tag:blogger.com,1999:blog-1560191475956867915.post5132582830254826142..comments2023-06-26T09:00:10.400-04:00Comments on Ramon's Kiva Blog: Paying interest to Kiva lendersRamonhttp://www.blogger.com/profile/07497282705635098520noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-1560191475956867915.post-52279769459098794462012-01-23T15:28:20.252-05:002012-01-23T15:28:20.252-05:00Personally, it would be great to earn some money o...Personally, it would be great to earn some money on the loans I have out via kiva. It would not be an economic decision at all, but would make me feel like I am participating in a fair market exchange, rather than just giving the money away. That has a greater emotional return for me. I've already had someone default, so oh well, but would be cool to see it grow in value. Definitely would encourage me to lend more. May be some places where it could be a very good economic return. Heck, with savings accounts earning a half a percent today, 2-3% is 6x the market rate (though there is more risk in the microloans)Ambassador Kasunichttps://www.blogger.com/profile/10886925909002573555noreply@blogger.comtag:blogger.com,1999:blog-1560191475956867915.post-87810131884046058342011-11-22T02:34:15.166-05:002011-11-22T02:34:15.166-05:00I realize this post is old but it's the top of...I realize this post is old but it's the top of the search for kiva interest so I wanted to add for other searchers - Kiva's partners are charging anywhere from 20-80% interest to those "poor people" without access to credit. Available on their own site. So in reality, your actual payback rate would be even lower and longer considering that only say at worst case scenario, each increment paid is only 20% spread out among the "lenders".<br /><br />This means if there are 10 lenders at their $25 each, for everyone to be 100% satisfied, the borrower has to pony up somewhere around 4 times the cost of the loan to begin with.<br /><br />From there, lets say on that $250, the payments are $50 per month. Only $10 is disbursed the first month to ALL the lenders. The interest is racking up and the next month, after that $50 payment, the borrower still owes over $235 (after fees). So you get a buck, Kiva partner gets $40. At that rate, it would take almost 2 years to get your initial $25 back.<br /><br />Again, this is the worst case scenario, minimum paying, etc. But at the end - you've lost maybe $5 in investment interest (if you get paid 100%) and Kiva partners have made 100's of dollars for a $250 loan. Kiva's partners have essentially eliminated any financial burden in the first payment, putting it all on lenders.<br /><br />If you get paid back only 80%. Not only have you lost the $5 from investing, you've lost another $5 over 2 years.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1560191475956867915.post-46627645221706193292010-01-13T22:22:53.632-05:002010-01-13T22:22:53.632-05:00You're also neglecting a few things. First, t...You're also neglecting a few things. First, the time value of money. Your money is sitting there, loaned out, and not making you interest. That money could be in the bank. It could be earning you 3%. So by having it in Kiva, you're losing that potential zero-risk 3% return. That's a loss.<br /><br />Also, I'm not sure how Kiva handles currency risk, but if the value of the dollar vs. the local currency skyrockets, that loan will still end up costing someone a lot of money. I'm not sure who gets stuck holding the bag though.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1560191475956867915.post-21260275993022735852009-02-19T16:01:00.000-05:002009-02-19T16:01:00.000-05:00I would be perfectly fine with 1% interest, that w...I would be perfectly fine with 1% interest, that way you really are not hurting the person you are loaning to and the money you can loan on the site would increase with each loan thus helping more people down the line. Kind of like paying it forward. Maybe the interest on the loan could not be directly paid back to the loaner, but be kept on the website ear marked for the user.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1560191475956867915.post-28766087030088000622008-11-07T03:05:00.000-05:002008-11-07T03:05:00.000-05:00the loan i looked at for a vietnamese group had a ...the loan i looked at for a vietnamese group had a default payback of %82. That means I would need to make something like %25 to approach money market rates.<BR/><BR/>Also, the "partners" are charging the borrowers something like %22. I can't say i'm thrilled about losing 20 cents on the dollar so I can fund a vietnamese company that lends out money at %22. <BR/><BR/>So lets see: <BR/>I give $100 to BinhMinh which loans it out at 22% interest. <BR/><BR/>BinhMinh pockets the 22% on every payment made and give me back just the principal. <BR/><BR/>The loan goes in default after I've been paid $82<BR/><BR/>So, I lose $18, BinhMinh makes something like $17.<BR/><BR/>Why don't I just send $18 to the borrower directly and call it a day?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1560191475956867915.post-89049294453311402772007-05-06T21:29:00.000-04:002007-05-06T21:29:00.000-04:00Kiva loans aren't donations. Currently, they are l...Kiva loans aren't donations. Currently, they are loans that the lender gets paid back in full. <BR/><BR/>The loanees are the ones that have to pay interest to the respective Kiva MFI partner that dispurses the loan. So, technically they're interest-free only for Kiva loaners.<BR/><BR/>I'm guessing that Kiva's MFI partners could all be a bit more efficient with their dispursal and collection systems. I think that requiring Kiva's partners (since the entrepreneurs already pay interest) to pay interest will encourage them to become more efficient. And, this will highly benefit micro-entrepreneurs in the long run.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1560191475956867915.post-13275622133072332002007-04-24T22:09:00.000-04:002007-04-24T22:09:00.000-04:00I added to the discussion on my blog(linked on my ...I added to the discussion on my blog(linked on my name) as well, though I disagree on the economic incentives involved.Anonymousnoreply@blogger.com