1 Expiring Loans1.1 Why do loans expire?
Every loan request on Kiva is posted for a maximum of 30 days, which is defined as 720 hours from the exact time the loan is posted. If the loan is not fully funded by the end of that period, it expires.
1.2 When does a loan “turn red”?
When there are 4 days, 23 hours and 59 minutes left in the loan’s 720 hour fundraising period, it “turns red”. That is, an extra line is added to the loan’s description on the list, and to its loan page, indicating “4 days left”, and counting down the days remaining every 24 hours. In the last 24 hour period, this is replaced by a countdown of hours and minutes until it either gets funded or expires.
1.3 What does “x days left” mean?
“x days left” really means x full days plus some unspecified number of hours and minutes. Thus, for example, “1 day left” actually indicates that more than 24 hours (but less than 48) remain to fund a loan.
1.4 Why would a loan not get the funding it needs in 30 days?
A number of factors make some loans intrinsically more popular or more easy to fund. Small loans need less support than large loans, and thus can be funded more quickly. Many Kiva lenders prefer to lend to female entrepreneurs, some prefer to lend to individuals rather than groups, some prefer to avoid currency risk, and so on. In general, then, most loans that turn red tend to be larger than average, or loans to groups, or to men, or to women with currency risk. There are exceptions to this general trend. But the most significant factor in whether a loan gets funded within the first few days after it is posted or languishes until it turns red seems to be luck. If a loan appears on page 1 of the list, sorted by Popularity, for a long enough period, it tends to attract funding. And once it attracts funding, it will stay on page 1 longer, giving it a chance to attract more funding. But if a loan is swept off page 1, especially quickly after it is first posted, it must be discovered by someone and supported in order to climb back to page 1. The longer a loan does not attract funding, the less likely it is to get noticed, and the more likely it is to reach the point at which it is in danger of expiring. (See “3.1 What is Popularity?
1.5 What happens to money already lent when a loan expires? Is the loan partially funded?
When a loan expires, every lender who has supported it receives an e-mail notification and a refund. The Field Partner does not receive the funding it had expected for that loan. There is no mechanism on Kiva to provide partial funding for an expired loan.
1.6 When a loan expires, does that mean the borrower doesn’t get his or her (or their) funds?
Generally, no. Most loans are advanced (“Pre-disbursed”) by the field partner prior to being listed on Kiva. So the borrower already has the loan in hand and expiry will not affect the client. In cases where the loan has not been advanced prior to being listed on Kiva, the field partner may be able to fund the loan with other capital that it has on hand. Kiva limits field partners to funding 30% of their loan portfolio with Kiva funds.
1.7 If the borrower still gets the loan, then why is expiry a problem?
Although expiry of loans is not an immediate problem for the entrepreneur(s), we believe that it is a problem for the Field Partners, and hence for future entrepreneurs, and for Kiva.
Field Partners advance funds to entrepreneurs with the expectation that these loans will ultimately be financed by Kiva lenders. Before loans began expiring, this expectation was extremely certain, so the Field Partners could have great confidence that a loan request posted on Kiva would mean that funds would be provided by Kiva lenders to reimburse the amount they had advanced to the entrepreneur. But with expiry of loans comes uncertainty for the Field Partners, who now risk not being reimbursed for loans advanced. As with all risk in financial circles, this risk comes with a cost. For example, the Field Partner may have to fund the loan from another, non-Kiva, source of funds, which may involve higher interest charges. (Kiva provides funds interest-free, which is of obvious benefit to Field Partners.)
The cost is likely to be passed on to other entrepreneurs, who might not receive a loan because the funding for it is not in place, or who might have to pay a higher interest rate to compensate for the higher risk. Or the Field Partner might become less able to provide other, non-loan services. If the risk of expiry becomes significant, it might also make Field Partners more hesitant to advance Kiva-related loans.
In addition to the somewhat indirect cost associated with risk of expiry, it also carries direct costs because the posting of a loan on Kiva costs the Field Partner time and energy (and hence money), which is wasted if the loan request expires.
If Field Partners suffer or begin to bear extra costs associated with expiry of loans, then they will be inevitably less able to help other entrepreneurs. This goes against the primary goal of all three partners in this enterprise: Kiva, Kiva lenders, and the Field Partners. The goal for all three is to help people to build better lives by providing them with access to microcredit.
With respect to the borrowers, expiry of a loan may send an unintended message that there is something wrong with their projects that means that they don't merit being funded. We believe that every loan merits being funded, and every borrower deserves the opportunity to improve his or her life.
1.8 How can I see a list of loans in danger of expiring?
You can see a list of loans, sorted oldest to newest, by selecting “Expiring Soon” in the “Sort By:” drop-down box near the top right corner of the loan list. The oldest are those at highest risk of expiring. Or you can use this link:http://tinyurl.com/n7r5jw
1.9 How can I see a list of expired loans?
You can see a list of all expired loans, sorted oldest to newest, here:http://tinyurl.com/y9eh8j6
1.10 What times are there a lot of loans in danger of expiry?
We have found that the last few days of each month is a time with a greater number of loans in danger of expiry, as loans posted on the first of the month near their expiry date. Typically many hundreds of loans are posted on the first of each month, and some are inevitably left by month's end.
In addition to the end of the month, the days before the 15th of each month can be a period in which there is a significant number of loans nearing expiry. This is a period when Kiva lenders are awaiting repayments in order to re-lend. Loans posted near the 15th of one month can be overlooked until they near expiry near the 15th of the next month.
Feedback about this FAQ, as well as general discussion about the LLL team is always welcome on the LLL team thread
To see a list of all loans in danger of expiry go to http://tinyurl.com/n7r5jw