How does Kiva work for MFIs?

[Guest]

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[elphaba]

I'm doing a technology analysis paper for a technology seminar class and one of the questions asks about the design of the technology and its methodology. I was reading earlier somewhere on Kiva's webpage one one of the pages about field partners that Kiva transfers money monthly to MFIs.. I was wondering how that works?? Does the MFI wait until loans are fully funded and to disburse loans or do they just fund them and get paid back by Kiva?? It seems like there should be more frequent money transfers since there are always new business descriptions/loans.

Does anyone know how Kiva works from the perspective of MFIs, not just for the users? When/how does money change hands, etc? Thanks so much to anyone who can help!

[AccountAbility]

While it is somewhat scattered among a number of threads on this forum, there is a wealth of information here about how Kiva funding works. 

In short, at the end of each month a net transfer occurs between Kiva and the various MFIs.  The net is made up of loan disbursements going out and loan repayments coming in.  The MFIs who have sufficient cash reserves will fund their Kiva loans with their own funds before this transfer date.  The smaller ones may wait until the Kiva funds are actually transferred.  The single transfer date keeps costs down since frequent wiring of funds internationally is expensive.

Dan

[Diane R]

And some MFIs do not actually hand out cash to their clients.  Action Now: Kenya instead shops with the clients, using the loan money to purchase the goods requested and helping ensure the best deal, and they do not list a loan as disbursed or "Active" until the shopping is complete.  SELFINA (Sero Lease and Finance Ltd.) in Tanzania purchases the requested goods and engages in a sale and lease-back arrangement with their clients, where they purchase the goods and over time lease them back to the client until at the end of the repayment period they have paid to own them.  You can read more about SELFINA's process in a recent Kiva Fellows Blog entry by Joannah Davis who is in Tanzania now, and about Action Now: Kenya's process in a Kiva Fellows Blog entry from last November by Naomi Arron.

--Diane.

[dh]

In one of the threads, it was mentioned that MFIs are allowed to front the loan up to thirty days in advance. In effect, lenders would be buying an existing loan, freeing the MFI's funds for other uses. This allows MFIs with available funds to respond quickly to time-sensitive loan applications, such as loans to stock up prior to holidays, without waiting for Kiva to perform translation and vetting.