Below is the list of questions I sent Liz early Wed., and the responses she provided during the discussion at our call on Thurs. 23 April 2009.
Our call started, however, with Liz telling me she'd like to provide some input on the question Premal asked on the last Kiva Community Conference Call (April 15, notes
here). Premal's question was summarized in the call notes as follows:
Loans to teachers through Teach for America (TFA):
An opportunity has come up with Teach for America which places young college grads into tough schools to teach. Turns out that these teachers need money to get set up. They are just out of college. TFA already makes loans to these teachers, 18 month terms. There is some discussion of having them raise money on Kiva. We would like to hear your perspective on this.
To answer any speculation (and there was plenty), Liz told me that this suggestion would not be undertaken this year, if ever. While there is lots of support for Kiva in the future to look into "other types of lending opportunities for social impact", as Liz put it, the TFA idea has been dropped for now. Kiva will be entering the US microlending market this year, and they will be watching to see how this expansion goes and what lender reactions will be, but will not be moving on any other kinds of lending in the US. Liz and the Kiva staff thank everyone for their thoughts; she said they found it educational to hear our reactions, and it helped inform their decisionmaking.
On to the weekly questions!
[1] Currency Risk:
Please thank the staff (and thank you!) for putting together a
set of answers to many of our questions on the Currency Risk proposal. KivaFriends were satisfied with the answers (not necessarily 100% supportive of the program, but happy to have more clear answers), with the exception of these items:
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[1a] A clarification requested on Q#8, where the answer stated, "The currency rate date used to calculate whether any Currency Loss has occurred will be the date on which the bill is issued to the partner-so the 15th of the subsequent month for any given month."
I would assume they meant "the 15th of the previous month for any given month." For instance, the currency rate date for payments received on 4/15/09 would have been 3/15/09.
DISCUSSION:Correct, the wording should have said "previous month".
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[1b] What conditions would nullify the Currency Risk sharing program?
Assume that a MFI has opted into the "currency risk sharing program" and subsequently enters into a period of non-payment and/or a long term restructured payment agreement (similar to ANK) that is due to lack of controls, bad business practices, fraud, malfeasance, etc. on the part of the MFI or its employees. Will the currency risk sharing program for this MFI be terminated and the MFI required to shoulder any FX loss over the restructured period?
DISCUSSION:Currency Risk could be shared only by MFI partners in good standing, not any in default of a Kiva policy, so those being investigated or restructured would not have the option to continue to share currency risk.
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[1c] For loans made to countries where the exchange rate has been dropping at roughly 20% per annum for years, lenders might expect roughly even odds on suffering at least a small F/X loss on loans to the country. How will Kiva meet its requirement for due diligence in such cases? How will it prevent gaming the system by MFIs?
DISCUSSION:The exchange rates would be drawn from objective data from XE.com, not from self-reported data from the MFI, which should prevent such gaming. If that does not answer the concern here, if someone would like to expand on this question further Liz would be happy to get a more in-depth answer.
I asked Liz how many of the MFIs were likely to participate in the Currency Risk program and which they are. She did not have that information but would see if she could find out for me. One fact she had was that if an MFI elected to participate in the Currency Risk program, it would be applied to all their loans, not to just selective loans. (In other words, an MFI participates for all its loans, or for none.)
[2] Unused Credit policy:
What became of this proposal? Is it still under consideration? Planned for implementation? Are other options being considered?
DISCUSSION:Kiva staffers took the feedback they received to heart. They took a step back and are looking instead at ways to provide additional options for unused credit. One possible answer is that some features of the proposed matching program may offer a solution, so lenders could indicate that after some period of inactivity they'd like their unused credit to be applied as a matching loan, or turned into a contribution. They are still working on the legal questions internally, and may be coming back to the community here to ask for feedback on proposals in the future.
One interesting fact Liz mentioned is that the Kiva Customer Service regularly receives calls and emails from lenders who have some unused credit and want Kiva to take it over, most of them asking for their credit to become a contribution. So there is a slice of the lending community who do want to be "hands-off" about what happens to their unused credit.
