SEED Development Group - defaults now declared

[Guest]

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[Kay]

I don't know what you would call SEED, but this all took place before the recent violence in Kenya. 

[cpbailey]

I think it is SEEDy...

When a partner has ALL their loans go bad at once without a trigger event, then it is NOT the loan that is the issue.  Kenya had a trigger event the end of December, and SEED and WEEC both had irregularities months before then.

I think or at least hope that Kiva has exception reports now that have them look at any partner which:

1.  Hits 5% delinquency rate; it is time to investigate the cause to eliminate computer glitches.
2.  Hits the 30% Kiva maximum of total loans made.
3.  Hits 5% maximum of the total outstanding balance of all Kiva loans.  No partner should cause more than 5% default rate should another Kenya event occur.  If there are several partners in a country, the total for the area/region should also have a cap.

One thing I noticed was that WITEP had outstanding description of the borrower.  I seem to remember detailed updates, too.  I guess the money was spent on creating a loan and not paying it back!  The pretty pictures are great, but I would prefer a partner which focused on the business end of repaying their debts.  Ethics and good business practices are more important to me than a novel description and an award winning photo. 

Colette

[Canadian Here]

Colette:

We should  have to make that choice?   

I think not! 

Lorna

[Canadian Here]

Was SEED just being non-compliant (and sounds to me like a bit fishy), or was the irregularity a result of the violence in Kenya?

Red:

If I posted what I really thought, some would accuse me of being paranoid. 

Others might say it's defamitory...

What do YOU think??? 

Lorna

[Kay]

I think it is SEEDy...

Good one, Colette!

When a partner has ALL their loans go bad at once without a trigger event, then it is NOT the loan that is the issue.  Kenya had a trigger event the end of December, and SEED and WEEC both had irregularities months before then.

In my experience, I believe the last repayment notice I received on a SEED loan was dated October 1, 2007.  Repayment notices on most of my outstanding SEED loans stopped in September, 2007.  Until then, none of my SEED loans had "missed a payment," and I had a number of SEED loans that were completely "repaid" (before all repayment notices stopped). 

So, clearly, the "trigger" event stopping the repayment notices was the audit Kiva refers to. 

[Claus-Peter]

Accoding to my opinion Kiva is doing a great job as long as they manage to keep the default rate remarkable under 3% of the total loans.


Claus-Peter

[cpbailey]

Kay,

I guess I didn't define a trigger event very clearly.  Uhm, not I guess--I just didn't!  My bad.

A trigger event which would cause loans to ALL go off at once could be the post election riots in Kenya.  This was not caused by either bad borrower choices by the partner or bad partner choice by Kiva.  It was an outside event that was so complete, so disruptive that it is causal to the loans ALL failing at once.  Another event could be earthquakes that cause many houses and businesses in the area to collapse, roads in and out of the village to be inaccessible, and so on.  Tsunami in another area could cause major disruption.  Drought, fire, war, widespread disease could all in theory cause loan disruption through no bad decisions.  

Kiva needs to have triggers in place internally to keep a partner from having too long a leash when numbers start to go south.  This way if it is a computer glitch, it is remedied right away.  If it is a misunderstanding, it is clarified before the partner gets too deep.  If it is an ethical issue, then the amount at risk can be limited by changing course sooner.  It isn't the loss of $25 here or there, but the default rate overall must not drop to the point that people make choices other than Kiva.  I would assume that multiples of 5% would be significant psychologically for people.  So dropping below 95% would turn some people away.  Below 90% likely would be much more significant.  

Claus-Peter, it is amazing how low the percentage of loans defaulting is. 

Colette

[Kay]

In principle, I would agree with you, Colette! 

[redstarr]

I see, the problem was even before the violence, so it couldn't have been related.  Yep, I see how it was now.

[Fiona Ramsey]

Hi everyone:

I just wanted to drop in and let you know that the whole team has been watching closely the reaction to the news about SEED today, and we really appreciate all the discussion that has taken place and everyone sharing their comments so freely (in fact Shelby emailed around a link to this thread.)  It's great to have a group of such engaged lenders that we can always look to to get a sense of the pulse of the lender out there!

While I'm writing I did want to let everyone know that Kiva does have a system with a number of triggers so that we can continue to improve our early detection of policy violation, as obviously that is very important.  Ultimately we're very proud of our risk management team for all the hard work they constantly do to detect and investigate any policy violation, and personally I'm proud to be a part of an organization that values transparency so highly. 

On another note - Michelle Kreger just got back today from a long trip to Sth America where she visited 12 Kiva partners - and has such glowing reports about every single one of them!!  I think that was very timely, after the announcement about SEED, to be reminded that the majority of organizations are high quality orgs working hard to make a real difference in the world. 

Thanks again to you all for your continuing support and for being a constant source of feedback to us!

Fiona