Kiva or Similar?

[Gilberto de Piento]

I've seen kiva mentioned here before but when I search it is mostly just journal entries of amounts invested. Anyone using it? What do you think? How do you pick loans to fund? Zidisha claims to be better because it avoids fees, is that true?

[Gilberto de Piento]

Thanks!

When I mentioned fees I meant the interest collected by the banks.

[Chris]

I'm a long-time Kiva lender. I like it.

On the fees, the microfinance institutions (MFIs) charge the fees. There is a lot of debate whether this is a bad thing or not; I am in the camp that it is not a bad thing. The loans made through Kiva are loans that traditional banks aren't servicing, either because the loans are too small, the borrower has not credit history, or the loan is expensive to service (collect). So the MFIs have costs, and they need to pay people to manage the loans. The "high" interest rates also need to be looked at from a relative perspective, especially if the local currency is suffering high inflation. Lastly, the MFIs often provide more than just loan servicing, some offer savings products and small business classes as well. So the purpose is more holistic than straight peeer-to-peer lending. The fees charged do go to pay for things. This is a Good Thing, as it helps develop the finance industry in-country.

On loan selection, I look for a few factors:

• MFI is profitable
• MFI's portfolio default rate < 5%
• No currency loss
• Preference toward capital goods (refrigerators, machinery) over inventory
• Borrowers with families

I believe that as a result of considering these factors, I have been able to achieve an above-average repayment rate over time.

[enigmaT120]

I thought a Kiva was a Hopi religious building, or something like that. Oh well.

[Gilberto de Piento]

Chris, thanks for the detailed explanation. I'm still debating whether to participate in this area.