How do you choose who to lend to?

[Guest]

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[Haji]

Dear Kiva friends!

My name is Yelena and I’m a current Kiva fellow in Azerbaijan. I am creating a PowerPoint presentation for the loan officers at my MFI to help them better understand Kiva lenders. I’d like to ask you:

•   Why do you lend through Kiva?

•   How do you choose which loans to fund? What draws you in? And conversely, what draws you out.

•   Are there any other bits of information you’d like to share with loan officers?


I’ve written two blog posts on Azerbaijan for the Fellows blog since the beginning of my fellowship, if you’d like to learn more about Azerbaijan, Komak or me you can find them here: http://fellowsblog.kiva.org/?s=yelena+shuster


Thank you 

Yelena Shuster

[JohnR]

Hi, Yelena.

1. I lend through Kiva because I can loan as little as $25; the money is repaid so I can use it to help another person; I like helping people who are helping themselves; I like knowing where the money is going.

2. How I choose:  Very subjective.  There are practical elements (I try to balance loans to many different countries to spread the risk I would look for is whether there's currency risk or not; I try not to loan when there's currency risk; I also look at the financial strength of the MFI and try to avoid one and two star MFIs).  After that I look at the photos of the borrowers; sometimes there will be something about a borrower (or a group) that jumps out at me - that's the subjective part, it could be the person's smile, their clothes, what's going on in the background (something that shows me about the borrowers work or where they live vs. a blank wall).  If no one jumps out at me, I'll screen for occupation (I'm a Buddhist, so I try not to lend to someone whose job involves killing animals).  After that, if I need a tie-breaker, I look at the length of the loan.  I also try to have a variety of borrowers, so I'll try to keep a balance between men and women have have borrowers of all ages.

3. I would encourage the loan officers to try to catch the borrowers smiling when they take the photos.  A lot of people are suckers for little kids, so if there are any around get them into the photo.  Make sure the photo is in focus.  A picture of the person doing their job/at their job site is more compelling than one standing in front of a blank wall; second best would be anything that shows the local buildings or flora/fauna.  (These are just suggestions on getting a loan filled more quickly; the loan will probably fill regardless.)  If you can, diversify the types of loans in any given batch of loans.  People have the most credits on the 15th of the month, so try to get them posted up then.  Many people love to get updates on their loans.

Hope this helps.

John

[RichardF]

Hi Yelena!

Here's a good background topic on your question:  Who do you lend to?

Another way you can see for yourself what's popular in a straightforward, no secret sauce added, kind of way is go to the Kiva Bank website (http://www.kivabank.org) and sort the listings by "Popularity ($/Hr)".

As far as who I lend to goes, it changes over time.  In a nutshell, I look for a risk-managed connection.  The less risk the better, the more the loan agrees with my personal biases the better, the more the loan balances out my overall interests the better.

Bottom line... Put a Baby in That Picture!!! 

[David2051]

Hi Yelena,

Welcome to KivaFriends, and thank you for being Kiva Fellow!  Your energy and efforts in the field add so much to the experience of being Kiva Lender.

This has been said before, but I too try to avoid currency risk.  I just don't have the necessary understanding to evaluate currency risk, so I use the KivaMFIChecker add-on in FireFox to black list MFIs that "share" currency risk.  Something would have to really jump out about a loan with currency risk for me to lend if it has currency risk.

I also avoid end of term loans or irregular loans that don't have a repayment for a long period of time, and with MFIs with fewer stars or default and delinquencies, I look for shorter term loans.  If I have any reservations about a loan I look for 12 months or less term, and the shorter it is the more likely I am to lend.

Looking through Komak's loans right now I see currency risk and irregular payments with almost a year before the first payment is due.  That is a hard sell for me.  I don't mind the quarterly repayment schedules though.

On the subjective side, good compelling stories that relate how the loan will improve their situation help.  Good clear photos of the workplace with smiles, children, animals, or an actual bee hive help tremendously.

I hope you have a great Fellowship! 
 

