USA loans

[Guest]

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[DoubleR]

The record of $4.9million in new loans last month seems to disprove the argument that non-US borrowers are being deprived of their loans.

Regards,
Ronan

[Marilee]

(Disclaimer to avoid confusion: I am cautiously in favor of US lending, within reasonable bounds, and believe the management is so far displaying a thoughtful attitude toward figuring out those bounds.  Here I am only addressing the statement "If you don't like them, don't loan to them.")

"If you don't like them, don't loan to them.": a dissenting opinion

From the devil's advocate standpoint, I must point out that another thread is all a-dither about making sure not one loan goes unfunded.  So, logically, if there are Kiva lender forces fighting to try to see every loan funded, even if they're of a variety usually considered lower priority by the lender base...

In the current system, the final result is, whatever Kiva lists, we will fund, up to the maximum the lender base can afford.  Through lending caps, they decide what aggregatevolume of lender money goes to what MFI.

Even if the MFI receives exactly the same amount of money in the end (one loan didn't get funded? put up another!), it is not in the MFI's best interest to document a lot of borrowers that don't get funded.  That's wasted staff time and energy.  I think the lender base would also find it demoralizing to see loans expiring regularly.  I know I was delighted to find out that everyone gets funded.

I see two major choices of path here, though if I've missed some I'd love to hear it:

Choice A) Through its choice of partners and rationing of MFI allowances, Kiva continues to de facto dictate in aggregate where the money goes.  Anyone listed will, inevitably, get funded.

Choice B) Kiva starts listing many more loans than can be funded and lets the least popular drop off.  As I said, this wastes staff time at the MFI, and if Kiva lets the supply/demand ratio get too skewed, less popular MFIs will be gambling on how much support they'll receive.  Africa lending skyrockets, Azerbaijan is out in the cold until it starts listing more women.  (And Kiva better figure out how to highlight group loans better if it wants to keep focus on this valuable but harder-to-sell loan demographic.)

I can see plus sides to choice B.  The market bends to popular demand.  But it's not how the system works right now, and choice A comes with certain responsibilities on Kiva's part.  If they give an MFI loan listing space, the loan gets funded.

Human nature is such that some people will click on anything, and some people will just want to make sure no one is left out.  Unless they start listing enough loans to let some expire on a regular basis and some MFIs are not being funded up to their cap, we should all be aware that Kiva is dictating the priorities.

There are related analogies that I keep wanting to make on this subject (such as the fact that Kiva prioritizes MFIs that preferentially loan to women, which I totally support, and the difficulties and prejudices that creep into systems ostensibly based on choice so imposing organization-level values on who gets funded isn't necessarily bad), but this post has gotten long.  In short,

Whatever you think of Kiva's choice to add US loans to its priorities, I think it's important to acknowledge that the choice is not, with the current supply caps, really under the control of individual lenders.

Of course, since it's still a pilot, if enough people don't lend to the US, or only get to them when they're about to expire, along with the man-with-a-cow and the big-group-from-Bolivia, they may just end the program.  So in that sense, individual lenders may still have an effect.

(quick edit to fix mixed-up nouns)

[cjp1973]

Article on everywun.com about kiva.  Thought some might be interested in it.

Featured Current Event: Controversy persists over Kiva’s US loans
Thursday, July 9th, 2009 | by: Megan



When Kiva launched in 2005, the microlending organization set forth on a mission, as Kiva states, “to connect people through lending for the sake of alleviating poverty.” Now, with one loan given to entrepreneurs in the developing world every second, it’s clear that Kiva has successfully engaged many in achieving their dream. What is not so clear to many people is Kiva’s recent decision to feature U.S. entrepreneurs as recipients of their loans.

A large number of people have joined the debate on whether this was the right move for Kiva. Here are just two examples of arguments from opposite sides of the fence:

In favor: ”Diversity is part of what makes Kiva interesting. Kiva is a stunning example of people of wildly different backgrounds and worldviews coming together to make a positive difference in the world. With the extremely long loan terms and small quantities of the US loans, I can’t imagine them having any negative impact on the other countries.”

