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

[Guest]

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[Gerard]

Hi KivaFriends,

A fair warning: this may be the longest post in KivaFriends history. However, there’s lots to clear up, so I wanted to make sure we get a comprehensive update out to you and give you the chance to use this thread to inform you about what’s going on and give you the space to ask questions and get answers without too much interference. For the sake of this thread, let’s try to keep it to a strict Q&A just to make things totally unambiguous.

First I’ll talk about bugs that we know about and what we’re doing to fix them. Then, I’ll talk about the new repayment system. I’d encourage all of you to use this space to ask any questions about anything I post and clear up any confusion. Here we go…

Bugs:

Vanishing repayment bug

The symptom: You see a repayment in your Kiva account and in your transaction history for a given loan, but don't see that repayment listed on the entrepreneur's business profile page with the previous repayments. Essentially, your transaction history is correct, but there is no corresponding information on the entrepreneur's profile page.

UPDATE: This one is fixed!

Difficulties logging in last night (11/10/08)

We recently changed to a multi-server configuration. Some aspects of our testing of this configuration carried over and was causing people difficulty logging in. This was fixed this morning.

Our invites feature is broken:

The symptom: You can page through your invites, people have trouble accepting invites, people who redeem gift certificates that you’ve sent may not be listed as invited by you.

This one we’re still working on. It may be a number of weeks before it’s resolved as there are a number of higher-priority issues to be cleared up.

Loan confirmation bug:

The symptom: Lenders weren’t receiving loan confirmation emails after lending.

This one is fixed!

Penny bug:

The symptom: You got an extra penny or you didn’t receive a penny that you should have when repaid. Essentially a rounding error.
We’ve filed this one, but until it is resolved, we’re fixing these on an individual basis.

Gift Certificate continue button bug:

The symptom: Some browsers aren’t able to render the “continue” button that should appear after accepting our gift certificate terms during the purchase process.

UPDATE: This one is fixed!

I'm sure I've missed a few bugs. As there are more, or if you have questions about others, I'll add them to this list.

New Repayment System (aka PA2):

How it works:

When one of Kiva’s Field Partners uploads a loan request to Kiva, they provide Kiva with a schedule of repayments that they anticipate the entrepreneur will make. We automatically generate this schedule for the Field Partner by counting months from the disbursal date, but they’re free to change it.
At the end of every month, Kiva requires that our Field Partners indicate whether or not they’ve collected these repayments from the entrepreneur. In recognition of the fact that it takes most of our Field Partners a fair amount of time to catch up with their activity for the month, they have a 15 day grace period after the end of the month to do so.

After this 15 day grace period, we generate a statement with this information and bill our partners for all of the repayments that they indicate they’ve collected. Our Field Partners then have an additional 30 days to make a payment to Kiva so that we can deposit the repayments into your Kiva account. The repayment due date reflects the last day the Field Partner can pay before the repayment becomes delinquent.
For example, if a Field Partner posts a loan with the first repayment on January 10th, we ask them to indicate whether or not they’ve received this repayment by January 31st.

On Feburary 15th, at the end of the grace period, we generate a bill to the Field Partner for all of these repayments. The Field Partner then has until March 15th to pay this bill before we mark the payment on Kiva as delinquent.

Why you haven’t seen any repayments in the past weeks:

It was important for Kiva to create a partner administration/repayment system with a billing cycle. Our old system didn’t have this. As a result, once the system is banging on all cylinders the resulting data output will be more accurate, more closely reflect what’s happening on the ground between the Field Partner and the borrower and improve transparency overall.

Moving to this system necessitated that we create a period where no repayments were being sent to lenders because no bills were going out to partners and no funds were being paid to Kiva. As a result you probably haven’t seen any repayments into your Kiva account for a while.

When you can expect to see your next repayments:

The brief answer: Most loans that had been repaying before the 15th of the month will get a repayment on or just after November 15th. Most loans that had been repaying after the 15th of the month will get a repayment on or just after December 15th.

Here's why:

The way that repayment schedules are generated is different in our old system and the new system.

