Just a question: if there is a product you are ready to purchase for 30€, how much are you ready to lend instead ?
Me, personally... rather a lot, probably, because I am stingy
but don't really have liquidity issues, now, and I would lend on Kiva, anyway. Thus, instead of paying €30, I would readily consider lending as much as $250 but had to think about it with $500 (I might do it anyway) - always given that
(1) I lend it in my name and with funds returning to my Kiva account (no Gift Certificates or something like that),
(2) I get to pick the loans without restrictions as to repayment term, region, and MFI,
(3) I am free to donate towards Kiva's administration costs... or not.
$250 sounds a lot at first and might deter users (which you would not have to mind, mig, because you basically profit from the sales not the loans), but it is in fact very reasonable IMHO. Because the lender is likely to be repaid the money - well, or technically "be able to withdraw" it from Kiva after repayments from her/his loans, and does something good with it, too.
Her/his costs are:
(1) Risk of default - at the moment (factoring in MIFEX) less than 3.5%, with portfolio diversifaction and choice of 5-star-MFIs the lender is IMHO on the very safe side with assuming no more than 5% of losses on defaults;
(2) Loss of interest - if the lender gets to choose the loans, (s)he can determine the loan term her-/himself. Unless (s)he is very cheap and very lucky in getting hold of short-term-loans, I guess it is a good guess that the average loan term (for borrowers) would be around 10 months. Taking into account the delayed repayments according to PA 2, and not taking into account the opportunity to prematurely withdraw monthly repayments, this would mean loss of interest for around 1 year. Let's assume, the lender is able to get safe 5% p.a. in interest for a 1 year obligation / overnight money etc.
(3) European lenders will lose out on currency conversion fees and bear a currency risk/chance €-$. Paypal invariably charges a conversion fee of 3.5% when withdrawing Paypal-$ to a €-bank-account; for investing, you will either have to pay these 3.5% for conversion € => $ or you can go with the CC-conversion-rate (in Germany usually 0 - 1.75%). Let's assume it's Paypal all the way: 7%, but disregard the currency risk/chance.
Thus, overall, $250 in Kiva loans would cost the lender at most $42.50 or about €33.50 at today's exchange rate of €1 = $1.2695, and these are very conservative assumptions and calculations - I consider it would turn out at no more than €25, always with the (rather big) risk of the Euro getting stronger, again.
HTH, best wishes,
Wolfgang.
