MIFEX - concerns, updates

[Guest]

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[Natasha]

After a long day at work I came home to find out this turn of events. I am sorry to those who have had many loans defaulted today (I only had a small percentage of loans of which one was a kiosk "loan" and the rest were "loans" to schools- where were all of those agricultural loans that were effected by rain? )

In a nutshell, for me, the MIFEX DEFAULTS are....

Debacle, Disappointing, Disgraceful, Disgusting... !!!!

Edit: Allow me to add Deceitful and Despicable to my "D" words. Quite some time ago, I already wrote to Kiva to express my opinion that it was extremely bad business practice to divert loan repayments to operating expenses. I entered into the agreement by making an interest free loan to a borrower, not financing operating expenses of an MFI.

[Tatiana]

Yeah, personally I had 14 defaulted loans in a single day come to find out two minutes ago.  Didnt know my first defaulted loan would come in huge bunches, close to 3% of my entire portfolio of loans.  Now I am over twice the average default rate.  A little hard to swallow at the moment--i was always prepared for defaults but not so many, and all at once.  How unfortunate for everyone.

My default rate jumped from 0% to 5.01% overnight.

Not that my portfolio is as big as yours of course.

I wouldn't mind defauted loans so much if they happened because of unforseen circumstances and nobody could help it.

But being robbed by two American youngsters who saw a way to get rich quickly gives a bit of a strange taste in the mouth.

[Sengbe Pieh]

Q: What do I do if I have other questions?

Have more questions? Kiva staff would love to speak with you. Please join us at one of the times below for an open discussion on MIFEX:

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[quizzoid]

I had 8 MIFEX loans default, including one that was disbursed in April, 2008 (or so).  This is disappointing, but not unexpected.  What's most disappointing is that it might be a long time before I can make loans (via Kiva and a new MFI) in Ecuador again.

I'm not sure if a transcript of the "chat with Matt" will be posted or not.  From the chat, I believe that Matt has gotten our message about needing more effective and more regular communication from Kiva.

What I also learned from the chat is that MIFEX was one of Kiva's very first MFI partners.  Therefore, although Kiva has learned many lessons about effectively managing their MFI partners in the last three years, it was already too late to apply these new procedures to MIFEX.

The information posted here on the MIFEX founders is very interesting.  I wish I'd known that MIFEX was founded by two 23-year old graduates from Stanford.  If I'd known that, I would have chosen other more experienced MFIs to make loans to.

[Ramón]

Although I really don't like what Mifex did, and I have to blame Kiva's lack of oversight for allowing them to go on this long, I do want to relativate Mifex's actions a bit.

Before saying that the founders stole the money, the email I got from Kiva states that they used this for operational expenses. Let's do a small calculation:

- Mifex borrowed $1.4M from Kiva
- 35% was used for operational expenses, or $490k
- they charged about 14% annualized interest, or $1.4m x 65% x 14% = $127.4k
- total budget = $617.4k
- say this is used over 3 years (2006/7/8), then the annual operating budget is about $205k.
- assume a "fully loaded cost" of $50k per headcount (which is about 1/3 of what it would be in the US), then this pays the salary of about 4 employees.

Again, I definitely am not trying to justify what Mifex did, but I also hardly can imagine that this was a "get rich quick" scam by the founders...

In the early days, I did communicate with some of their field officers. I googles their names, and although the founders may have been inexperienced, their loan officers had a long history in microfinance around Latin America.

Ramon

I'll try to be on the conference call on Monday.

[Henry]

There has been a good deal of talk and speculation of a possible non-business relationship between Matt, Premal, and the MIFEX Boys -through the college connection, which might have added to the delay in news on this issue.  I wish this had been cleared up last night, as the answer to this question will go a long way with my thoughts on the matter, and would put this 'unlikely' issue to rest.

Maybe someone could clear this up on the phone call?

[Tatiana]

You might have a point there, Ramón.

Although in your calculation is missing the 24.14% of $1,396,800  = about $337,188 never paid back to Kiva.

And they started April 2006, so two years before repayments stopped instead of three as in your calculations.

The urban lending program was started in April 2006 as the first microfinance operation to be fully funded by Kiva.org (a non-profit also started by Stanford graduates).

Not to mention the fact that is doesn't give much confidence in their good intentions that they intentionally increased the loan amounts with 35% from the start.

[quizzoid]

Again, I definitely am not trying to justify what Mifex did, but I also hardly can imagine that this was a "get rich quick" scam by the founders...

In the early days, I did communicate with some of their field officers. I googles their names, and although the founders may have been inexperienced, their loan officers had a long history in microfinance around Latin America.

I agree, I doubt that they deliberately set out to embezzle money from Kiva lenders.  I think it's more likely that they naively hoped that they would get funding from other sources that would cover their operational overhead, and that they badly underestimated the amount of hard work required for a successful MFI.

However, the e-mail update that we got from Robert Edgar in June was a bunch of spin-doctor bullshit.  So it's impossible for me to look kindly upon these two (i.e., the MIFEX founders), given that they deliberately lied to me about the money that they had borrowed from me.

[TropicalPete]

A Fact: MIFEX set out to defraud Kiva Lenders from the beginning.

Inflating the loan amount is fraud. It is not a matter of opinion at this point!!

[TropicalPete]

The good news is these two crooks live in Miami where we can have civil recourse.

Kiva NEEDS to sue them to get back it's good name.
Kiva hide these facts from us for a VERY long time. In order to avoid the future speculation that someone at Kiva received a kickback from the 500K embezzled they need to pursue this legally. Maybe someone at Kiva personally profited? (a wild speculation at this point)