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…
…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:
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
The Kiva Team
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.
Also in the comments, with an excellent Executive Summary, reader Gerrald introduces us to a micro-lending alternative: Zidisha
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!