Bugs and New Repayment System - Q&A With Kiva CS

[Guest]

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[Gerard]

Delinquent and Defaulted Loans:  Exactly what happens after Kiva marks a scheduled loan repayment as delinquent?  Under what circumstances will kiva mark a loan as defaulted?   Exactly what happens after Kiva marks a loan as defaulted?

When a repayment passes its due date, it gets marked delinquent. We still have the same default policy - we define default as 6 months after the official final due date of the loan. At that point, we "write-off" the loan, and it is moved from delinquency to default on the balance sheet. At this point it also gets marked as defaulted in our system.

Questions for Gerard:
1. Would it be possible to show that payments are made weekly, but transferred to Kiva on a monthly basis? See Robert's example.
http://www.kiva.org/app.php?page=businesses&action=about&id=72728

2. Do you really need to show due dates for which no payment is expected?
Example http://www.kiva.org/app.php?page=businesses&action=about&id=73862&_tpos=1&_tpg=1
It seems to be sufficient to show only due date when a payment is expected.

On question 1 - It's important to distinguish here that the repayments that we show as they are made on Kiva are repayments from the Field Partner to Kiva, not repayments from the borrower to the Field Partner. While this new system is a big step ahead of where we were in terms of flexibility of reporting, having the Field Partner report the weekly payments is too big of an ask. Instead, we focus on telling lenders about the repayments that are due to them.

On question 2 - Showing the zero repayments serves two functions: First - to easily allow our system to understand that it should expect no repayments for those months and, as such, not to produce a bill for those months. Second - to let lenders know not to expect any funds until the end of the loan.

Moderator note. The first quote code was adjusted to properly display the reply.

[RichardF]

The reason that repayments may be clustered around the 15th of the month is because that's when we bill our partners. It makes more sense and is simpler to keep everyone on the same billing cycle than to spread things out regionally. Because of net billing you'll see most payments paid into your account around the 15th, 16th, or 17th of the month, but you can still see payments later than that if the partner has to send us a wire for the balance.

I believe the overwhelming message on the Kiva Friends site is "No, it does not make sense to us to cluster all repayments around a few days each month."  

I believe this will continue to be a thorn in Kiva's side as long as this type of loan repayments system is in place.

[Gerard]

Changed "Loan Term/Start Date" question

Checking my Kiva account yesterday and I came across the following.  An older loan I have, no longer has a photo of the entrepreneur (which is not a big deal to me, although I just wonder a bit about the change).  The thing that has me concerned somewhat is that the "Loan Term/Start Date" of this loan has changed to Nov 11, 2008 now for some reason.    I'm wondering if this is going to affect repayment and will things be all out of whack now because of the changed Loan Term/Start Date, which in fact actually started back in March?

The problem here is the way we serve our images and the new multi-server configuration we just implemented. This is one of the bugs I forgot to mention in the first post. We're working on this one, and it shouldn't have any effect on repayments.

Gerard,

Thanks for your response. My concern is that the system seems to have been developed to optimize accounting transparency to the exclusion of all other factors, including the users' lending experience, and that this will result in reduced lender involvement and reduced lending.

From my point of view, you have thrust a lot of unneeded back-office accounting complexity upon the lenders. I'm sure that the accounting wonks are delighted, but I don't believe that, for the typical lender, the benefits in transparency associated with foregrounding these details even remotely justify the increase in complexity. No matter, the new system helps the MFIs, and I can ignore the details. If you have a real concern with meaningful transparency, though, let me easily see which of my loans are delinquent, keep me fully informed on the current status of problem MFIs, and follow your own policies on declaring loans defaulted.

Of more concern to me is the change in the lending experience. Everyone benefits when a continuous stream of new loans and repayments encourages lenders to visit the site regularly. If I have a few credits coming in every day, I'll check in with Kiva, see what's available, and maybe add new money for that loan I can't resist. If repayments bunch up, lending becomes a chore and I won't drop by as often. Seriously, would you patronize a store where one day they give you a $100 credit limit and the next $500, where one day they're overstocked and the next empty?

