Discussion on business descriptions / Loan use

[Guest]

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[Henry]

I warned my gift certificate folks... WAIT for a couple of weeks!  Be picky!

[KivanSteven]

Hi Karen, though we can only theorize of the circumstances behind all these loans, I would also agree that 20 loans in 2 years is far excessive...at the same time it might also mean he/she is successful repaying her loans and making the most of them otherwise she would most likely not continue to be loaned to so repeatedly. 

Though 20 is far more than enough for most people in a 2 year span, I tend to think that an entrepreneur who in a sense lives off their loan is doing so because they have to.  A loan isnt always intended to make profits and create savings or increase wealth, but sometimes it is and can only be intended to improve the standard of living, such as through education, readily accessible supplies of food and suitable clothing, access to health care, etc...things that constantly cost money.  Im no expert by any means but my thinking is that the profits they make from utilizing their loan $$ is used for these sorts of things...after they have repaid the loan and when they can no longer profit from that which the loan originally produced, such as from a new cow or a new stock of store supplies, a new loan might often be requested in order to repeat the process of making profits from loan usage and continuing their new found affordability of food, health care, and education.  Thats just how I see a lot of these entrepreneurs surviving.  I dont think its the best situation but if they have access to that which defines them as being over the poverty line and have improved the lives of their family members by doing so then I think its a definite benefit, even if they have to constantly use loans for years on end.

[matteol]

Hi,

I saw this lown from the same organization (ceprodel) and came here looking for some opinions. http://www.kiva.org/app.php?page=businesses&action=about&id=29746

the problem that Karen put is also a concern to me. not only that but the MFI charges 36% interest rate. I understand that if the MFI is an NGO (which is the case) they are not making profit, so they are probably paying for overhead, classes, cost of other sources of funding. my worry is that if the interest is so high the borrower is not always hable to get this good return on his investment and thus get stuck in this lowning cycle. Unfortunantly due to poor education, many poor people dont even understand the concept of interest rates, so they make the dept because it seams to solve the problem. I remember the case of a women in brazil selling cookies that someone went and calculated what costed for her to make it and she was having a loss!! Ofcourse I belive this wouldent happen here because the NGO is responsable also for helping the person run their business, but shouldent we be worried by an ineficiency on the NGO? that makes is hard for them to lower interest rates? and thus help people better?

on other thing, I am trying to lend less this days, if there are two few projects knew entrants might be dicureged to lend. maybe because its christmas people are giving away more. I am trying to hold and give only to the best projects untill there are a couple more projects on the table.

glad to hear some opinions on this

Matteo

[miGIRLS]

 - the problem that Karen put is also a concern to me. not only that but the MFI charges 36% interest rate.

 - thus get stuck in this lowning cycle.

-  I am trying to lend less this days, if there are two few projects knew entrants might be dicureged to lend.
Matteo

Matteo -  I saw several loans with borrowers having 28 loans, 15 loans, and other numerous repeat loans in a couple of years. Essentially living on credit. This is not how microfinance is supposed to work. Even if people need money, Kiva is about helping people start businesses that prosper in the business cycle, not creating borrowers who are slaves to the lenders because they can never get out of the cycle. This is not right.

As for the interest rate... it is far more complicated than most of understand. Besides the rate generating income for the MFI to cover its expenses of everything from marketing, training, compliance, etc., the cost of inflation, exchange rates, risk, etc. add to the cost. I quit worrying about the interest rate, and put faith in Kiva on that as it is complex.

HOLD OFF ON LENDING! What a great idea for us devoted KivaFriends. With so few loans available for the 2000+ new lenders each day, I can see every reason to store up some KivaCredits for the future when there are loans needing lenders and I would otherwise be desperate for some KivaCredits to relend. So, I must say, I am with you on that. Those of us who are not going anywhere, because we're devoted Kivans, should perhaps hold off for a week or more while the Kiva Gift Certificates are being redeemed and the newbies are having their fun. There are those of us who have stopped funding with new money, and are only relending, as we have our limit of a share of our assets in Kiva, or have other goals we have set for ourself. Perhaps it's time to be more particular, look for a special loan we really connect with, find something we can get in together with our other KivaFriends, or that are stuck in the pipeline and really need a boost to get funded.

Great thoughts, Matteo! Thanks for your contributions.

Karen
 (my new goal is to accumulate $100 in KivaCredits!)

[matteol]

Hey Karen,

thanks for you answer. Still I am bit scheptical about high interest rates. I know its complex and sometimes I write an email to organizations to ask about why their interest are so high if they are NPO. I trust in Kiva, they have shown an amazing work and determination, but I also think they are a young organization struglying to meet demand, so right now this kind of filtering might not be their first priority. In the end, business will always get funded (that is what is happening this days anyways) but I dont want to contribute for people to roll out depbts. I had a close experience with this in my country and I know how big of a trap that can be (even with good intentions by the lender). My brother in brazil was very poor, and some time ago he was taking things on credit not thinking of the interest rates he was paying but only at the size of the installments (that look very payable for him). He had to cope with 1,5 years of hardship when I told him he couldent do that anymore and that he had to live with no debts. I didnt even help him so he would understand the full consequences of depending on debts. some time ago I read a great article on business week, talkign about projects to help in africa, and how some did good, but some did bad. So guys, I for myself, I want to be carefull and not let my selfish side get in the way of helping people for real.

each one is alloud to have their own conclusions, of when they are doing good and when not, but lets all keep in mind the first objective is to help, the second is to feel good while doing so

heppy lending guys

Matteo

[Sherri]

The lenders on Kiva are vital to Kiva.
Without our money there would be no loans.
I feel they must provide clear information about how and for what my money is to be used. And they must live up to their published mission or they are betraying the lender's trust.

Clear explanations are definitely owed to me as a lender if Kiva wants me to trust them with my funds.

I totally agree with that. I have no problem with personal loans but they should be labelled as such. And I personally do not fund them- I prefer business use loans.

[valandderek]

HOLD OFF ON LENDING! What a great idea for us devoted KivaFriends.
Karen

This won't be too difficult for us.  Our home PC died on Christmas eve.  Won't be back in action until we get set up with another computer!!

 

Val and Derek

[miGIRLS]

This won't be too difficult for us.  Our home PC died on Christmas eve.  Won't be back in action until we get set up with another computer!!

 

Val and Derek

V&D

So sad to hear of the passing of your PC and I hope it is resurrected or replaced soon.

Hooray! I have one ($25) Kiva Credit now, or my four Kiva Credits I have loosely pledged to accumulate in order to stifle my lending so the new lenders will have more loans. I have to stay off the Kiva loan site or I will get sucked right into a loan... in Peru, no doubt, as Peru loans seem to have features in their loans I like.

Karen

[Kay]

in Peru, no doubt, as Peru loans seem to have features in their loans I like.

Karen

I haven't seen any loans from Peru lately!

[Kay]

V&D
So sad to hear of the passing of your PC and I hope it is resurrected or replaced soon.

I'm sorry to hear that as well!