In the old system the repayment schedule was automatically generated by counting months from the date the loan was fully fundraised. So if we have the following loan:

$600 loan with a 6 month loan term
Funds raised on 6/23/08
Partner entered a disbursal date of 7/7/08

*Note that all of the following dates represent payments made by the Field Partner to Kiva, not payments made into your Kiva account*

You get this repayment schedule:
7/23/08 - $100
8/23/08 - $100
9/23/08 - $100
10/23/08 - $100
11/23/08 - $100
12/23/08 - $100

In the new system, we generate a repayment schedule for our partners based on the disbursal date that they mark. They’re free to change this schedule, but for this example, we’re going to assume that they won’t. So for the same loan, where our disbursal date is 7/7/08 you get this repayment schedule:

8/7/08 - $100
9/7/08 - $100
10/7/08 - $100
11/7/08 - $100
12/7/08 - $100
1/7/08 - $100

On November 15th, our system will take a look at the payments that have already been made and compare them to the scheduled repayments. For this example, we’ll say that the following actual repayments have been marked in our system:

7/23/08 - $100
8/23/08 - $100
9/23/08 - $100
10/23/08 - $100

So we have $400 in actual repayments on the books. However, remember that our repayment schedule looks like this:

8/7/08 - $100
9/7/08 - $100
10/7/08 - $100

So we have $400 in repayments and only $300 scheduled. Our system looks at this and assumes that the partner has overpaid. The actual repayments and the new repayment schedule are out of sync. This means that for the month of November, this loan doesn’t get a repayment. Now let’s push this schedule out a month. That means we still have the following repayments:

7/23/08 - $100
8/23/08 - $100
9/23/08 - $100
10/23/08 - $100

Still $400 in repayments. Now, since a month has passed, our repayment schedule looks like this:

8/7/08 - $100
9/7/08 - $100
10/7/08 - $100
11/7/08 - $100

So now we have $400 in actual repayments, and the system says we have $400 scheduled to be repaid. You’ll then receive a repayment in your Kiva account and the actual repayments and our repayment schedule are now in sync.

Why move to this system?

1 – Better function in low connectivity: PA2 makes improvements to the site our Field Partners use to post fundraising loans. Mainly, we’ve designed the website to work better in low-connectivity environments since many Field Partners operate in areas of the world that lack a decent internet connection. Better function in low connectivity means that Field Partners can post more loan requests more frequently.

2 – Greater flexibility in loan terms: Partners can now set a more accurate disbursal date for the loan they’ve posted. They can create a schedule that isn’t monthly if, say there’s an agricultural loan that only repays once at the very end of the loan term, or if a given entrepreneur requires a non-monthly repayment schedule. They can change the dollar amount of a given expected repayment. All of this is in the name of more accurately reflecting what’s happening on the ground and bringing greater transparency to our platform.

3 – Greater liquidity: This new system allows for lenders to receive partial repayments. Instead of waiting to deposit a repayment into your Kiva account after the entire loan term has ended, we are now able to deposit these funds as they are repaid to us. This means that you have greater control over your Kiva funds.

If you have any questions, please reply to this thread and I'll do my best to get you some answers.

-Gerard

[wind5001]

Gerard,

right now, because I am in a rush, no questions, but a huge thank you for this!! 

[howard]

Many thanks, Gerard, for all this. After a bit of study, much will be clearer. Just one question - rather than the torrent of repayments on the 15th monthly, wouldn't it be better all round to spread them, say Africa on the 5th, Latin America on the 15th and Asia on the 25th (with Middle East and Eastern Europe fitted in where convenient)?

Howard

[RichardF]

Thanks Gerard, this is helpful!

Kiva Lending Teams Question:  As a team leader, why do I get a message someone has joined a team but the team doesn't show up on their lender page and they don't show up on the team members page?

[Robert]

I think that I understand now one reason why the length of the loan and the number of repayments cannot always agree. The loan that made me understand is this one: http://www.kiva.org/app.php?page=businesses&action=about&id=72728.

