A little more than a year ago, in December 2011 to be exact, I signed up to be a lender on Kiva.
You can read my initial views about it here (click on the link).
I liked the idea of being to help others who are in need to money to get their businesses up and running so that they can fend for themselves and loved ones. The money that I was giving would be a loan which would be repaid over a stipulated period of time and therefore, I would be able to help more than one person with the same initial amount of US$25.00. over a long period of time. Sounds like a great idea, I thought.
Then, I got around to wondering how it all really works and this is where I got disenchanted with the whole microfinancing idea.
I spent time going though pages and pages of people who were in need of loans on Kiva and finally made my choice of funding someone who I thought whose loan I would help fund along with 24 other people around the world (Kiva has loads to mugshots of the people in need of loans from various parts of the world on their website).
Here's the catch --- most of the people whose profiles and mugshots are on the website have already been approved for loans by Kiva's field partners. So what does this mean, you ask? Simple, Kiva's field partner will manage and disburse the loan should Kiva fail to raise the funds from Kiva lenders, people like you and me. However, if enough Kiva lenders are able to raise funds for the loan, the Kiva field partner is spared of disbursing the loan themselves and instead uses the funds raised by Kiva lenders. So, that simply means that the lenders are really funding the already rich Kiva field partner instead of the needy person whose profile we see on the website.
To make matters worse, I discover that the field partners charge very high interest and fees on the loans. Case in point: the person that I chose to lend money to had to repay the field partner 46.28% in interest and fees while I, on the other hand, only got my US$25.00 back after over a year, with no appreciation on my initial loan sum. It needs to be noted that I was lucky as I got my full initial loan amount back as not all loans are fully repaid by the end of the loan term.
So while you may think that you're giving the chosen person whose profile you see on the Kiva website a helping hand, in reality, you are really helping the field partner by giving them an interest free loan while they laugh all the way to the bank at your and the needy person's expense. A 46.28% portfolio yield is waaaaayyyy better than what anyone will ever make on the stock market.
The person that I thought I was helping by giving an interest free loan is really being charged a hefty sum of money and I get no satisfaction knowing that my interest free loan is doing nothing by way of helping this individual in need but instead is helping fund the field partner's financial interests. For this reason, I am withdrawing my funds from Kiva.
You can read my initial views about it here (click on the link).
I liked the idea of being to help others who are in need to money to get their businesses up and running so that they can fend for themselves and loved ones. The money that I was giving would be a loan which would be repaid over a stipulated period of time and therefore, I would be able to help more than one person with the same initial amount of US$25.00. over a long period of time. Sounds like a great idea, I thought.
Then, I got around to wondering how it all really works and this is where I got disenchanted with the whole microfinancing idea.
I spent time going though pages and pages of people who were in need of loans on Kiva and finally made my choice of funding someone who I thought whose loan I would help fund along with 24 other people around the world (Kiva has loads to mugshots of the people in need of loans from various parts of the world on their website).
Here's the catch --- most of the people whose profiles and mugshots are on the website have already been approved for loans by Kiva's field partners. So what does this mean, you ask? Simple, Kiva's field partner will manage and disburse the loan should Kiva fail to raise the funds from Kiva lenders, people like you and me. However, if enough Kiva lenders are able to raise funds for the loan, the Kiva field partner is spared of disbursing the loan themselves and instead uses the funds raised by Kiva lenders. So, that simply means that the lenders are really funding the already rich Kiva field partner instead of the needy person whose profile we see on the website.
To make matters worse, I discover that the field partners charge very high interest and fees on the loans. Case in point: the person that I chose to lend money to had to repay the field partner 46.28% in interest and fees while I, on the other hand, only got my US$25.00 back after over a year, with no appreciation on my initial loan sum. It needs to be noted that I was lucky as I got my full initial loan amount back as not all loans are fully repaid by the end of the loan term.
So while you may think that you're giving the chosen person whose profile you see on the Kiva website a helping hand, in reality, you are really helping the field partner by giving them an interest free loan while they laugh all the way to the bank at your and the needy person's expense. A 46.28% portfolio yield is waaaaayyyy better than what anyone will ever make on the stock market.
The person that I thought I was helping by giving an interest free loan is really being charged a hefty sum of money and I get no satisfaction knowing that my interest free loan is doing nothing by way of helping this individual in need but instead is helping fund the field partner's financial interests. For this reason, I am withdrawing my funds from Kiva.
