Corporate Kiva lenders?

I came across this lender (or here for another instance of the same lender) while browsing lending opportunities on Kiva. This must be the first sighting of a new trend: small, corporate entities in the "First World" helping small, corporate entities in the "Third World".

There are an abundance of opinions about capitalism and globalization about. Some of them have more merit than others, although (in my humble opinion), globalization is inevitable and the best thing to do is to make sure it works for all, and not just to turn huge corporate profit even higher without merit to those that provide the labor. I consider Kiva to be the "happy face" of globalization: persons on one side of the world provide the wherewithall to persons on the other side of the world so they can become more productive and progress their unalienable rights to Life, Liberty and the pursuit of Happiness.

(posted from Lima, Perú)

Repayment rates...

Interestingly, my entrepreneurs in Ecuador appear to be paying back faster than the ones in Mexico. I guess to sample is too small to take any statistical conclusion...

Finally - invested again

As I wrote before, I've had quite a lot of troubles finding a new investment opportunity for the second half of January. The offer of Latin American businesses was quite low, often even zero. I even emailed Luis at Mifex to ask if there were new businesses in the pipeline-- there were, he said, and obviously my patience worked out.

There were three businesses in need listed by Mifex:

1. Esperanza Mazon
2. Helen Minota
3. Jenny Cevallos

I chose to go with #3, Jenny Cevallos. Her story was simply the most compelling. I believe that Esperanza Mazon has a good chance of paying back, but her business approach seems too small to me for her to really progress. Also, 6-10 months for such a small amount seems a very slow repayment rate. Helen Minota's business seems good, although I am not sure about how she would run a business as a single mother with three kids. I hope her family will help her out with childcare, as it often happens in Latin America. And Jenny Cevallos, who got my vote, appears to be a serious and savvy business woman. Her husband is supportive and works, she looks very dedicated, and has invested time, effort, and money in her business and store.

Let's see in a few months how things are working out!

More on the same theme...

We passed the 15th of the month a few days ago, and I have been frantically looking for a good Latin American business to invest in to fulfill my promise of "a new business every paycheck". I need to diversify a little, as the only opportunities that are open right now are in Mexico and Ecuador (again!). Not that there is anything against these-- on the contrary, I have become a great fan of Mifex and I think that Luis Crespo c.s. are doing a great job there, and I would encourage everyone to invest there!



However, as discussed in my first blog entry, diversification is the key for a healthy portfolio. I'm really looking forward to invest in a business in Honduras or Nicaragua. Let's hope some get posted soon...

Kiva activities in Latin America

On The Kiva Chronicles blog, a commenter remarks that there are very few Kiva investment opportunities in Latin America. This is true:

• Of the 28 partners that Kiva lists currently, only 5 are from Latin America.
  
  
• Compared to some of the Eastern European partners, they are not very active. I see once in a while a loan appear from Prisma in Honduras (but nothing in Nicaragua), and I see regularly loans from Mifex (Ecuador) and Admic (Mexico). Where are the other MFI's? FVP (Mexico), Fundación Adelante (Honduras), Prisma Nicaragua, where have you gone?
  
  
• Where is the rest of Latin America? I can't imagine that the existing MFI's in Brazil, Guatemala, Perú, Colombia, Bolivia, to name a few, are all set.
  
  
• Are there any other reasons that MFI's cannot or don't want to "hook up" with Kiva? I can think of several reasons why not:
• Currency import and export restrictions (Bolivia, Venezuela, other countries as well probably). I know that exporting US Dollars is prohibitive in Venezuela, where according to local regulations individuals can only take US$10,000 per year out. The process for businesses to apply for a money-export-license is prohibitive as well...
• Increased overhead for micro-loan administration because of Kiva reporting requirements. I don't think that this is a valid argument-- microloans are administration-intensive by nature, due to extra due diligence that is needed due to the lack of collateral. Also, many MFI's have a social chapter (business counseling/advise, assistance, group loan events, etc.) into which Kiva should well fit.
• Access to cheaper funds. Possible if the MFI is backed by a large charitable fund from which it can draw no-cost or very low-cost loans. That'd be a good problem to have, but also-- not very likely.

If anyone has any contacts with MFI's in Latin America (that are not yet Kiva partners), or contacts that could help get contacts, or people that know people that know people (et cetera), please let me know. I'd be more than happy to send an email or two, or make a few phone calls, to put them in touch with the right person at Kiva.

My 5th Kiva loan - Random Thoughts

• Man... this is addictive! Is there such thing as KivAddication? Every time I go out for lunch, go shopping with the family and we spend $25, I think "hmmm.... I could just have funded a micro-enterprise in need with that!". That's a good thing, I hope???
• I started seriously thinking about a diversification strategy. I really only want to invest in Latin American businesses, because that's where I feel closest to. So the issue is to distribute risk.
• Talking about risk, with Kiva, I identified 3 levels of risk (and Kiva isn't too clear about 2 of them.)
• First, there is the well-known risk of non-payment by the borrower. We all know that and take that risk with our eyes open.
• Then, there is the risk caused by the stability of the MFI. If, for any reason the MFi goes out of business while the loan is being repayed, how will Kiva get their money back? How will the borrower continue repayment? I guess we'll be out of luck then... in other words, it may be wise to diversify your investments over multiple MFI's, especially if they're not huge and well-funded institutions
• Last, there is the risk of Kiva going into receivership. Although I try really not to think about that one, it is a factor that should be considered. That risk is very small while Kiva continues to get funded (see for example this blog). and currently there is absolutely no reason to doubt that this will continue to be the case. But what will happen if new loans would ever start to decline, and thereby Kiva's source of income (your gifts and maybe future interest charged on loans to the MFI's) declines? There may be hundreds of thousands of dollars in outstanding loans if that would ever happen. And Kiva is not a bank, therefore you are not FDIC insured of something. I don't think you can do anything about this, except for monitoring Kiva's health as an enterprise and making sure that they don't go under by continuing to fund more loans!
• Matt Flannery puts in a lot of thought into the statistics behind the loan patterns at Kiva. I think that one of the reasons for very quick funding of African loans is, in addition to all the reasons that are mentioned in his blog and its comments, that there is a language barrier for Latin American loans. Take for example this journal entry about Rosa Parra. You really need to speak Spanish to understand what is going on. Seen the number of recommendations it got, I'm glad to see that it was picked up by many people... (BTW-- that story is amazing and very sad--- if I were a lender to that loan, I'd have try to turn my loan into a gift, if at all possible)
  
• Getting back to Matt's speculations, I'd definitely say that I started to check some basic metrics about a business before investing. That has made me a little bit wary of the large loans some Eastern-European/Near Asian borrowers are looking for. My main, completely subjective considerations include:
  
• Can I imaging this business to be profitable?
• Is the loan amount on par with the amount of revenue I think the business will generate?
• Is the loan amount good to invest in the stated objectives?
• Is the amount vs. revenue vs. payback period - ratio good enough? I mean, if you need 12-15 months to pay back a $400 loan, then there is something fundamentally wrong with your business plan...
• How stable is the country? Do I know of some recent news event that may cause super-inflation during the repayment period? Will I lose my money because a coup-d'etat is about to happen, or local violence on the streets will cause my prospect-investment venture to have to close down for extended periods of time?
  
• It is very good to know that quite some due diligence is done by the MFI. I've seen several businesses for which the loan fell through for a number of reasons, even though the Kiva community raised the money. See for example here and here. (Interestingly enough, also some of the borrowers back out of the financing even though they qualified...)