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Another thing that's interesting is that it's really not all about enabling entrepreneurship. Increasingly, I have noticed loans for education [1], home-buildin

Another thing that's interesting is that it's really not all about enabling entrepreneurship. Increasingly, I have noticed loans for education [1], home-building [2], and other needs. I point this out not to be a jerk. Certainly, these are worthwhile causes in themselves, but there is no lack of traditional charitable giving opportunities elsewhere. I suspect Kiva knows this and is really selling the more differentiated and compelling idea of helping people to stand on their own, as the article mentions. To be fair, most of their loans are still around enterprise, but I cannot help but wonder if loan requests for such needs reveal that the very idea behind Kiva is unrealistic to some extent. That is, when you have people who don't have homes or basic subsistence wherewithal, is it realistic that they can launch or run a successful business? Is it also realistic to expect that a significant portion of their loans won't end up redirected to other needs? This concern is not helped by the fact that the only updates I've ever received are regarding loan repayment, and not how the recipient is actually faring. It's also not encouraging when I see people requesting loans to pay off other loans. [3] Recent articles posted on HN have shown that just giving money to poor people with no pretense or payback requirement is surprisingly effective. Maybe Kiva is selling a dream that has greater marketing appeal, but less actual effectiveness. [1] http://www.kiva.org/lend/667533 http://www.kiva.org/lend/667533 [2] http://www.kiva.org/lend/667257 http://www.kiva.org/lend/667257 [3] http://www.kiva.org/lend/652349 http://www.kiva.org/lend/652349

curiouscats 13y ago
While you are right about lots of Kiva loans, you can pick what you lend to, which is what I do. I agree with you about the attractiveness of direct cash. One thing to remember is microfinance has been around a long time. My guess is there is more evidence of effective microfinance than of direct payment. That is not to say direct payment isn't as effective but just to remind people while I think microfinance should have more evidence for effectiveness there has been some good research. Based on the initial success it has grown a ton. And conditions change (including the large amounts of money being thrown into micro-finance). Studying how effective it is today, how effective specific orgs are (Kiva, but also specific banks Kiva works with) and specific methods and factors (how much does interest rate matter, does purpose the funds will be put to matter...) is important. I think the rush to increase funding to microfinance has probably been good. You can suffer real costs to people by moving to slow and needing too much research. But I do think today, there should be more research going on (in a lean startup kind of way - what is successful, mini-experiments...).
doktrin 13y ago
> Another thing that's interesting is that it's really not all about enabling entrepreneurship. Increasingly, I have noticed loans for education [1], home-building [2], and other needs. This is actually a not-uncommon catch with regards to micro-credit in general, both in the US and abroad. At one point I worked for a micro finance institution, having been very impressed with the concept (applied generally) and the goals of the company. What I realized shortly after joining was that the overwhelming majority of loans issued were for "life expenses" - which often translates to "buying stuff", although this is of course not always the case. Ultimately, then, micro-credit in this context is really just lending targeted at an under-served demographic with not-quite-awful interest rates. Certainly not evil by any stretch (and on the whole, a net-positive) - but not living up to the very serene ideals of more Grameen-purist micro finance.
- unclebucknasty 13y ago
  >the overwhelming majority of loans issued were for "life expenses" >micro-credit in this context is really just lending targeted at an under-served demographic I think we have to be careful when providing loans to impoverished people as a means of helping them with subsistence-level stuff. Seems that it is very likely to leave them worse off, especially when interest is involved. Going forward, they now have largely the same income and expenses, yet also a debt to service. Reminds me of payday loan places here in the U.S. And, it seems difficult to imagine that those who would saddle impoverished people with interest-bearing debt so they can meet basic needs aren't knowingly preying upon their plight. But, I have no experience working in the field. I'd be interested in hearing success stories or other scenarios to the contrary that you may have witnessed.
  - rahimnathwani 13y ago
    Two basic elements of underwriting for personal unsecured loans are assessing the ability to pay and the willingness to pay. If the borrower expects to have monthly expenses which are greater than their monthly income, and therefore nothing left over to make regular repayments of interest and capital as they become due, then the lender has no business making the loan in the first place. I'm not familiar with payday lenders in the US, but responsible ones in the UK will steer customers to an installment-based product if it turns out they've needed to roll the loan over to the next month, more than a couple of times.

curiouscats 13y ago

While you are right about lots of Kiva loans, you can pick what you lend to, which is what I do. I agree with you about the attractiveness of direct cash. One thing to remember is microfinance has been around a long time. My guess is there is more evidence of effective microfinance than of direct payment. That is not to say direct payment isn't as effective but just to remind people while I think microfinance should have more evidence for effectiveness there has been some good research. Based on the initial success it has grown a ton. And conditions change (including the large amounts of money being thrown into micro-finance). Studying how effective it is today, how effective specific orgs are (Kiva, but also specific banks Kiva works with) and specific methods and factors (how much does interest rate matter, does purpose the funds will be put to matter...) is important. I think the rush to increase funding to microfinance has probably been good. You can suffer real costs to people by moving to slow and needing too much research. But I do think today, there should be more research going on (in a lean startup kind of way - what is successful, mini-experiments...).

doktrin 13y ago

> Another thing that's interesting is that it's really not all about enabling entrepreneurship. Increasingly, I have noticed loans for education [1], home-building [2], and other needs. This is actually a not-uncommon catch with regards to micro-credit in general, both in the US and abroad. At one point I worked for a micro finance institution, having been very impressed with the concept (applied generally) and the goals of the company. What I realized shortly after joining was that the overwhelming majority of loans issued were for "life expenses" - which often translates to "buying stuff", although this is of course not always the case. Ultimately, then, micro-credit in this context is really just lending targeted at an under-served demographic with not-quite-awful interest rates. Certainly not evil by any stretch (and on the whole, a net-positive) - but not living up to the very serene ideals of more Grameen-purist micro finance.

unclebucknasty 13y ago
>the overwhelming majority of loans issued were for "life expenses" >micro-credit in this context is really just lending targeted at an under-served demographic I think we have to be careful when providing loans to impoverished people as a means of helping them with subsistence-level stuff. Seems that it is very likely to leave them worse off, especially when interest is involved. Going forward, they now have largely the same income and expenses, yet also a debt to service. Reminds me of payday loan places here in the U.S. And, it seems difficult to imagine that those who would saddle impoverished people with interest-bearing debt so they can meet basic needs aren't knowingly preying upon their plight. But, I have no experience working in the field. I'd be interested in hearing success stories or other scenarios to the contrary that you may have witnessed.
- rahimnathwani 13y ago
  Two basic elements of underwriting for personal unsecured loans are assessing the ability to pay and the willingness to pay. If the borrower expects to have monthly expenses which are greater than their monthly income, and therefore nothing left over to make regular repayments of interest and capital as they become due, then the lender has no business making the loan in the first place. I'm not familiar with payday lenders in the US, but responsible ones in the UK will steer customers to an installment-based product if it turns out they've needed to roll the loan over to the next month, more than a couple of times.