MIFEX - concerns, updates

[Guest]

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[Ramón]

Update:

Here is the link to the initial document. Please send me (by email or PM) any questions you have, and I will update them. I plan to send this list of questions to Premal and Michelle Kreger this coming weekend.

http://docs.google.com/Doc?id=ddngdh9d_21fjhmpws8&invite=gqqj9c2



A few comments and questions that I would like to see addressed (possibly during the conference call):

- I have a few Mifex loans that were paid back in full. These were 6 and 10 months loans that all started in December 2006. I don't know if they were leveraging the 35% already in those days, but they obviously had funds to pay them back. Were they funding the repayment of running loans with the new loan money that came in at that point? Did they really "set out to defraud Kiva Lenders from the beginning", as the topic summary suggests?

- Robert Edgar's email was pure spin. Fully agree. What was the objective of this email?

- The money that was never paid back -- was this paid back by the borrower to Mifex and disappeared there, or did the borrowers actually default (either through their own fault or because Mifex wasn't available to receive the money)? (@Tatiana - yes, I am conscious that I left that out. I assumed that this money was not paid back, but I see now that it's not safe to assume that.)

- Would Kiva be willing to share the audit report (or at least its executive summary / relevant subset) with the Mifex lenders?

We should collate a list of question and send it straight to Premal to cover during the call. I can open up a Google Document with these questions -- send them to me via PM and I will share the link.

Ramon

[Jan & John]

Sad day indeed - however...
We are also 'in shock' about Mifex but we were only burned on 1 loan.

In chat Matt said "we are exploring legal options."  That is good enough for me as I am sure this is the most he will be allowed to say at this time about legalities.  I know people will be pounding this nail to death until they get some kind of satisfaction.  I personally don't think it will help the situation for KF to push for more.

I firmly support Matt and all the other people at Kiva.
I truly think they started, and continue to run, Kiva on a shoestring and a prayer with the intention to help the poor.  They are still recipients of my prayers.
I am sorry to see them branded with the same iron as these two in Ecuador.
I also know that we only see part of any story, so I will have to go with my own gut feelings and take the rest on faith.

Matt admits to taking risks while building Kiva and Mifex was one that didn't pay off.  They have learned a lot about due diligence and have implemented many procedures in the partner process that will go a long ways to prevent another Mifex.
Matt admits that Kiva has learned many lessons in 3 years and I think Matt and the others are running fast behind this snowball they have started.
Matt admits to "serious flaws" in the old repayment system and the new system still has bugs they are chasing but I am satisfied to wait until December.
Matt finally 'heard' us on the subject of communication and we will wait to see what/when/where that improves.

John and I went into Kiva knowing there were no guarantees in this life and will continue to support Kiva into the future because we believe the borrowers gains are greater than our losses.

This is a sad but hopeful day for me...
jan

[wthepoo]

Ramon,

there is one question that is continuing to bother me - even though I (lucky me) was "too late" to have any MIFEX loans in my portfolio. It is a kind of follow-up to your question:

- The money that was never paid back -- was this paid back by the borrower to Mifex and disappeared there, or did the borrowers actually default (either through their own fault or because Mifex wasn't available to receive the money)? (@Tatiana - yes, I am conscious that I left that out. I assumed that this money was not paid back, but I see now that it's not safe to assume that.)

From reading Kiva's FAQs on MIFEX I got the impression that MIFEX borrowers in general perform fine (like the absolute majority of Kiva borrowers) and that it was "just" MIFEX that defrauded Kiva lenders (for whatever reasons - not necessarily to buy Porsches for these two guys; I don't really care so much, it's still fraud to mark up the loan sums to cover operating expenses).

For loans already repaid to MIFEX by the borrowers, the money will most probably be lost in the black hole of MIFEX - maybe some could be recovered from the two guys (they will most probably be liable for damages also under US law), but I would not bet a lot on this.

But: What is with loans not (yet) repaid by the Kiva borrowers (always minus the 35% or so mark-up)?* Their open instalments (debatable whether including the interest part or not) could theoretically be collected and (completely or - with other creditors present - at least in part) paid back to Kiva lenders. Will such a collection still happen (maybe even organized by Kiva?)? Would it potentially help recovering at least some of the loss or would it be too costly? => Why has Kiva decided to declare loans defaulted in general even if there are still repayments due to MIFEX?

===
* Either because repayments have not been collected in the past or because instalments are not yet due (there are some recent MIFEX loans that should still be active according to their schedules).
===

Oh, and another question: Has MIFEX filed for bankruptcy, yet? If not, it might be a consideration for Kiva to do so ASAP to prevent other creditors from "grabbing" available funds.

Again, I am in the lucky position not to have lost anything with MIFEX, but I feel with those of you who did - sometimes very considerable sums - and I also am eager to see how Kiva will deal with such a crisis because it might not be the last one.

Best wishes,
Wolfgang.