Please find some way to reestablish a steady flow of loans and credits. Perhaps MFIs could have daily quotas, with loans popping up throughout the month rather than bunched at the beginning. Our electric company offers a levelized billing option, spreading out the peaks and valleys of seasonal variations in power consumption. Perhaps  Kiva could offer a similar option for repayments, gradually releasing them to individuals in a steady stream. Cash flow should not only be more liquid than under the old system; it should also feel more liquid.

When you create a personal one-to-one lending environment, you have to expect people to take things personally. The strong feelings expressed in this forum are in some measure an indication of Kiva's success. Keep in mind that if you neglect the lenders, you put the entrepreneurs at risk, and Kiva is ultimately about the entrepreneurs. When frustrations build up, I find that there is no better way to remember why we are all in this together than to make a loan. If you will excuse me, I think I'll do that now.

Perhaps you do see more accounting detail, but I don't think that it's being thrust upon lenders. This is just a smarter system than the old one since it more accurately reflects what's happening on the ground. There's more transparency around the repayment schedule (namely, you can see the repayment due dates) and we give the money back to you earlier than before. All the accounting detail is on KivaFriends, since you folks have been asking for it. We haven't really presented this information on Kiva yet in a way that gets into this much detail. We will find a way to do so, but only for lenders who really want to dig down and learn more about how the billing system works. If you don't care to do that, you don't have to.

The change in the lending experience that you're noting is a temporary transition period. You will see more fluid repayments once the new billing system kicks in. Yes, there will be many repayments clustered around the 15th of the month and in the initial months that this system is in place, we might sell out on those days. However, there's a big chunk of our team working to add new partners and optimize our website to get more loans from our existing partners. It's all a work in progress!

[Gerard]

Gerard,

Nothing was mentioned about the private data of borrowers being compromised on team lending pages or if this is being addressed.  I wrote to Kiva when I noticed the glitch via contactus@kiva.org on 10/31 and received a response from Liz on 11/3 thanking me for pointing it out. 

Yes - this is one that we've filed with the engineers. It looks like it's limited to loans that are displayed on lending team pages. It's in the hopper for a fix.

[Jan & John]

I know this thread is supposed to be Question and Answer so...

1. Does Gerard ever get to sleep on this new full time job ?

2. Is Gerard aware that pleasing everyone will NEVER happen on this site, but we love each other and Kiva just the same?

and...

3. Does Gerard know how thankful we are to just get EXPLANATIONS !  Whoopee !

  thanx, jan

[Diane R]

When a repayment passes its due date, it gets marked delinquent. We still have the same default policy - we define default as 6 months after the official final due date of the loan. At that point, we "write-off" the loan, and it is moved from delinquency to default on the balance sheet. At this point it also gets marked as defaulted in our system.

With all due respect, Gerard, this is not what's happening now.  In my portfolio alone, I have DOZENS of loans through MFIs that have stopped paying over six months ago -- MIFEX and EbF come to mind, but there are others.  We have not heard that these loans are being rescheduled, nor what the status of these MFIs is.  I am certain there are hundreds of Kiva loans that are in this state.  Loans are not being moved to Default in the way you suggest above.  I prefer to think, as we have been told, that Kiva representatives are trying to work out some option with the MFIs that are in this situation, but we need to hear about it.  Promising status updates at the end of Oct. and saying nothing through the first two weeks of Nov., for instance, does not instill confidence.

I'd rather the MFIs work out some way to make good on the loans, but either way just TELL us something!

--Diane.

[wind5001]

With all due respect, Gerard, this is not what's happening now.  In my portfolio alone, I have DOZENS of loans through MFIs that have stopped paying over six months ago -- MIFEX and EbF come to mind, but there are others.  We have not heard that these loans are being rescheduled, nor what the status of these MFIs is.  I am certain there are hundreds of Kiva loans that are in this state.  Loans are not being moved to Default in the way you suggest above.  I prefer to think, as we have been told, that Kiva representatives are trying to work out some option with the MFIs that are in this situation, but we need to hear about it.  Promising status updates at the end of Oct. and saying nothing through the first two weeks of Nov., for instance, does not instill confidence.

