5 ms·

I agree Kiva should have more results data. The article is fairly lame though. In one quote is says "With interest rates often exceeding 100 percent," which I

I agree Kiva should have more results data. The article is fairly lame though. In one quote is says "With interest rates often exceeding 100 percent," which I am pretty sure is completely false. I have made hundreds of loans and I worry about rates above 40%. I seek lower rates (often between 20-30%) and find them often. The article says Kiva doesn't discuss the rate - but it is shown on every lending page, as a lender you can select based on loan rate (I know, I do). The article also doesn't provide data either on the failure of Kiva to help. Granted I think Kiva should provide more data on the impact of loans and whether it is helping or not - I like to believe it is but <a href="http://investing.curiouscatblog.net/2009/10/16/micro-credit-research/">I http://investing.curiouscatblog.net/2009/10/16/micro-credit-... do question how useful Kiva really is</a>. I don't know about expenses for Kiva (though sites like Charity navigator rate it highly). But as a lender on Kiva it really doesn't matter. Kiva expenses are paid by donation. To lend using Kiva you can make donations but you don't have to. High expenses matter it seems to me if you are choosing who to donate to. Kiva does take advantage of human psychology in a smart way it seems to me, connecting lenders to people that need loans. It is a bit of a fiction as the article points out but it is also real - your re-payments are based on that loan. I see the benefits of that human connection as worthwhile (people like that human connection - showing their photos adds to that) though agree if you want to find fault it is something you can question. I like another site that provides charity to local groups directly http://www.globalgiving.org/ http://www.globalgiving.org/ I do figure there is more chance of fraud given the nature of having lots of little organizations that it is hard to monitor. But I like getting directly to small groups that are making an effort and being able to target what you like. Some sites that have published research on micro lending http://microfinanceresearch.org/ http://www.microfinancegateway.org/p/site/m/ http://www.cgap.org/