[s_shewan]

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)

I don't think we should be wildly speculating about things like this. Let's just stick to the facts. If Kiva is pursuing any legal recourse they are not going to be able to post updates to us about it. And if they have no legal recourse then we will have to "let it go" knowing that the borrowers did get loans and did repay even if the money never made it back out of the MFI and into Kiva's and the lenders hands.   I am sure, however, that Kiva will do it's best to recover what it can.
We all know going in (at least I hope we do) that there is a chance of losing our money. I call it a donation, just as it is a donation when I give to www.educationgeneration.org  or www.imagine1day.org or UNICEF or any number of other organizations that I see fit to support. I would not put more into Kiva than I can afford to lose. I would however be sad to lose it.....but it isn't going to create a hasrdship for me if I do.

That being said.....I am satisfied that Matt and the gang have learned a few lessons in communications and are doing their best. 

Susan

[TropicalPete]

Susan,

Do you only put in the bank what you are willing to lose?
Kiva is not like UNICEF it's more like a bank than a charity.

Normal banks help middle/upper class citizens. Microfinance banks help lower/poor class citizens.

Pete

[AccountAbility]

I suspect there might be two kinds of lenders on Kiva.  Some will agree with you, Tropical Pete, but some (and many, based on the lender comments I read) do think it closer to a charity -- where their main concern is for the borrowers, not for getting their money back.  In these cases getting your money back is so that the next borrower can have a turn.

Dan

[s_shewan]

Susan,

Do you only put in the bank what you are willing to lose?
Kiva is not like UNICEF it's more like a bank than a charity.

Normal banks help middle/upper class citizens. Microfinance banks help lower/poor class citizens.

Pete

No I don't consider Kiva like a bank.  In my bank my money is guaranteed (insured) up to $100,000 per account ....in Kiva there are not such guarantees.  If my bank fails, I will get my money .....if Kiva fails or the MFI fails, I don't.  My bank gives me interest....Kiva does not.  I don't believe the money in these MFI's  in countries around the world are insured as my money is in the bank here in Canada. If they were, there wouldn't be this MIFEX issue.

Kiva is nothing like a bank  IMHO.
And I certainly wouldn't put my retirement savings or my kid's university savings into it.
So, in my mind ....the money in Kiva is in Kiva to stay and keep rotating through different countries month after month and (hopefully) year after year.

Now the MFI's are banks to help lower/poor class citizens, yes. But technically I'm not putting my money into their bank. I don't have an account with them and they are not giving me interest or charging me fees. My money is just travelling through Kiva and the MFI to the person I want to help. Hopefully that person will do well pay back the loan and I will send my money travelling through another MFI and to another person who needs a loan. If the person does not do well and can't pay it back for whatever reason then I just consider it a donation, hope it improved their life in some little way, and move on.

Normal banks help middle/upper class citizens,   debatable ..........
Normal banks seem to help themselves and their shareholders but that's a whole other issue that I won't go into here.

Susan

[Mona]

I agree with you, Susan!

[Henry]

I suspect there might be two kinds of lenders on Kiva.  Some will agree with you, Tropical Pete, but some (and many, based on the lender comments I read) do think it closer to a charity -- where their main concern is for the borrowers, not for getting their money back.  In these cases getting your money back is so that the next borrower can have a turn.

Dan

I mostly if not strongly agree - The issue as I see it, is this....   

If a lot of 'not getting your money back' happens - it could be a disaster for KIVA.  Which is why I think it's important we never express . . .  "it's OK, I felt good doing it".   While that might be our 'inside thoughts' it's not 'everybodys' feelings on the matter. 

Personally, if the people I loan to default - for various understandable reasons - that's ok, in some instances I've wished there were a 'forgive' my share of debt button.  But when AN MFI is the cause of such - that is not acceptable to me.

Just my humble opinion.

[s_shewan]

I mostly if not strongly agree - The issue as I see it, is this....   

If a lot of 'not getting your money back' happens - it could be a disaster for KIVA.  Which is why I think it's important we never express . . .  "it's OK, I felt good doing it".   While that might be our 'inside thoughts' it's not 'everybodys' feelings on the matter. 

Personally, if the people I loan to default - for various understandable reasons - that's ok, in some instances I've wished there were a 'forgive' my share of debt button.  But when AN MFI is the cause of such - that is not acceptable to me.

Just my humble opinion.

I agree. If an MFI fails, or in the case of MIFEX, "skims money off the top" and can't send the money back to Kiva that is truly more disturbing, upsetting and needs to be investigated fully and if there is a way of making the MFI accountable then that should be pursued.  But I go into this whole process knowing that it is a possibility that an MFI will fail.
I have rules when it comes to Kiva lending. I haven't been a Kiva lender for as long as most of you but I follow my rules because they are good for me.

1. Don't lend more than you can afford to lose.
2. Don't lend too much to one borrower.
3. Don't lend too much to the same MFI (diversify)
4. Don't lend too much to the same region of the world. (diversify)

It's like playing the stock market only I don't expect to make any money.   

Susan