I'd rather the MFIs work out some way to make good on the loans, but either way just TELL us something!

--Diane.

Diane was quicker than I...but I had the exact same thoughts when I read your explanation of default loans, Gerard. It is not what is happening. We NEED information regarding these issues: MIFEX, EbF, Wedco and more...

[waywardcats]

Gerard,

Let me start by saying that we do appreciate all you do, and have been doing to keep us updated.  We know you are working very hard because of all the changes, and we really do appreciate your coming and giving us the detail that some of us have been asking for.

Perhaps you do see more accounting detail, but I don't think that it's being thrust upon lenders. This is just a smarter system than the old one since it more accurately reflects what's happening on the ground. There's more transparency around the repayment schedule (namely, you can see the repayment due dates) and we give the money back to you earlier than before. All the accounting detail is on KivaFriends, since you folks have been asking for it. We haven't really presented this information on Kiva yet in a way that gets into this much detail. We will find a way to do so, but only for lenders who really want to dig down and learn more about how the billing system works. If you don't care to do that, you don't have to.

The bolded part of your statement gives me pause.  I can only assume that when you speak of "before" you are speaking of the period before you began releasing partial repayments to lenders on a daily basis.  When the funds were first released Roma said:

After tomorrow, we'll be returning money to lenders nightly. Of course, we will wait until we receive the repayment from our Field Partners, we'll mark it in our books, and then every night our system will check to see if there are more funds to return to lenders.

Now it would appear that two-months after implementing a system in which liquidity was the goal, it will be reduced to a few releases a month.  This seems more of a step backward for lenders than a step forward.   In any case, my question to you is, from the standpoint of customer service, do you not feel that it would have been better to spend some time focusing on the explanation BEFORE the transition period rather than in the middle of it? 

The change in the lending experience that you're noting is a temporary transition period. You will see more fluid repayments once the new billing system kicks in. Yes, there will be many repayments clustered around the 15th of the month and in the initial months that this system is in place, we might sell out on those days. However, there's a big chunk of our team working to add new partners and optimize our website to get more loans from our existing partners. It's all a work in progress!

Thank you for letting us know that this is a temporary transition period.  Would it not be a good idea to at least at this late date to post a notice on Kiva for your lenders that repayments are in transition and thank you for your patience?

-Kerry-

[dh]

You will see more fluid repayments once the new billing system kicks in. Yes, there will be many repayments clustered around the 15th of the month and in the initial months that this system is in place, we might sell out on those days. However, there's a big chunk of our team working to add new partners and optimize our website to get more loans from our existing partners. It's all a work in progress!

Gerard,

Thanks for sticking with us. We understand how hard all of you are working to resolve the outstanding problems.

I don't know how to interpret the bolded sentence. What many of us at KF want, and what we believe to be in Kiva's larger interest, is for a typical lender's repayments to be roughly uniformly distributed throughout the month. What kind of distribution can we expect once the system settles into steady state?

--Don

[wind5001]

Gerard,

someone else stated it before and I am sorry for repeating things, but I consider it very important:

The huge advantage for the lender as well as for Kiva during the two months of daily repayments was this: whenever I crossed the threshold of $25 I'd run to the Kiva platform and choose a new borrower. If I was close to $25, I started looking around, and then I caught a loan, and heck, $5 were missing, so I simply added those to my Kiva credit and made the loan. I was in strict relending mode, but still inserted some cash here, some there. After all it was only a couple $$$. Am I clear in what I am trying to say? With repayments scattered around the month, I was visiting the Kiva website much more often than before. And I think I made more loans than I normally would have. This means, Kiva can attract lenders to come back more often to the homepage and thereby increasing chances of additional funding. This will get lost when most payments are being made between 15th and 20th of each month...

I know, I was repetitive, but I was not sure whether that point had been made clear enough. For the lender, there is really no big advantage in the new system.