[wthepoo]

Hi Yelena,

here is another thread you might want to read: http://www.kivafriends.org/index.php/topic,2243.msg34468.html#msg34468

Since my answer there (http://www.kivafriends.org/index.php/topic,2243.msg34530.html#msg34530), my criteria have somewhat changed.

In particular, like David, I do not (and in my case that is: never so far) lend where currency risk sharing is "possible" (and this also means not to Komak borrowers since they have opted to take part in this scheme). This is not because I believe that the risk is substantially elevated (in most cases it will only concern cents, if anything) but because I'm not sure it is fair to ask lenders to take on part of that risk as well (and non-US lenders in particular), it considerably easens the load of well-run MFIs (that should have some currency risk hedging/insurance etc. in place anyway for the 70%+ rest of their portfolio), the methods of calculating, implementing and accounting for the loss are nearly sophisticated enough etc.

Also, I am not fond at all of the translation templates in place especially with some Asian MFIs; they just don't provide important information ("a service based business in the service industry offering services" or something like that), and the results are often rather impersonal.

Best wishes,
Wolfgang.

[Jan & John]

Hi Yelena, thanks for all your hard work and dedication as a Fellow.

I am one of those who is first drawn in by the photo.  I just looked through the available Azerbaijan loans, and have to say only a couple actually caught my eye.  Clarity and colour in the photo will do that and most were either blurred or very dark.  From there, I am very attracted to the ones where I can make eye contact and form a human connection with the people I lend to.  Even in a group photo, I usually can find someone who speaks to me with their eyes.

The similarity in the photos is a concern and I know it is hard to make each man-with-cow or each retail store photo look different.  I don't know the solution for this other than to post to Kiva in small batches and try to have some variety in the loans. 

I don't usually worry about the loan term as long as it appears reasonable for the type of business.  I feel the terms should suit what works best for the borrower.  I loaned just the other day for 38 months... to a lady to buy a car to deliver her baked goods... seemed reasonable to me.  But I don't understand a long term for agriculture or for seasonal retail items such as clothing.  That doesn't make sense to me and if it feels like I might be burdening the borrower for longer than they will have income from their product, then I worry.

I think we are all drawn to specific terms such as - single parent - disability - teacher - etc. so it usually helps to have more information rather than less in the description.  Someone else mentioned children, we're suckers for kids. 

Currency risk has me a little worried, but not so that I will not lend.  I do think that MFI's should be trying to cover those losses elsewhere.  If the choice in loans came down to currency risk... I would choose the loan without.

thanks again for trying to help make our world a better place for all...
-jan-

[Haji]

Hi John, Richard, David, Wolftang, Jan & John.

Thank you very much for replying to my post.

Best,
Yelena

[David2051]

Hi Yelena,

Can you report back and let us know about currency risk from Komak's point of view?  How do they deal with currency risk in the other 70% of money they don't get from Kiva?  What do they think of the other issues we raised?  We don't often hear their side of the story.

Thank you,

David

[Haji]

Hi David,

Actually Komak had no idea that "sharing" currency risk made such a difference to many lenders! We are now looking into switching to cover currency risk. So thank you for those comments. Will update you on our progress.

P.S. I just posted a new entry to the fellows blog about Komak.
http://fellowsblog.kiva.org/2010/06/10/revelations-by-the-director-of-komak-kiva-field-partner-in-azerbaijan/

Yelena

[cjp1973]

Hi David,

Actually Komak had no idea that "sharing" currency risk made such a difference to many lenders! We are now looking into switching to cover currency risk. So thank you for those comments. Will update you on our progress.

P.S. I just posted a new entry to the fellows blog about Komak.
http://fellowsblog.kiva.org/2010/06/10/revelations-by-the-director-of-komak-kiva-field-partner-in-azerbaijan/

Yelena

Wow, that is fascinating.  I wonder how many others MFI's don't know this.  Thanks you so much for having a dialog with us here at KivaFriends.  We really appreciate it. 

Charmaine