When is a Loan not a Loan?

[Guest]

.

[Canadian Here]

Except "third party beneficiaries" have NO obligation to pay back.

Dan

And B-I-N-G-O, neither do KIVA business owners! If they do, that's great...wonderful...if they don't, can't or won't repay, too bad for us.

Lorna

[RichardF]

Kiva Field Partners lend to Kiva Entrepreneurs.  That's where the lender/borrower relationship exists for the entrepreneurs.

[Canadian Here]

Kiva Field Partners lend to Kiva Entrepreneurs.  That's where the lender/borrower relationship exists for the entrepreneurs.

IMHO, that's part of it...we also 'lend' (with no requirement for repayment) to the MFI's, who in turn, pass along our funds to the 'third party beneficiaries'.

Lorna

[RichardF]

There's the rub.  If I am lending $ to an MFI, that's different than purchasing a loan from them.  I just want a very explicit statement from Kiva (more than what appears to be predominately a disclaimer) of what my financial position IS and with whom.

[AccountAbility]

Richard, I agree with you that there is no question that a true loan exists between the MFI Field Partner and the entrepreneur borrower.  That's why the term "third party beneficiary" doesn't work.

That leaves the relationship between the Kiva "lender" passing through Kiva to the MFI Field Partner as the undefined piece.  It isn't correct to equate the understanding that the money is at risk with no obligation.

Kiva lenders (I'll stop using quotes to denote my skepticism) somehow participate in the loan the MFI makes.  In so doing, the risk of default shifts from the MFI to the Kiva lender (As is the case in all loan participations in the banking world).  A participation in the banking world is at least in part a contractual obligation between the participant and the originating lender.  But in order for the risk to shift, the participant also shares in the underlying borrower's obligation.

It is this last area that Kiva has left undefined.  Maybe it's because they haven't come up with any definition which still keeps them outside of the various restrictive compliance requirements for banking, finance and securities.  If this is the case then in the meantime, all they can do is assert "no obligation".

Dan

Dan

[Alphecca]

I agree that the Borrower/Lender relationship is between the MFI and the local entrepreneur.

But each MFI might have a different type of loan agreement. They must adhere to local laws. too.

Their qualifications are also different if it's a group loan or individual loan.  Groups have to meet with a certain frequency, keep records, collect funds, and so on.
I have seen a write up where the MFI resorted to some measures such as putting a lein on the borrower's property in order to get loan payments. (Central America)

Kiva imposes conditions / restrictions on the MFIs (for record-keeping, accuracy in representing their loans, etc.)
I have never seen an individual loan more than $1200, or longer than 24 months, so I infer these are Kiva conditions.
 
My point is, that it might not be possible for Kiva to have one "universal" statement on the precise, legal relationship between the "lender" (us) and the eventual borrower, since there are intermediaries (Kiva and MFI) and variations in local laws and the actual loan agreements.

[AccountAbility]

My point is, that it might not be possible for Kiva to have one "universal" statement on the precise, legal relationship between the "lender" (us) and the eventual borrower, since there are intermediaries (Kiva and MFI) and variations in local laws and the actual loan agreements.

It is sufficient for this discussion that a lender-borrower relationship exists between the MFI Field Partner and its borrower, no matter what the actual details might be.

So that leaves defining (a) what is the relationship between Kiva and the MFI Field Partners and (b) what is the relationship between Kiva and the individuals who fund a loan opportunity on its website.

The legal link is of a sufficient obligation to shift the risk of a legitimate loan relationship from the MFI Field Partner through Kiva to the individual funding the loan opportunity.  Whatever that obligation might actually be, it needs to be clearly identified by Kiva and not denied as the current Terms of Use stipulate.

Dan

[RichardF]

The legal link is of a sufficient obligation to shift the risk of a legitimate loan relationship from the MFI Field Partner through Kiva to the individual funding the loan opportunity.  Whatever that obligation might actually be, it needs to be clearly identified by Kiva and not denied as the current Terms of Use stipulate.