ploxiln 13y ago
The article claims that when you look for specific loans, you're being fooled: the loans have already been made, and the interest rates listed are inaccurate. Quote: Kiva’s initial attraction was that it was a peer-to-peer lender, but it is not in fact a peer-to-peer at all. The loans featured on the website were made months before, and Kiva users are essentially buying them from the banks. But the deception does not end here. Kiva cleverly chooses to reveal out-of date portfolio yields instead of actual interest rates on loans, conveniently and consistently under-estimating the real cost to the poor.
- curiouscats 13y ago
  Kiva publicly states, and has for years, the loans are made prior to individual funding via Kiva. While I do believe the majority of users don't know this, I think Kiva does a decent job of disclosing it, saying they are being deceptive, I believe is inaccurate. It is true the yields are quoted as portfolio yields (average for the lender overall). This seems adequate to me. If the yields are not representative (out of date, etc.) that is bad and Kiva should fix. I didn't notice evidence that this was a widespread problem. Kiva also lumps in all costs to the lender so it isn't like many financial institutions in the USA trying to fake low interest rates with lots of hidden fees etc. (though regulation has made it more difficult for financial institution to make loan rates deceitful - not that they don't try but it is much harder than 15 years ago). It is peer-to-peer at the essence I think, though it is often not directly that way and I don't think Kiva hides how it works at all. Though I do agree it is easy for someone to not make one or two extra clicks to read a bit about Kiva before making a loan but I think Kiva's balance is fine. Kiva also has a new thing called Kiva Zip that is more "pure" peer-to-peer for people that want that. I have given to another organization that just made grants (instead of loans) for over 10 years now. Trickleup.org It doesn't have the neat peer-tp-peer psychology going for it. And it is straight charity, not a loan. I have also wished trickleup.org did (or arranged for professors to do) studies on the impact. They have done a bit more in the last few years on the research piece. I would like more study of Kiva. I want to understand if it is helping and what factors matter. I steer toward lower loan rates but does that really make sense (I figure too high a rate increases risk for the person). I try to lend to purchases of equipment that will increase productivity (though I can't always find those loans) - is that really effective? I also like loans to buy things to rent out devices to increase productivity (some people buy washing machines and lend them out...). I am very lucky. I like to help give others a chance to gain economic success in the very limited ways I can afford to. I hope Kiva helps, but I do question if it does. And I question if they are focused on growth so much (as most USA based organizations are) that they grow beyond what is helpful. It is possible there is a core that is now say 20% of the Kiva's loans that are hugely beneficial. 50% that are sometimes great, sometimes bad... the value is questionable overall... And say 30% that are likely to just make things worse. But those figures could be anything (from what I know - I don't have any data). Given what I know I think it is worth lending some money through Kiva. If I were one of those huge foundations giving Kiva millions I would spend at least 20% on research until there was good data on how successful it is and what are the keys for making it work.
mfheretic 13y ago
Kiva does not state interest rates. You are viewing portfolio yields, which are not interest rates and consistently underestimate the actual rates. For a post specifically discussing this topic with 10 examples using actual data comparing actual interest rates versus the portfolio yield stated by Kiva, see: http://blog.microfinancetransparency.com/whats-wrong-with-kivas-portfolio-yield-statistic/ http://blog.microfinancetransparency.com/whats-wrong-with-ki... If you want to see an MFI with rates approaching 100%, look at Mexico in particular. Before the MFI quit Kiva, Brac in South Sudan had a portfolio yield of 88%: http://www.microfinancetransparency.com/evidence/PDF/11.24a%20Kiva%20-%20BRAC%20South%20Sudan.pdf http://www.microfinancetransparency.com/evidence/PDF/11.24a%... This MFI quit Kiva, but you can see it here: http://www.kiva.org/partners/107 http://www.kiva.org/partners/107 note that Kiva now states the portfolio yield is "only" 69.03%, but you can't lend through them anymore as they are one of the many MFIs that have quit Kiva. Portfolio yields do not include the impact of forced savings, some fees etc. and can be manipulated, and for a discussiong on why these are absolutely critical in understanding how much a loan costs, see the excellent website www.mftransparency.org, an NGO dedicated entirely to revealing the actual interest rates charged by microfinance banks, many of which exceeed 100% (but are not all Kiva partners). It is not possible to generalise about the ratio between the portfolio yield and the actual interest rates, but as a rule of thumb, a yield over 50% is likely a little too close to an actual interest rate of 100% for me, but this is a very broad rule of thumb that I use if I can't get more accurate data. But it is good that you look at this, albeit flawed statistic, and try to only make reasonably priced loans. If everyone does this then the MFIs offering lower rates will receive more funding, encouraging those charging high rates to reduce them. Competition basically. Please do not think this is a trivial detail. As the post above demonstrates, this can make a big difference in the overall cost of the loan that the poor person actually pays, so if you are trying to avoid exploitative interest rates you really must consider this. But, the more interesting question that is harder to answer, and has far reaching implications, is why Kiva does not publish these rates. See the comments on the Next Billion article. Is Kiva unable, or unwilling to do so? They manage to get all sorts of other information - why not the interest rate? How hard can it be? The bank presumably knows this crucial piece of data, and yet this is replaced with a knowingly flawed portfolio yield statistic. Why?
- 13y ago

ploxiln 13y ago

The article claims that when you look for specific loans, you're being fooled: the loans have already been made, and the interest rates listed are inaccurate. Quote: Kiva’s initial attraction was that it was a peer-to-peer lender, but it is not in fact a peer-to-peer at all. The loans featured on the website were made months before, and Kiva users are essentially buying them from the banks. But the deception does not end here. Kiva cleverly chooses to reveal out-of date portfolio yields instead of actual interest rates on loans, conveniently and consistently under-estimating the real cost to the poor.