Against: “The US is the wealthiest and most resource-full nation in world history. To think that we are asking lenders from the US and around the world to even consider lending to the US is a shameful, disgraceful decision. One result, and we think it is unconscionable, sets the stage whereby the truly impoverished third world borrowers may now have to COMPETE with US borrowers for Kiva funding.”

At Everywun, we believe if an idea is proven to be successful, that it should be utilized to benefit the greatest amount of people possible. While poverty status in the U.S. and a developing country will always be a relativity issue, we are supportive of Kiva’s initiative as long as it stays true to its mission of “alleviating poverty” wherever it goes. With this said, it seems that some of the current U.S. Kiva loans are questionably not doing this. We’d love to know what you think.

Everywun Action: What is your stance on Kiva’s decision to lend to U.S. borrowers? Simply by responding in a comment here, and letting us know what you’d do, we’ll credit your account with 25 credits if you use your Everywun email address thanks to our nameless nonprofit organization!

Everywun Quiz: Take our Microfinance Quiz and earn two credits for each correct answer!
 

[RichardF]

Hi Marilee, I second your comments with a resounding maybe!!! 

I agree the two options you offer would hold if all Field Partners post their maximum quota of listings every month.  As far as I know, we mortals, except for maybe Ian, don’t actually know that to be the case.

Here’s another possibility where what lenders do actually would have an impact on total Field Partner Kiva portfolios, even if every listing we see still does get funded. 

We know each FP has some magical upper limit on the amount of loans it can post each month.  We know each FP places listings in a queue, waiting for the perfect moment to be released by the Kiva loan spitter outer.  From the recent addition of currency risk info to listings, we also have hints that some loans seem to sit around in the queue longer than others. 

What all this suggests to me is that the Kiva FP loan posting rules are not a simple, one-dimensional quota system.  Instead, it looks like a maximum cap is out there plus some staging rules that determine when specific loans are let out of the chute.  For example, if one rule has something to do with how many or the value of listings that can be “fundraising” at any give time, then the longer it takes to fund the typical loan, the more likely it will be that an FP does not hit its monthly listing quota.

I don’t know if slowly funded loans actually do cause an FP to fall short of its maximum fundraising possibility.  But I do know something keeps listings in the queue.  As usual, Kiva is not forthcoming with lenders on what actually controls how loans get posted from the queue, so all we can do is reverse engineer and speculate from what we observe.  At any rate, I hope this offers a counter-counterpoint for anyone who wants to believe their actions do have consequences.  (Uh-oh, I think I just slipped over to one of those esoteric topics.)

[wannado]

Nice post, Marilee. Thank you!  --  Marsha

[YowieFreak]

... we mortals, except for maybe Ian ...

Are you implying that I am a mere mortal, just like you??!?! 

[RichardF]

Are you implying that I am a mere mortal, just like you??!?! 

It depends on what the definition of "I am" is!  I deliberately place a "," in the middle of things to provoke your reply! 

[marilyn386]

As this topic has already been discussed very much in detail only a short comment from me: Of the 1103 loans that are currently fundraising on Kiva 1101 are for non-US entrepreneurs. I think this gives one a very good idea where Kiva's focus and priorities are.

Yes, you are correct that there are only 2 US loans vs. 1001 non-US loans.   But do you really believe that Kiva would launch such a large national campaign with TV coverage on all the major networks to only help 2 (now about 40 for the month) Americans?  It is obvious that for this campaign to be truly successful, one would expect that the number of US loans would increase exponentially in the future.

We are already experiencing problems funding the additional influx of loans this month.  And before you ask.... no, I don't believe the small number of US loans are to blame this month.  However, when you consider the average US loan is around $5000 vs. $400 for other loans and the fact that older loans (all non-US) will expire, a future ramp-up of US loans is going to tip the ratio of US loans to non-US loans exponentially.

