MFIs that have opted to share currency risk with lenders

[Guest]

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[Amy-in-PHX]

Hey Amy - I just checked your portfolio pie charts, and gender appears to be just male and female again? Please let me know if it's working properly for you!

Back to bed,
John

Yes John, Thank you.  Everyone seems to have a real gender now.  I noticed that your message was posted around 1:00am California time!  If you are at home, you really are going above and beyond, to be working at 1:00am on a Saturday.  Thanks again for the fast response,
Amy

[JohnAtKiva]

Yes John, Thank you.  Everyone seems to have a real gender now.  I noticed that your message was posted around 1:00am California time!  If you are at home, you really are going above and beyond, to be working at 1:00am on a Saturday.  Thanks again for the fast response,
Amy

I actually live in Brooklyn...  but my son is sick and woke up with a fever, so I had to get him back down by strolling him outside.  Afterward, I checked out KivaFriends.  The real people who went above and beyond here are on the engineering team - they fixed the bug within minutes of me posting it!

My kid is still sick today, so I'm going to give him a bath to cool him down.  Back later!

John

[JohnR]

John, thanks for your explanation and for letting us know Kiva did look at different options.  That's good enough for me.

I hope your son feels better soon.

John

[alan]

It seems Hagdan sa Pag-uswag Foundation, Inc. (HSPFI) has decided to share currency risk with no notice. 

[AccountAbility]

@all - When I started at Kiva, I thought of it as basically a micro-lending site that happened to be a non-profit. I've come to learn over time that it's more useful to think of it as a non-profit that happens to enable micro-loans.

There are many legal and accounting limitations on what we can do as a non-profit.  For example, I would've gladly offered to personally cover the risk of currency loss from all affected lenders.  Or we looked into having Kiva itself cover the risk of currency loss, since as we pointed out in the email... the risk of currency loss for the average lender is very low.  We looked into these and many other options, but for various legal and accounting reasons, they weren't possible.

I wish we could've handled it differently as well but as a non-profit, we just didn't have many degrees of freedom here. Sorry guys!

This cycles back to a question I had with the last situation on currency loss potential.  Some time ago, Kiva set up a captive entity to handle the float from all the fund movements and to make any interest that was available from that float.  Is that entity also non-profit and subject to the same restrictions? (I know there isn't much interest to be had right now with rates so low, but there usually are at least a few dollars in there from that activity.)

Dan

[JohnAtKiva]

This cycles back to a question I had with the last situation on currency loss potential.  Some time ago, Kiva set up a captive entity to handle the float from all the fund movements and to make any interest that was available from that float.  Is that entity also non-profit and subject to the same restrictions? (I know there isn't much interest to be had right now with rates so low, but there usually are at least a few dollars in there from that activity.)

Dan

Hello Dan.

First I should note that I am not a lawyer or an accountant (nor have I had the chance to vet this response with our Legal or Accounting teams).  So please take everything I say here with a hefty grain of salt!

There is indeed an entity called, "Kiva User Funds, LLC" that's owned by the Kiva Microfunds non-profit.  The LLC does generate some interest, but more importantly the entity is structured in such a way so that every account holder gets FDIC insurance up to $250,000 per depositor per bank (the "per depositor" is just to convey that if you have your own account at Wells Fargo, then that money counts towards your $250k FDIC insurance I believe).

In any case, the restrictions on the LLC are indeed less onerous than those on the non-profit; we've been looking into the difference for a separate issue.  One key difference: any contribution to an LLC would not qualify for a tax deduction!

Hope that's helpful...

Best,
John

[AccountAbility]

Thanks, John.  That is helpful.  Right now in the current financial environment, I'm not sure of what use the lesser restriction might be put to, but if interest rates return to their former levels there could be a number of possible uses--currency exchange rate stabilization perhaps being one of them.

Dan

[Skimmis]

Hello Dan.

First I should note that I am not a lawyer or an accountant (nor have I had the chance to vet this response with our Legal or Accounting teams).  So please take everything I say here with a hefty grain of salt!

There is indeed an entity called, "Kiva User Funds, LLC" that's owned by the Kiva Microfunds non-profit.  The LLC does generate some interest, but more importantly the entity is structured in such a way so that every account holder gets FDIC insurance up to $250,000 per depositor per bank (the "per depositor" is just to convey that if you have your own account at Wells Fargo, then that money counts towards your $250k FDIC insurance I believe).

In any case, the restrictions on the LLC are indeed less onerous than those on the non-profit; we've been looking into the difference for a separate issue.  One key difference: any contribution to an LLC would not qualify for a tax deduction!

Hope that's helpful...

Best,
John

Ty for an enligthning message without legal mish mash