Ukraine - bad choice right now?

[Guest]

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[Ari]

I found this awesome lady in Ukraine who sells women's shoes that I want to lend to but it's been all over the news today that Ukraine's president dissolved parliament.  He and the prime minister are not the best of friends these days and some analysts predict clashes between their respective supporters.  Given this, should I wait to make my loan to the shoe lady ?  Her shoes rock!  Take a look: http://www.kiva.org/app.php?page=businesses&action=about&id=7385

[SylvainF]

Well, I cannot predict what's gonna happen, but helping a small entrepreuneur is always good, especially if you think her shoes rock

[Joe]

I agree, I think she's worth the risk despite what may happen around her. The beauty about Kiva is that it's only $25 minimum, so you're not going to lose your shirt if something happens. That said, if you were planning on donating a lot more (or the entire requested amount yourself), then it's probably good to be somewhat aware of what's happening in their country. Then from there, maybe fund the minimum or a little more than you may have planned, and let other lenders share the risk with you.

[notabanker]

I have a question about the whole shoe selling idea...it seems like there are quite a few entrepreneurs in Eastern Europe, on Kiva, that want to sell shoes...this is not a business that I have ever seen as a traditional micro enterprise. It seems very cost intensive (ie high inventory carrying costs) which would generally be a negative for a budding business person. Why the larger than average amount of interest in shoe sales in Eastern Europe? And what is the "business case" for this opportunity?

[Ramón]

Separate from the fact that shoe-selling may or may not be a good business idea (...being married and observing women around me, I'd say, it is... and all shoe stores appear to be booming around here), I think the topic of selling to a possibly instable country is a very interesting one...

I've been heavily investing in Ecuador. As I already wrote in by blog (here: http://kivaramon.blogspot.com/2007/03/soon-to-be-republica-bolivariana-de.html) Ecuador is hard on their way to become a socialist state. Generally, not good for business...

Ecuador's advantage is that they dollarized their economy. It's gonna be hard to put import restrictions, and their money can't really devaluate against... eh... itself, the dollar.

As for the Ukraine, I think that the concerns are mainly focused around two things:
- devaluation of the local monetary unit. One of Kiva's loan conditions is for the MFI (and thereby, generally the borrower) to take the currency exchange risk. Chances are, that if Ukraine goes the way of Zimbabwe, your entrepreneur won't be able to pay back the loan
- political change towards more restrictive money export rules. If that's the case, the MFI may not be able to pay back to Kiva.

[RA]

I wouldn't let it influence me.
If you were investing solely to profit, it might be a consideration. But, with the objective to help people help themselves, it's different.
If you looked closely at most of these third world goverments you would see lots of problems - which is part of the reason these people need loans in the first place.

RA