiary. Too little and delivery is inefficient and controls on being sure the money is used wisely are lacking.

      Then, as you suggest, there is the concern of what helps and what only creates dependency and more misery.

      Sometimes, as Dave suggests, the temptation becomes just to throw up your hands and do nothing. The uncertainties and inefficiencies become an excuse.

      I wrestle with this in all my charitable giving. As much as I try to reasonably vet those I support, I realize that even with the good ones it is not perfect or likely even close.

      We do what we can with the information available, and maybe be a bit slower to judge.

      Once, a number of years ago, I was walking down a city street with two friends. One stopped to give a homeless guy some cash.

      The second said, “I never give to those guys. He’s only going to spend in on cheap wine and get drunk.”

      The first replied, “If for whatever reason my life’s path had taken me to where he is, I’m not sure I wouldn’t do the same.”

  12. Joy says

    I wish we all could see with the heart of your “first” friend. But, here is the irony of it.
    The “second” friend couldn’t because of the path his life has taken him. However, I do hope that day opened his heart to see. 🙂

  13. Scott W says

    Jim-I have toyed with lending thru Kiva for a couple of years and have had some of the concerns mentioned above. After reading thru both sides and the responses from Kiva, I have taken the plunge. Made my first $200 loan and $30 donation to Kiva. I’m not looking for money back I will continue to lend it out if I get the $200 back. All in all I think it is a good idea.

    Thank you for all you do on this site and the reminder about this organization.


    • jlcollinsnh says

      Hi Scott…

      Glad to hear the discussion helped.

      That’s my plan, too. We’ll just keep recycling the money as the loans get paid back.

  14. Gerrald says

    Just wanting to chime in into the discussion above. I was really interested by your post on Kiva, and spend the rest of the evening doing my own due diligence on Kiva, finding also about the crazy interest rates and some other issues. Finally settled on zidisha.org which radically cuts out the middle man, and is therefore able to offer loans to a rate of 5-20% depending on how much interest the lenders (that is us) demand. They strike me as much more transparent than Kiva, and trying to pull off a very exciting idea.

    • jlcollinsnh says

      Thanks, Gerrald…

      So they pay interest to the participating lenders like us?

      Kiva does not….

      Perhaps you could provide an executive summary on them for us here?

      • Gerrald says

        I’ll do my best below. Note however that as stated above, I did not lend to them yet so this is just by reading around: I read their whole website and read around on the internet. See https://www.zidisha.org/faq for more detailed info.

        Their basic principle is the following: they allow lenders to lend to borrowers. Zidisha provides the website and manages the money streams, and does some (but limited) real life followup on the borrowers if they do not meet their payment schedule. Very lean organization, peer to peer lending to low-income individuals, and therefore high risk.
        On their website, you have direct communication with the person you are lending to. She pitches her loan proposal, and there is a messaging board that can be used to provide updates and keep the contact. All actually realized repayments and the schedule are public for every loan, so there is a lot of transparency. First time borrowers are limited to 50 dollar, only when they prove creditworthiness by paying back on time they get access to ask for larger loans.

        As a lender, you browse through the open loan proposals and decide how much you want to contribute to which loan. Each proposal has an expiry date, if it is not fully funded before that time, your money is refunded. You set your own interest rate which you want to receive, ranging from 0 to 15%. Zidisha has a base level of 5% interest to cover bank fees etc (as said before their overhead seems to be very limited). If the loan gets fully subscribed, the potential borrower gets a loan offer with an interest rate of 5% plus the weighted average of the rate offered by the lenders. In this way, the lenders basically set the risk premium for the loan (which is reasonable I feel as they also directly bear the risk of default and risk of delay).

        Some miscellaneous items you might want to be aware of:
        * The borrower has the possibility to reschedule the loan, which seems to happen very often. Based on a cursory glance at several loans, it seems that most loans do get repaid but that rescheduling is very common (which makes sense: you are directly lending to a low-income person in a developing country which should be considered high risk).
        * Defaults and write-offs happen.
        * Zidisha’s interest rates are calculated in a way that is non-standard in our banking system: they use a flat rate instead of our typical declining balance interest rate. In their words: “In a flat interest rate, the interest rate per month is a fixed percentage of the original loan amount, regardless of the fact that the loan capital is declining each month.” They are very transparent about this, and when you think about it, this way of calculating interest if rescheduling is common is simple and transparent. Just a matter of convention and clarity for me (some people online have made a big fuss about this. After the comments, Zidisha updated their website to make this as transparent as possible.)

        This is the basics I think. I tried to make it as short as possible. Feel free to come back with more questions.

  15. Lucas says

    Sounds to me like Kiva is not charity. It’s a non-profit, but not charity. Nothing wrong with that.