curiouscats 13y ago
Kiva publicly states, and has for years, the loans are made prior to individual funding via Kiva. While I do believe the majority of users don't know this, I think Kiva does a decent job of disclosing it, saying they are being deceptive, I believe is inaccurate. It is true the yields are quoted as portfolio yields (average for the lender overall). This seems adequate to me. If the yields are not representative (out of date, etc.) that is bad and Kiva should fix. I didn't notice evidence that this was a widespread problem. Kiva also lumps in all costs to the lender so it isn't like many financial institutions in the USA trying to fake low interest rates with lots of hidden fees etc. (though regulation has made it more difficult for financial institution to make loan rates deceitful - not that they don't try but it is much harder than 15 years ago). It is peer-to-peer at the essence I think, though it is often not directly that way and I don't think Kiva hides how it works at all. Though I do agree it is easy for someone to not make one or two extra clicks to read a bit about Kiva before making a loan but I think Kiva's balance is fine. Kiva also has a new thing called Kiva Zip that is more "pure" peer-to-peer for people that want that. I have given to another organization that just made grants (instead of loans) for over 10 years now. Trickleup.org It doesn't have the neat peer-tp-peer psychology going for it. And it is straight charity, not a loan. I have also wished trickleup.org did (or arranged for professors to do) studies on the impact. They have done a bit more in the last few years on the research piece. I would like more study of Kiva. I want to understand if it is helping and what factors matter. I steer toward lower loan rates but does that really make sense (I figure too high a rate increases risk for the person). I try to lend to purchases of equipment that will increase productivity (though I can't always find those loans) - is that really effective? I also like loans to buy things to rent out devices to increase productivity (some people buy washing machines and lend them out...). I am very lucky. I like to help give others a chance to gain economic success in the very limited ways I can afford to. I hope Kiva helps, but I do question if it does. And I question if they are focused on growth so much (as most USA based organizations are) that they grow beyond what is helpful. It is possible there is a core that is now say 20% of the Kiva's loans that are hugely beneficial. 50% that are sometimes great, sometimes bad... the value is questionable overall... And say 30% that are likely to just make things worse. But those figures could be anything (from what I know - I don't have any data). Given what I know I think it is worth lending some money through Kiva. If I were one of those huge foundations giving Kiva millions I would spend at least 20% on research until there was good data on how successful it is and what are the keys for making it work.

mfheretic 13y ago

Kiva does not state interest rates. You are viewing portfolio yields, which are not interest rates and consistently underestimate the actual rates. For a post specifically discussing this topic with 10 examples using actual data comparing actual interest rates versus the portfolio yield stated by Kiva, see: http://blog.microfinancetransparency.com/whats-wrong-with-kivas-portfolio-yield-statistic/ http://blog.microfinancetransparency.com/whats-wrong-with-ki... If you want to see an MFI with rates approaching 100%, look at Mexico in particular. Before the MFI quit Kiva, Brac in South Sudan had a portfolio yield of 88%: http://www.microfinancetransparency.com/evidence/PDF/11.24a%20Kiva%20-%20BRAC%20South%20Sudan.pdf http://www.microfinancetransparency.com/evidence/PDF/11.24a%... This MFI quit Kiva, but you can see it here: http://www.kiva.org/partners/107 http://www.kiva.org/partners/107 note that Kiva now states the portfolio yield is "only" 69.03%, but you can't lend through them anymore as they are one of the many MFIs that have quit Kiva. Portfolio yields do not include the impact of forced savings, some fees etc. and can be manipulated, and for a discussiong on why these are absolutely critical in understanding how much a loan costs, see the excellent website www.mftransparency.org, an NGO dedicated entirely to revealing the actual interest rates charged by microfinance banks, many of which exceeed 100% (but are not all Kiva partners). It is not possible to generalise about the ratio between the portfolio yield and the actual interest rates, but as a rule of thumb, a yield over 50% is likely a little too close to an actual interest rate of 100% for me, but this is a very broad rule of thumb that I use if I can't get more accurate data. But it is good that you look at this, albeit flawed statistic, and try to only make reasonably priced loans. If everyone does this then the MFIs offering lower rates will receive more funding, encouraging those charging high rates to reduce them. Competition basically. Please do not think this is a trivial detail. As the post above demonstrates, this can make a big difference in the overall cost of the loan that the poor person actually pays, so if you are trying to avoid exploitative interest rates you really must consider this. But, the more interesting question that is harder to answer, and has far reaching implications, is why Kiva does not publish these rates. See the comments on the Next Billion article. Is Kiva unable, or unwilling to do so? They manage to get all sorts of other information - why not the interest rate? How hard can it be? The bank presumably knows this crucial piece of data, and yet this is replaced with a knowingly flawed portfolio yield statistic. Why?

13y ago