Kiva Bill Payments/Bank Partnership/Liquidity

[Guest]

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[saruon]

I was thinking that at times my personal financial situation keeps me from lending as much to Kiva entrepreneurs as I would like.  It would be beneficial to have a safety net in case I run into financial trouble in the future.  I propose a partnership where banks and companies would accept Kiva loan balances as payment for bills.  Clearly some rules and restrictions to prevent abuse would be necessary - otherwise people would simply lend and then use their new balances it to pay their bills (good for Kiva, bad for banks) but overall it's a win/win/win.

Benefit to Lenders:

- Lenders will be able to give much more to Kiva knowing that they have a safety net in case they run into financial troubles down the line

Benefit to Creditors:

- Promoting this program will give companies access to a premium customers
- Positive publicity

Benefit to Kiva:
- More money will flow to Kiva entrepreneurs

Since default rates are so low I believe that the biggest risk of lending to Kiva entrepreneurs is liquidity risk.  I urge members to brainstorm and come up with other ideas to increase liquidity as it would enable lenders to give much more than they currently give.

[David2051]

I was thinking that at times my personal financial situation keeps me from lending as much to Kiva entrepreneurs as I would like.  It would be beneficial to have a safety net in case I run into financial trouble in the future. 

Hi Saruon,

I think there is a safety net already built in.  If you run into troubles, you can withdraw your credits each month and use them to pay bills.  With an average repayment rate of 98-99%, I've seen people mention things like using their children's college savings fund to help alleviate poverty through Kiva until it is needed, etc.  I once saw a lady post in a team message that she had been homeless before and felt like she might end up homeless again, but she knew the money she put into Kiva would be available to her in the future if she ran into troubles and needed it.

This would not allow you to access all of your money at one time, but keeping this in mind, you might want to focus on shorter term loans.  I hope this helps...

David

[Skimmis]

The shortest loans are on 4 months, so you could get 25% of your money back each month.

[saruon]

Thank you.  I do not think I did a good enough job explaining the basic concept.

Every Kiva loan begins with charity.  When I make a loan I agree to forego any financial gain (and even accept potential loss) to help the working poor.  However, after this act of charity I am left with nothing more than a financial instrument.  When factoring in default rates and inflation, a $25 Kiva loan once made is worth something like $22-$24 in today's dollars.  However, as of today nobody will accept my Kiva loan as payment for anything so I have lost access to my money (liquidity) until the loan is repaid.  If the value of my loans was accessible to me in case of emergency then I could make more loans.

Now, there are many ways to increase liquidity and I believe even small increases in liquidity will allow much more money to flow to the world's working poor.

[Skimmis]

You probably should save the credits for your own emergency fund.

[iampaul]

However, as of today nobody will accept my Kiva loan as payment for anything so I have lost access to my money (liquidity) until the loan is repaid.  If the value of my loans was accessible to me in case of emergency then I could make more loans.

Your thinking puzzles me. The collateral value of your car is the value of your car. If your bank has a lien on your car for the unpaid balance of your loan, surely they're not going to let you borrow again against any portion you still owe them just on the basis of a historical repayment rate by all of their car loan customers of 98% or some such.

Paul

[wthepoo]

I believe the idea is rather making Kiva loans (or rather the claim/expectation to receive repayments) transferable and thus, e.g., open for factoring so that in case of an emergency you can somehow "sell" your current Kiva portfolio or part of it for, say, 80-90% of the outstanding amount (depending on risk ratings, delinquencies and loan terms).

I agree with you, though, Paul, that it's unlikely that many commercial banks/factors would agree to that - and to favorable rates - just because Kiva has worked rather well so far, especially seeing that under the ToU there is no actual claim of lenders against borrowers or MFIs, there's (almost) no collateral (not even on Kiva's level, apart from the balance due to newly raised loans) and the loans aren't exactly low-risk in many cases. With Kiva growing, though, in the longer run it could maybe be an option for Kiva itself to offer such a safety net by agreeing to "buy back" loans at a (drastically) reduced rate.

Best wishes,
Wolfgang.

[Skimmis]

I can buy your account for half price. And others who want to leave Kiva fast.

[RichardF]

Just like at the Folio Investing Note Trader for Prosper loans, buying and selling Kiva loans is subject to capital gains and losses.  As such, that activity should be subject to SEC regulation.

I'm all for it!

[Henry]

prove it R - in this situation I don't think so