[3] Website errors this week:
There have been a noteable number of errors and problems reported this week. Many encountered IE errors trying to download their transaction history (and were told that this was scheduled for a fix in “the next couple of weeks”, which several felt was too long to wait). More worrisome, though, is that there were many problems getting paid-for credit (through Paypal) to register in people's accounts despite having received confirmations, and a significant number of phantom loans, where people would check out and even receive a transaction record, but the loan would neither show up in their portfolio nor would they get the loan confirmation email. Are there server or website problems that we need to be aware of? Should lenders report these mishaps individually, and if so, to whom and how long should they wait before reporting the problem?
DISCUSSION:There was a Paypal issue the last couple weeks that caused a number of problems for Kiva (and other vendors!) when checking out. Paypal sends back to a vendor something called an IPN (Instant Payment Notification) once they've verified payment, indicating in Kiva's case that it's OK to credit the lender with the loan, or credit or GC purchased. These IPMs were VASTLY DELAYED and not being returned to vendors (like Kiva) as they usually are. As a result, Kiva's back end did not receive verification that the transaction had gone through, within its normal time deadlines, and as a result some lenders had their basket emptied with no loan and no credit. There is currently no email notification to lenders when this happens, either, although there should be something sent that says, "We're sorry, we couldn't process this loan as you requested, so we're giving you credit instead." Liz has filed a bug asking for this, but none of the solutions are "bite-sized", as she put it, so it may take a while to get this notification architected and implemented.
[4] Matching proposal:
There was some discussion on this topic but not a lot. I will be starting a separate thread to tease out more discussion (and also because I have a lot of comments which I provided separately which I'd like other KFs to see), so more comments will likely come up for the next call. One early comment worth noting concerned the required donation when opting into this program:
"When is a donation a donation and when is a donation a lender fee (which may not remain optional)? I think consistency has its merits."
DISCUSSION:There is still internal discussion at Kiva about how to represent this when the matching proposal is implemented. The design is not finalized, but they want to correctly identify whether this should be a fee, or a donation (which would mean a 0% option would be available). Discussions are underway.
[5] MFIs guaranteeing loans Kiva borrowers:
This topic caused some concern among KFs. The fact that there are MFIs who are guaranteeing the loans they have "sold" to Kiva effectively says that the default risk has not shifted to Kiva lenders, in which case a Kiva lender cannot truthfully say that that borrower's loan is in our loan portfolio. Transparency demands that these guarantees stop. Maybe if they stopped the guarantee, the MFI Field Partner would have enough to cover currency risk.
[5a] So tell us if you would please, which MFIs guarantee the loans for their Kiva borrowers?
[5b] I just received this journal and I thought it might be a good case in point for the conversation on guaranteeing loans.
The Viv ansanm Group
$1,275.00 Loan Amount
83% repaid
Quote from Journal entry:
Sometimes outside economic pressure are so strong that they have a crushing impact on our moral structure. This is the apparent situation in which we find the members of the Viv Ansamn Group. After repaying their first loan without missing a step, thirty days after their 2nd loan should have been repaid the individual who paid back the most is only 50% repaid. There is one individual who only came to one repayment meeting, afterwards she moved from the area and is nowhere to be found. The loan officer responsible for the group, Kenas Metelus, realized that the loan was going to be difficult when he attempted to visit associates who missed repayment meetings and didn’t find them at home. What made things more difficult for him was when he asked other people in the community, they claimed to have never heard of such people, in some cases. All attempts to encourage repayment have to date been unsuccessful. The president of the group, Lutherking, who had a better relationship with the associates than the loan officer has been unable to find the other associates and even repay her own loan. There are several different accounts circulating about the cause of the default, some blame the global economic pressure and difficulty, others say it is the type of businesses that these associates were involved with that hit a bad cycle, whereas others still say that the default was on purpose and planned by the members of the group. We here at Esperanza are still unsure of the specific cause and are still involved in activities to encourage the group members to repay the loan. On behalf of Esperanza, we thank you for your support.
If the loan is already 83% repaid then it seems obvious that Esperanza is guaranteeing this loan. As a lender to this group who will apparently have no repercussions from this possible default I have to say that I really do feel quite disconnected from my entrepreneurs at the moment.
