SEED Development Group - defaults now declared

[Guest]

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[Kay]

Thank you, Fiona! 

That's very encouraging about the South American partners!

[Wood Fairy Glenda]

Just one note about my one defaulted SEED loan: I am very sorry to learn that there were financial shenanigans going on there. On the other hand, the personnel in the SEED office were very helpful to me in sending me information about the welfare of my borrower, Mike Odour (http://www.kiva.org/app.php?page=businesses&action=about&id=4752).  He was one of my favorite borrowers, supporting all his siblings after his parents died, and working to better his carpentry skills.  I had already gotten a very nice update on Mike before the Kenya violence.  In response to my inquiry, I received a personal email that, though his business place had burned, Mike himself was unharmed.  I was very glad to receive this news,  and hope that Mike is able to get another loan, whether or not from SEED.

[Kay]

Yes, I could be wrong, but I have to believe that there were/are some very dedicated people working for SEED, notwithstanding the "financial shenanigans." 

[Ingvar]

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?

Part of the updated Field Partner page reads like some detective story:

Q. Has Kiva pursued legal action against SEED?

A. Yes. Kiva has launched criminal and legal proceedings against SEED’s management. We take it very seriously when a partner violates our policies and abuses the trust of our lenders. When an unfortunate situation such as this arises, we commit to seeking justice and reconciliation through all legal options.

Q. What happened with SEED, and why has Kiva decided that the loans should be defaulted?

A. Kiva and SEED Development Group entered into partnership in January 2007. Following a period of low responsiveness from SEED’s Management, Kiva sent a qualified Fellow to SEED in the summer of 2007 to investigate and monitor loan handling and repayment. Upon discovering that entrepreneurs were not receiving the full amount of the loans raised on Kiva, we immediately halted new loans to SEED. Kiva then followed up with an audit, which confirmed these discrepancies.

After confirming the presence of discrepancies, Kiva undertook a swift course of action. We began by retaining the services of a Kenyan law firm to establish a legal case against SEED. Our efforts, in conjunction with SEED’s clients, led to the apprehension of SEED’s Executive Director by the Kenyan authorities. Despite what our lawyers felt was compelling evidence that Kiva funds had been stolen crime had been committed, the Kenyan criminal justice system did not bring formal charges against the Executive Director of SEED, and he was released. We followed up with several political inquiries, including an appeal to the Police Commissioner and the Attorney General in Kenya, and to date we have not been able to move the case forward. This led to the conclusion that it is highly unlikely that any additional funds will be recovered, and SEED loans should be defaulted. Despite significant difficulties, we continue to explore legal options to bring this case to justice, and will inform lenders in the event that additional funds are recovered.

[Ingvar]

Yes, I could be wrong, but I have to believe that there were/are some very dedicated people working for SEED, notwithstanding the "financial shenanigans." 

Assuming that the funds were stolen by SEED personnel (I get the impression that that's most likely the case here) I believe that when the funds of an organization are embezzled by personnel, in most cases only a few people do the thieving, and a majority are honest. Unless the entire staff consists of a very small and tightly knit group, it seems unlikely that the thieves would let everybody in on the scam. So the rest of the staff would feel as cheated as the entrepreneurs and lenders, and probably even more chagrined, seeing their hard work abused and the organization destroyed.

[Soriak]

There was an article in the New York Times a short while ago, reporting that 8% of funds in business, government and charity are lost to corruption. The fact that Kiva works in high-risk countries without a functioning legal system should translate into even more corruption... and here we are, still below 1%.

[Jan & John]

There was an article in the New York Times a short while ago, reporting that 8% of funds in business, government and charity are lost to corruption. The fact that Kiva works in high-risk countries without a functioning legal system should translate into even more corruption... and here we are, still below 1%.

Now that's a big vote for the way Kiva is operating - they are obviously being very diligent finding the right partners...
Thanx Soriak, for the glimpse of the silver lining...
jan

[RichardF]

Okay, here's a story problem for all you math wizzes out there.

Kiva defines Default Rate as...

Default Rate:
Percentage of Ended Loans (no longer paying back) which have failed to repay (measured in dollar volume, not units).
How this is calculated:
Amount of Ended Loans Not Repaid in Full / Amount of Ended Loans

Amount Of Ended Loans Not Repaid In Full:
Remaining balance due on Ended Loans which are not repaid in full.

Amount Of Ended Loans:
Total amount of loans raised and disbursed which are no longer in the process of being paid back by an entrepreneur.

Now that I have a chance to try this out on my own loans, I added a few calculations to Christopher's spreadsheet to see if what I came up with matched what Kiva said for me.  It didn't.

Based on Kiva's export file, it seems to me this formula looks something like:

(Defaulted Status: You Loaned - Paid back) / ( (Paid Back Status: You Loaned) + (Defaulted Status: You Loaned) )

When I ran the numbers, my default rate was 3.64%.  Kiva tells me my default rate is 0.78%. 

Did I do something wrong?  Has anyone else tried to run their own default numbers?  Did they agree with what Kiva tells you?

p.s. My Delinquency Rate numbers don't agree with Kiva either.

[smallpotatoes]

I only have the 2 partially defaulted SEED loans ($18.75 loss) so my % default calc is simple and does match Kiva's value.

(Total $ loss on Defaulted Loans)/(Total Loaned) = 0.XX% Default Rate

Note: It appears to be Total Loaned and not "Amount of Ended Loans"

I haven't tried delinquency rates at all.

[RichardF]

Okay SP, what you did gets me the same number as Kiva, but that's not what I understand their definition to mean.  This isn't the only time it appears to me they don't do what they say in term of financial calculations.  Am I off base on that part?

p.s. Since all SEED loans are ended, the difference between the two equations is a wash for them.  However, the two different calculations are significantly different for just about everyone else.  In my case, the Kiva-defined default rate is approaching five times higher than their calculated default rate for me.  As you pointed out, the "true" default rate for SEED is, indeed, 100%, even though the bail-out default rate is 18.73%.  When Kiva talks about "transparency," they explicitly are referring to financial representations of their operations.  These apparent discrepancies in default rate calculations don't cut the transparency mustard.