    Business micro-loans are still a great idea. They provide people in poorer areas an opportunity to build their business. Let me write that again, an opportunity. As with any financial support system, some people will live off it for way longer than the system creators might’ve intended (welfare anyone?).

    A personal note of interest on the 34% rate vs. inflation: I grew up in Brazil in the 80s, when inflation was so high that every couple of years the ministry of economy would have to slash 3 zeros from all prices and rename the currency. As a child, I would routinely pay thousands, hundreds of thousands or millions for a simple comic book or an ice cream cone. My mother would tell me the new name for our money when it changed. By the time I was 10, the currency had changed at least 4 times. Thankfully, they’ve kept the same currency for 20 years now and inflation is well under control, in comparison.

    As children of a stable juggernaut American economy, it’s nearly impossible for you all to see the reality of a 34% interest rate as humdrum, but it’s likely a very good rate in these impoverished countries. Chances are that, by the time Tarif is selling milk from his grown cow, a few dozen bottles sell for the amount he paid for that calf.

    What I don’t get is how that money makes it back to you in dollars after so much time. After inflation, wouldn’t they need way more local currency to pay back a 1-year-old loan in dollars?

    • jlcollinsnh says

      Hi Lucas…

      I posed your question to Kiva and here is the response:

      Hi James,

      Yes, that could definitely happen. This is when you see loss due to currency exchange. Kiva allows its Field Partners to choose to pass catastrophic currency losses on to Kiva lenders. In these cases, if the value of the U.S. dollar appreciates more than 10% against the local currency, repayments made on Kiva loans will be marked with a currency loss.

      However, some Field Partners opt to cover all losses on the loan that are due to currency fluctuation. For instance, some Field Partners disburse loans to borrowers in US dollars, thereby posing no currency risk as the loan will never have to be converted into a local currency that might fluctuate against the UsD. Other Field Partners simply do not see foreign exchange rates posing a significant risk, as they operate in countries where the local currency exchange rate has fluctuated very little over the past several years.

      Meanwhile, some Field Partners may simply want to eliminate risk for its lenders, thereby hoping to increase the amount of loans made to the borrowers they support. These are just a few of a variety of reasons why Field Partners decide to opt out of sharing currency risk.

      Best wishes,
      Dima Litvak
      Community Support Intern

  16. Ryan says

    Hi Jim,

    Thanks for spreading the word! I’ve been using Kiva for a couple of years now and really love the idea. I stumbled on a phone app called Acorns…The app essentially rounds up any purchases you make using a debit/credit/checking account and puts it in an investment account. For example: buy a pack of gum that’s $1.05, it rounds up to $2.00, and puts 95 cents into an account (you can choose how aggressive the investment is). I’m planning on cashing out every 6 months and putting the “spare change” into Kiva.


    Love reading your posts…Can’t wait for what’s to come!


    • jlcollinsnh says

      Welcome Ryan…

      Thanks for the very kind words, great to hear you enjoy the posts!

      I’m curious…

      As a user of Kiva for the last couple of years, were you aware of some of the concerns other readers have raised? Have any of these caused you to rethink Kiva?

      • Ryan says

        Thanks for the reply, Jim.

        I’ve not been made aware of the issues that have been brought up, though I’ll be on the lookout for organizations with better business practices that will use my money in a way that’s more closely aligned with my beliefs.


  17. Denise says

    Another idea: Give Directly
    I went to see founder Professor Niehaus speak at UCSD a few weeks ago as part of a public lecture series. It eliminates the middle men (international and local NGOs), allows you to track how it’s doing on your phone, and allows the recipients to decide how they want to use the money. It isn’t always a profitable use, and sometimes it is profitable in the sense that they apply it towards cutting costs, generating returns as high as the interest rates Kiva averages. The difference is that it IS a charity, and you will not be getting any of the money back. But! Your donated dollar goes further and they are huge on transparency and the use of technology (mobile phones) to minimize expenses and middle men. Accountability throughout the system is tantamount.

  18. Jelle says

    In the Netherlands we have the website Lendahand.com. Here it works kind of the same as Kiva, but you get a decent ROI from it, between 3 and 4%. The local partner is responsible for your money so if there is a default you still get your money back. You do have a risk of the local partner collapsing, but it seems this risk is not that big.

    I like investing some of my money with this, I get a decent return and feel like I am doing something good.

    It is a little bit different from Kiva in that it isn’t micro financing but ‘meso’ financing. So only to small businesses. They also state how many people will be able to get a job because of the loan, which is a nice touch.

    The people that are borrowing the money have to pay a high interest, as with Kiva, but this is not easily solvable. I think they are happy there is at least an option to get finance for their businesses.

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