What are Kiva's current projections for US loan growth (and non-US loan growth, for that matter) based on the current lending base, and how do they plan to grow this lender base to accomodate the influx of new loans without sacrificing oversight (rating and monitoring MFI's, etc.) to safeguard the lenders' investments?

What percentage of US loans is acceptable that we can still say our mission is to alleviate poverty in the world and not become just another alternative marketplace for lending?  

Marilyn

[Marilee]

Hi Marilee, I second your comments with a resounding maybe!!! 

I agree the two options you offer would hold if all Field Partners post their maximum quota of listings every month.  As far as I know, we mortals, except for maybe Ian, don’t actually know that to be the case.

... (Clever explanations) ...

What all this suggests to me is that the Kiva FP loan posting rules are not a simple, one-dimensional quota system.  ... (More cleverness) ...

I don’t know if slowly funded loans actually do cause an FP to fall short of its maximum fundraising possibility.  But I do know something keeps listings in the queue.  As usual, Kiva is not forthcoming with lenders on what actually controls how loans get posted from the queue, so all we can do is reverse engineer and speculate from what we observe.  At any rate, I hope this offers a counter-counterpoint for anyone who wants to believe their actions do have consequences.  (Uh-oh, I think I just slipped over to one of those esoteric topics.)

Ah, so!  So the malingering loans might in fact be slowing down the funding of those MFIs, while the ones that are always snapped up will always hit their maximum cap.  Interesting possibility!

I do think our actions have consequences, even with a fixed cap, because if I were running Kiva and having a look at the statistics, I'd think twice about raising the caps in Azerbaijan when the loans there are already waiting until last.  I think what we choose to fund, in the long haul, is an expression of preference that the powers that be are (hopefully) monitoring and considering when they choose how to expand.

I totally agree that not-lending and specifically-focused lending does have power, just not as much power as I've seen implied in the posts of some others.  I didn't mean to imply that we lacked free will in the face of the overwhelming might of Kiva or anything like that.   


  I confess (deep breath, this is a can of worms and I don't want it to sidetrack the topic), part of the reason I burst out with the prior post was that I've been doing a lot of minority politics reading in the last year, and "if you don't like it, go somewhere else" or similar sentiments are often the refrain of someone who is trying to defend something based in majority prejudice.  The rationale is something along the lines of "If it's so unacceptable, it wouldn't be popular."  And that's not always true.

There are a number of minority personal choices that I make that, for one reason or another, other people freak out about.  And I tell them, "If you don't like it, you don't have to do it."  So it's not that it's always related to something bad.

It's just that, humans being what they are, it doesn't hold up as a core argument.  Someone will go along with anything, you know what I mean?  Whether or not we can exercise our individual choice with our individual money, the question of institutional ethics and how it affects group behavior is still worth discussing.

[marilyn386]

  I confess (deep breath, this is a can of worms and I don't want it to sidetrack the topic), part of the reason I burst out with the prior post was that I've been doing a lot of minority politics reading in the last year, and "if you don't like it, go somewhere else" or similar sentiments are often the refrain of someone who is trying to defend something based in majority prejudice.  The rationale is something along the lines of "If it's so unacceptable, it wouldn't be popular."  And that's not always true.

There are a number of minority personal choices that I make that, for one reason or another, other people freak out about.  And I tell them, "If you don't like it, you don't have to do it."  So it's not that it's always related to something bad.

It's just that, humans being what they are, it doesn't hold up as a core argument.  Someone will go along with anything, you know what I mean?  Whether or not we can exercise our individual choice with our individual money, the question of institutional ethics and how it affects group behavior is still worth discussing.

Marilee,

Boy, this is basically what I have been wanting to say, but you say it so eloquently.

We may not always agree, and each of us (myself included) can never "always be right".  But majority opinion does not always equal the "correct" or ethical opinion.

Marilyn