Lending Short Option

[Guest]

.

[bonzer]

I generally go for the shorter term loans as I don't know if I want to commit to lending on Kiva for long periods of time. I might do, I'm just not sure. I read that shorter term loans tend to fund quicker and I've noticed a couple of threads where people have mentioned that they also prefer short term loans.

So how about on longer loans (e.g. 18 months+) having a "lend short" option where you can opt to get your money back after e.g. 6 months? The way it might work is that say 50% of people on a specific loan choose to lend short, then the loan goes back onto Kiva as 50% funded after 6 months and then gets filled with new lenders.

Of course many of the original lenders might choose to lend again on the same loan for another 6 months. You could also offer the loan on Kiva prior to the 6 months being up as you know exactly what date the loan is going to be short of funds e.g. you could offer it for lending again after 5 months to ensure it has time to fill up with lenders again.

I know it sounds like a sub-prime credit crunch strategy but most Kiva loans seem to be "pre-dispersed" which presumably means that the MFI can cover the loan anyway it it fails to get funding on Kiva and the MFI will be fully aware of the time period over which the loan is guaranteed. Also the MFI wouldn't be forced to offer the loan with the lend short option if they didn't like the idea or couldn't cover it.

[Phoenix42]

I'm not sure I understand the benefit of this Bonzer, as I can see it only adding complexity for lender, Kiva and the MFI.
Also part of confusion is over my interpretation of your definition of short term loan, which I'm reading as 6 months or less loan - currently there are 50 of these available. Personally I would classify short term loans to be 2 months, those are much less common.

Good luck with your lending, and welcome to Kiva.

[bonzer]

By "short term loan", I mean loans with a short repayment term.

It's not that short term loans are unavailable on the site it's that longer term loans, so I understand, take longer to fund.

Some lenders may be put off loans by the length of term because it involves a long commitment to Kiva.

If you only want short repayment term loans, your choice of loan is also much more limited as the shorter terms tend only to be in certain countries and in certain sectors. For example, at the time of writing, loans with a term of 6 months that are currently fund raising are only available from 3 countries - Paraguay, Peru and Uganda.

My idea is to effectively offer a way for the lender to exit from the loan after a shorter period of time than the full repayment term of the loan. This would have the benefit of offering lenders who prefer shorter loans a wider choice and possibly help Kiva get loans funded faster.

[waywardcats]

Hello bonzer and welcome to KivaFriends,

I have to admit that I am not at all convinced that this could work, or that it would be beneficial to anyone other than a relatively small group of lenders like yourself. 

First, I agree that this suggestion would add a great deal of complexity that I do not see as being worth the effort to try to explain to everyone who would need to be involved.

My idea is to effectively offer a way for the lender to exit from the loan after a shorter period of time than the full repayment term of the loan. This would have the benefit of offering lenders who prefer shorter loans a wider choice and possibly help Kiva get loans funded faster.

Another thing I think would be very difficult to implement would be attracting lenders to the longer-term piece of these loans.  Those lenders would bear greater risk if a loan defaults after the first six months.  I personally cannot imagine agreeing to accept that sort of unequal risk.   

-Kerry-

[Skimmis]

wouldtn this add higher complexity and higher costs for no benefit?
If you want short term loans, just go for the short term loans !

I recommend using http://www.kivabank.org/ there you will sort the loans you like, with the shortest terms at the top.

[bonzer]

As I've explained, there are comparatively few loans with short repayment terms on offer and those loans tend to focus on specific countries and sectors which limits choice. It would be nice to be have a method of effectively converting any loan into a short term loan.

There are many models you could use to implement something like this. It doesn't have be complex or expensive.

One model for example might be a loan exchange, where you can re-advertise your piece of a loan on the site after you have held it for some minimum period of time. The remaining portion of the term could then be picked up by someone else, who could themselves then sell it in the future if they so chose. There is no risk or complexity to the MFI as the loan is fully funded at all times.

This would have the benefit of actually increasing the total number of loans available on Kiva as you not only have new loans, but parts of existing loans available for lenders to take as well, hence providing more choice for everyone.

[Mona]

The idea sounds interesting, but just one spontaneous thought: What makes the idea a bit more complex is the shared currency risk many loans have nowadays. The later in the loan term the higher the possibility to suffer a certain currency loss. This would on the one hand make it in general less attractive to take over a loan in the later months, and it might also lead to people "throwing their loan on the market" as soon as they see a currency loss has started to take place.

And the idea of people wanting to get rid of such loans and offering them on Kiva with most probably no-one else wanting to take them over, somehow makes my heart bleed a bit, especially if I imagine to be the borrower behind this ...

All the best,
Mona

[David2051]

I prefer shorter term loans as well.  I prefer something in the 12 month range, and even less if there is currency risk.

I'm truly shocked to see loans with terms of 30 or more months, and I avoid them.   

There is so much uncertainty with the longer terms and I don't see how a microloan can truly raise someone's standard of living over a time period of sometimes more than 3 years.  Expenses can also rise a great deal in that amount of time, so then how would they be able to repay?  I don't want my borrowers finding themselves in trouble a year or two down the road.

That being said, so far my loan term preferences have not been a road block to lending.  The regular sort by repayment term has served me well.

[saruon]

A loan exchange is a really good idea in theory.  However, existing loans would compete with fundraising loans and the goal of Kiva is to fund new loans so competition from already funded loans isn't really a good thing.  That being said, I'm open to any idea that increases lender liquidity.  The devil is in the details.

[carien]

For months all loans were funded very quickly so I don't see the problem. As a matter of fact the term of a loan wasn't the greatest problem by loans who expired in the past.


For months we didn't see any loans in the RED