In any case, perhaps instead of worrying about which MFIs are doing this, can we discuss with Kiva ways to stop it? Because if I am not really accepting the risk for my loans, then as a lender I am not really connected to these entrepreneurs at all but just a source of extra capital for the Field Partners.
DISCUSSION:In the new-ish feature in the loan repayments schedule table, information is now available in the Show Advanced table details on why a loan is delinquent. If you click on the word "Comments" in the right-hand column of the repayment table, you will see the new choices "Entrepreneur behind in repayment" and "Field partner behind in repayment". This data is meant to help expose whether it is the borrower who is behind in paying, or the MFI. This is the first step in showing which MFIs cover defaults or non-repayments from their clients: if the loan seems to be repaying monthly, but the link shows "Entrepreneur behind in repayment", that would indicate that the MFI is covering the loan. There are valid reasons why some MFIs will want to do this: they perceive, accurately, that there are risks to their reputation if their Kiva loans do not repay, and may want to mitigate that hit to their reputation by covering their borrowers' Kiva loans, to some degree. Liz's question to you is whether you would still find it a loss of connection to borrowers, in a significant way, if an MFI elects to cover loan non-payments yet this information is exposed and reported on?
Liz also mentioned that it is not safe to assume that the group guarantee isn't still in effect even if it seems (as with the Haitian loan cited above) that it couldn't possibly be covered. She will specifically ask for this particular loan to be looked into, and will let me know if she can find out more about why it seems to be being repaid, when the Journal seems to indicate the borrowers are not paying.
[6] MFIs moving from "Pilot" to "Active" status:
Don't Field Partners in "Pilot" status increase their fundraising limits when they transition to "Active" status? The following Field Partners have been in "Pilot" status for six months or longer:
Zene za Zene - Bosnia & Herzegovina (26 months)
Alide - Benin (14 months)
MCDT Sacco - Uganda (13 months)
HOPE DRC - Dem Rep of the Congo (26 months)
Ameen - Lebanon (7 months)
Asociacion Arariwa - Peru (7 months)
ADIM - Nicaragua (6 months)
Kiva specifically states that Field Partners should expect to spend UP TO 4 MONTHS in Pilot status (
http://www.kiva.org/about/pic_become). How about getting the aforementioned Field Partners to "Active" status so that they can post more loans? Only when we see a significant number of loans go unfunded should the conversation of encouraging competition to fund loans begin.
So the questions here would be:
[6a] What are the current requirements that need to be fulfilled for moving from Pilot to Active?
[6b] Is it correct to assume that, once in Active status, these MFIs could post more loans each month?
[6c] Which of the above MFIs might be moving into Active status and when?
DISCUSSION:The move from Pilot to Active status is not based on a simple checklist or formula, and does NOT necessarily mean an MFI can post more loans each month. It will depend on the partner's comfort with adhering to Kiva's policies, the due diligence Kiva staff have completed for that partner, and the partner's desire to offer more loans. Liz will recommend that they provide on the site more information on how the move from Pilot to Active happens and what this implies for an MFI. For those listed above, she will check and see if she can report back on the status of these in particular.
After covering these questions, I asked Liz to thank the engineering team for changing the wording on the donation page, it is phrased much better now. I mentioned in passing some of the problems people have had with exporting various parts of their Kiva portfolio for further analysis, and she said there will shortly be a fix going out to address many of these issues; she will try to get details on which export issues ought to be fixed.
I asked if they would be taping the next month Kiva Community Conference Call, and she said they are still planning to do this, and were delayed in April while working out the costs associated with turning on this feature through their conference call provider. I also suggested that someone ask listeners or staffers who speak up on the monthly calls to consider self-identifying before they make their comment ("Hi, this is Diane in San Jose, CA."), to make it easier to possibly connect with someone who has said something you (or the note-takers or Kiva staff) want to follow up on. Completely optional, of course, but maybe a mention at the start of the call would be a reminder for some. She was willing to consider this.
Finally, I told her we at KivaFriends (and me personally!) felt that our Liaison calls were very valuable, and asked her if Kiva staff felt similarly. She said yes, that we bring up topics that touch on issues they need to think about internally, and also highlight areas where they may not be communicating clearly. We've agreed to continue every other week as we have been.
yr obt svt, over and out!
--Diane.
