MFIs that have opted to share currency risk with lenders

[Guest]

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[Diane R]

There is now a new piece of information presented in the basket list when you select a "Possible" loan for your lending basket:

You have selected loans that carry possible Currency Exchange Loss.
Please familiarize yourself with this new feature and consider all possible risks prior to lending with Kiva.

FYI.
--Diane.

[cpbailey]

Perhaps, length of loan will become of secondary importance to some people after sharing the risk (but not the reward).  I think I personally will be looking a bit more at 14 month loans without risk sharing than shorter ones with risk sharing.  It is just another way to differentiate MFIs and their loans.

Colette

[rasilva]

Hello everyone,

I'm sorry to say this but i'm starting to think that there is a problem with Kiva's "bosses" way of thinking... why do they only see one side of the coin? 

So, let me use the example posted in the blog:

If a Kiva Lender makes a $25 loan to the pig-farmer in Cambodia, but when a repayment is made, the Vietnamese Dong has devalued by 21%, TYM Fund must make up the missing 20%, but the Kiva Lender will receive back only 99% of their loan value. If the Vietnamese Dong has devalued by 30%, TYM Fund would again make up the missing 20%, but the Kiva Lender would receive only 90% of their loan value, because Kiva lenders bear the cost of the additional 10% devaluation.

If Vietnamese Dong has devalued by 30%, we bear the cost of the additional 10%!
What if the opposite happens??? What if Vietnamese Dong valutes 30%? Do we get the additional 10%? No! 

You may ask me, why would you want to make money out of currency exchange? Well, i may want to invest in loans elsewhere. If Vietnamese Dong valuates 50%, i may want to redistribute the additional 30% to Bolivia, Peru or other countries. This should be a lender's decision.

The rules of the 'game' should be balanced and Kiva only sees one side of it. Please Kiva don't make the "unhappy lenders" group even bigger.

Just my $0.02,

Thanks,
Rui

[EmmaDilemma]

This is our current list of partners sharing fx risk with lenders.  I would expect it to expand rapidly over the new few days...
-Jonathan

+-----------------------------------------------------------------------------------+
| name                                                                             
+-----------------------------------------------------------------------------------+
| AMK                                                                               
| Christian Rural Aid Network (CRAN)                                                 
| HOPE Ukraine/Nadiya, a partner of HOPE International                             
| IMON International                                                               
| Lift Above Poverty Organization (LAPO)                                           
| Local Enterprise Assistance Program (LEAP), a partner of World Hope International
| Manuela Ramos / CrediMUJER                                                       
| Microfinanzas PRISMA                                                             
| Microinvest                                                                       
| MLF MicroInvest, a partner of ACDI/VOCA                                           
| Paglaum Multi-Purpose Cooperative (PMPC)                                         
| South Pacific Business Development (SPBD)                                         
| Vision Finance Company s.a. (VFC), a partner of World Vision International       
| Zene za Zene, a partner of Women for Women International                         
+-----------------------------------------------------------------------------------+

strange, lapo, amk, and manuela ramos are "covered". is this a bug or does it take some time to opt-in?

[YowieFreak]

strange, lapo, amk, and manuela ramos are "covered". is this a bug or does it take some time to opt-in?

Only new loans are eligible for currency loss sharing.  Any loans listed prior to about 24 hours ago are not affected - they will continue to be covered by the MFI.

[EmmaDilemma]

oh 
i hoped they changed their mind. sorry for my impatience.

[YowieFreak]

Only new loans are eligible for currency loss sharing.  Any loans listed prior to about 24 hours ago are not affected - they will continue to be covered by the MFI.

There are currently two LAPO loans fundraising where the risk is shared:  Shoyembo Olabisi and Fagbohun Folake.

[Jane Sladen]

Hello everyone,

I'm sorry to say this but i'm starting to think that there is a problem with Kiva's "bosses" way of thinking... why do they only see one side of the coin? 

So, let me use the example posted in the blog:

If Vietnamese Dong has devalued by 30%, we bear the cost of the additional 10%!
What if the opposite happens??? What if Vietnamese Dong valutes 30%? Do we get the additional 10%? No! 

The way I see it - the chances of the MFI's making money on a currency trade with US dollars is not great.  If they are lucky enough to make more than the 20%, the money should not go to the lender - it should go to offset all the 20%'s that they have covered in the past as losses. Maybe this would allow them to decrease their interest rate to the borrowers.

Jane Sladen.

[tomviolence]

If currency devalues too much, there is a risk the borrower or the MFI cannot make up the difference. That leads to defaults. A 20% window, in reality, is not something that happens often. Especially, over short loan periods. Yes, there are loans where the term is long, and the region is unstable. That is risky - with or with out currency issues.

The borrower is the other side of the equation. Should borrowers assume all currency risk ? Oddly enough, the one group there is vocal opposition to, US borrowers, has no currency risk. Where are the POKL team shouting we should take on the risk so the truly poor do not suffer the ups and down of international finance, rather than the US borrowers having no risk ?

To be fair, I would like symmetry, where currencies that increase in value against the dollar provide a return over our initial investment. I would ALSO not expect that to happen to often, but like the idea of equal risk reward.

[RichardF]

As soon as Kiva pays a "gain" of any sort to its lenders, then these loans become investments that are subject to a whole new league of regulation by the U.S. Government.  That's just not going to happen.