The amounts of the repayments are those that the entrepreneurs really have to pay, which is often not a monthly term. We focus on loans in Senegal (repaid in one payment at the end of the loan) and loans in Cameroon (a 4 month grace period after disbursement) to find non-classical repayment patterns. Many loans, however, will be repaid on a weekly or fortnightly schedule.

I was surprised in my example that the repayments differ from one month to the next, but then I understood that repayments are weekly. The loan is a 16 week loan, which is 4 months. The description says 3 months, but that is a bug. After correction of the bug, the description will correctly display 5 repayments, but it will still be a 4 month loan.

In my example, the loan (together with the grace period and the invoicing and wiring delays) is considered to have been disbursed either on Friday December 5, Saturday December 6 or Sunday December 7.

The amount of the weekly instalment is $4,125 / 16 = $257.8125.

Until December 15, the entrepreneurs must make 1 weekly payment: $257.8125, or  rounded to $257.81.
Until January 15, the entrepreneurs must make 4 weekly payments: $1,031.81.
Until February 15, the entrepreneurs must make 5 weekly payments: $1,289.0625, or rounded to $1,289.06.
Until March 15, the entrepreneurs must make 4 weekly payments: $1,031.81.
Until April 15, the entrepreneurs must make 2 weekly payments: $515.625, or rounded to $515.63.

This shows that Kiva displays exactly what happens in the field. Until now we were happy with our machine generated repayment notices, but it was not the real world outside. We have been spoilt, due also to the lack of communication. The new system is thus a BIG improvement. 

Kiva uses now a better word for the repayment dates. As these are the last possible dates, they are called "Due Dates" and not "Expected Dates". 

Now I have 2 questions:

• How will Kiva explain to the lenders that a 4 month loan has really 5 repayments when the repayments are computed by weeks and not whole months, whenever the loan does not start at the beginning of the month? It is in this case not a bug, but it must be properly explained, otherwise contactus will be swamped by misled lenders or, worse, potential lenders will walk away as they don't trust the system.
• Often, at least in my part of the world, borrowers pay the same amount for each instalment. In the beginning, the remaining loan amount is high and so a large part of the repayment consists of interests. Gradually, the interest payments get smaller, but a larger part consists of the capital repayment. As we lenders get only the capital part, shouldn't we get rising amounts over the loan period? If we get fixed amounts during the loan period, it means that the MFIs are underpaid in the beginning and are subsidizing our lending activity. That is not what we wanted, is it? Or do borrowers by chance make fixed capital and variable interest repayments, which means for them decreasing instalments? I don't believe so. Has anyone spotted a repayment schedule with increasing amounts over the period?

Robert

[P, B and J]

Thanks so much Gerard!  This really helps me to understand better!

Your post does too Robert!  Thanks!

[RichardF]

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?

[Ulli]

Gerard and Robert, thank you for the very useful explanations.

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.

[Alaska Pack]

Gerard,   Even though it's darker in Alaska because the days are getting shorter (last count in Anchorage 7.5 hours and dropping), your posting was enlightening.  Thanks !  Bernice and Jim

[P, B and J]

Changed "Loan Term/Start Date" question

Something strange happened very recently in my Kiva account.  I don't know if this is some kind of isolated issue due to uber specific circumstances or if it's something larger.  I'm not even sure if I should post it here to ask about it.  If my post should be removed, please let me know, and if it's preferable for me to just send an email to contactus about it, I will do so no problem.

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?

Date Posted: Mar 13, 2008
Date Funded: Mar 15, 2008
Disbursal Date: Mar 29, 2008

Loan page: http://www.kiva.org/app.php?page=businesses&action=about&id=40233

Here's an image of how it shows in my acct. (using Opera browser yesterday, but today in IE it shows the same thing):



Please let me know if I should leave this post in the thread or not, thank you!  Just not sure why the entrepreneur's photo was taken off and I don't want to compromise anyone's privacy or anything.  Although the photo is gone so maybe it wouldn't compromise anything? 

Thanks for any replies!
Jackie