Microfinancing and the Economy

[Guest]

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[Williejeff]

I am interested in what the impact of the economy and Oil/gas prices have on people's willingness to use microfinance or even charitable giving... 

[dh]

Do you mean how it will affect us personally or how we believe it will affect people in general?

[Williejeff]

As I talk to others about KIVA and even 'giving to others' in general, I am confronted with the a response that generally is about a fear about the increase in food costs and gasoline prices...leaving people with fewer $$ to use for others.  This is in spite of the fact that there appears to be a beginning of a worldwide economic shortage of food, increasing fuel prices elsewhere(Indonesia and other nations are stopping their fuel subsidy to their populations), and credit becoming harder to access in 3rd world countries, etc  If that is true, there would be even a greater need to assist others in developing new businesses.  My question is whether or not more people who can help others, and have the means, ... it they will become more concerned about taking care of self verses taking a risk on someone else.

[Soriak]

I think in general there'll be a decrease in charitable giving. Consider that people with lower incomes tend to give more to charities and they are the ones hurting the most in a stagflation/recession scenario.

Old article from 1990, but as far as I know it's still true: http://query.nytimes.com/gst/fullpage.html?res=9C0CE2D91530F934A25753C1A966958260

Even though giving among the wealthy has increased, Mr. O'Connell said, most of America's affluent families are not generous: Ninety-five percent of households with incomes exceeding $1 million yearly averaged only $16,000 in charitable gifts. The remaining 5 percent in the same class averaged $125,000 annually, he said.

''In comparison to the proportion of giving by lower-income families with little disposable income, most wealthy Americans have to be characterized as stingy,'' he added.

In 1989, households with incomes under $10,000 gave an avergae of 5.5 percent of their income to charity.

Last year $54.3 billion, or 47.4 percent of all charitable contributions went to religious organizations, according to Giving USA, the annual report of the Trust for Philanthropy of the American Association of Fund-Raising Counsel.

I think many people who loan through Kiva are donating to traditional charities also. Currend conditions could lead to people wishing to donate to the local community instead of a country far way - that'd obviously be bad for Kiva. On the other hand, people might anticipate the need for their money down the road and choose lending over giving. I'm hoping for the latter.

[cpbailey]

I think the middle class is suddenly being squeezed.  Suddenly those house payments may be ballooning.  Car payments don't go away.  Gas is higher.  Day care is a huge chunk of change.  Food costs are soaring.  Then interest rates hit those on fixed incomes (retired folks), and the stock market has seen better days.  Jobs are becoming a concern for some.  Oh, health care is a bigger nut, too.  Those who have run up credit cards or used their house as an ATM will have even more bills.

I know charities are seeing burnout from disaster after disaster.  Even KF hit saturation on the various drives over the winter.  so Kiva will be facing a challenging time.

Sometimes though, if you can reach someone who is struggling, it works.  The mortgage is adjusting.  Perhaps they are having to buy fewer clothes for growing kids, and they cut eating out a lot.  Maybe mom went back to work part-time or someone picked up a weekend job to help make ends meet.  Food at home is more budget--shop those sales, use an occassional coupon, make some beans instead of higher cost meats.  If Kiva finds a way to someone who faces these changes, perhaps they feel grateful to have meat most nights and to own their home.  Perhaps, just perhaps, it feels good to feel privileged enough to make a small difference somewhere else.

Colette

[Canadian Here]

I don't really consider this as 'giving', although it could be, if one is very unlucky  The odds are that we will get the majority of our money back, if not all of it.
Contrary to popular belief, I don't donate much to 'traditional' charities because I don't like the fact that the Directors and the Executive Officers usually pocket handsome salaries with great benefits. That's the way it typically is in Canada. I can't speak to the situation in the USA or elsewhere. I find the Canadian charity scenario both disguisting and discouraging. Here, operating expenses of 46%-56% of all donations is not unusual. That's a substantial amount.
A member of my family founded what eventually became a registered charity, designated as such under the Canadian Income Tax Act. I'm not saying that this organization didn't do good work and that there wasn't a need for it in the community. I'm saying that, in my view, the operating expenses for a relatively small non-profit were unreasonably high. The salary my family member took from it was, in my view, excessive and constituted a considerable slice of the operating costs. I'm not particularly proud of this fact, but that's my limited "insiders" view on Canadian charity scene. This experience didn't do anything to encourage me to sit down and write a cheque to any of them.

Lorna

[A Nonny Mouse]

I agree with Lorna -- I work way too hard to get the money I give away and/or loan -- and discovering later that it did not help needy people but lined the pockets of someone who didn't need it so much?    That makes me ill.

Nonny

[Canadian Here]

Nonny:

My relative was NOT a 'poor' woman. Her assets were over 1.2M a few years ago. Are you in Canada or the US, by the way? Just curious...

Lorna

[A Nonny Mouse]

I didn't think so, by the way you spoke of her...I myself am in the US.

[Williejeff]

I share your view of many charities.... I choose mine carefully....currently working with Feed My Starving Children in Minneapolis, where 94 cents of each $1 goes directly to food purchases... the vast bulk of work done by volunteers. Food goes to those in 3rd world who can not help themselves. One of the most efficient / cost effective charities I have found.  The money I give is matched by the time I give...make 3 trips there yearly to package.

What I am doing now with Kiva helps me balance.... assisting those who have a dream and want to develop the ability to help control their own destiny.  If I get repaid, great!  I can help others...If I don't, it is a risk worth the effort.

My fear is that giving, loaning and risking will be hurt with our current economic situation.  I hope it wont.

[Soriak]

I share your view of many charities.... I choose mine carefully....currently working with Feed My Starving Children in Minneapolis, where 94 cents of each $1 goes directly to food purchases... the vast bulk of work done by volunteers. Food goes to those in 3rd world who can not help themselves.

Do you know if the food is purchased in the US and shipped to the third world, or bought in developing countries? The former is sadly very widespread amongst charities and is partially responsible for the shortage of domestic agriculture - the local farmers can't compete with the free food given away by aid organizations. I think there's a trend now happening where aid organizations buy food from local farmers and hand it out, which is a great way to a long-term solution. (Farmers can expand, knowing they can sell everything they produce)

[cpbailey]

Saves a LOT of fuel, too.  I think much of the food aid policy from the US is to make a market for OUR crops.  So fuelish!   

Colette

[Williejeff]

Regarding Feed My Starving Children... Rice is grown here, purchased and shipped...however, the food goes to only those in true need, like Haiti, where the deforestation has resulted in a destruction of the soil.  There is little hope.

I support an orphanage there.  I have noted that there are no loans available for Haiti, and for very good reasons.  So, without the ability to loan money to people in Haiti, I choose to use an organization like Feed My Staring Children to help feed children in the orphanage.

Interesting the orphanage has to pay the shipping/receiving on their side.  Communication with the orphanage indicates that they do buy all they can locally, but there is not enough food to purchase, (most farmland is used to produce coffee and mangoes) resorting to having to pay a slightly higher meal cost for the packed food from Feed My Starving Children.  The preferred market is the local market.  The corrupt government obviously severely and negatively affects the lives and the hope of the people.

Other examples of where the 'charity rice' was sent was in the devastation resulting from the Indian Ocean Tsunami.  The food sent allow people to live and now they are rebuilding their lives and businesses.

Thus, I would argue the work of a charity is important to help people survive, so they can become farmers and merchants again.