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the people who borrow

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today my envy of other kiva fellows faded because i finally, finally got to meet kiva borrowers.

there is a certain sadness that most of these borrowers have. for some it’s buried deep beneath stoicism and the victories of subsequent success, but for others it’s brimming at the surface, and you get the feeling that one more slight push would send them into the chasm. when i take their photos, they never smile – and i thought of asking them to, but i don’t want to if there’s nothing to smile about. the truth is, life has been hard for them.

kiva lenders may think they are doing a great thing (and they are doing a good thing of course), but these borrowers don’t get the benefit of the 0% interest rate, and to them, they aren’t being done any favors – because who knows what they had to get through to make those repayments back in full and on time, with interest added. they certainly don’t owe anyone anything, and because of that, when i intrude on their lives with a video and a huge camera, i feel somewhat ashamed.

but it’s not all grey of course. so many in the microfinance industry are in it because they hope, as do i. and the borrowers i met, they do laugh, but don’t necessarily dream. the reality is that for many, loans are required for survival or working capital, not necessarily to step up or make a significant game-changing investment. consequently, default rates in the microfinance world are lower than those in the mainstream commercial world, because these borrowers need to repay to get the next loan, and the next, and the next. and perhaps that’s why some of them are willing to go on video, get their photographs taken, answer questions… even though they might not necessarily want to – because they don’t want to risk losing their line of credit.

i realize this post sounds a bit morose, only because one particular borrower made such an impression on me.  soft-spoken, it isn’t in her nature to fight. but she has to, because she has two young sons to feed – a little red-faced baby was sleeping soundly on the single bed she had, and her other son, no more than 6, was watching a dubbed version of LOTR while doing homework. the downfall of socialism 20 years ago meant the closure of a lot of government-run factories, and she lost her job. so now she sits in her dimly lit ger, sewing grey gloves, hoping to find a mass buyer.

hers is the sadness that threatens to overflow.

Chingeltey

where i went today: the Chingeltey ger district

lastly, a bit about my translator. when we came to this region he said, “you never want to come here. this is where all the poor people live.” he also came 40 minutes late to our appointment with the branch manager and staff… because he was having lunch after class. there’s also a certain smugness that he has, because he speaks English and is apparently rich and well-connected. all his family work in the government, and he roundly (he is round) tells me that he is able to get out of mandatory national service (army) because of connections and bribery. to top it off, he is very proud of the fact that most of what he wears or owns was bought overseas. can you tell what i’m thinking?? nevertheless, he is helping me for free (albeit receiving internship credit)… so i shall leave it at that.

Written by j

November 4, 2009 at 11:05 pm

Posted in Kiva, Mongolia

Loan expirations on Kiva

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Suzy Marinkovich, a Kiva fellow in Bolivia, wrote a post on loan expirations recently, questioning the ethics of the Kiva website functioning like a marketplace.

Here’s my response:

i’ve been thinking about loan expirations for awhile as well.

i personally don’t have an issue with the marketplace concept because kiva is exactly that. lenders get to choose individual borrowers they want to lend to, and choice will always involve personal biases. however, that freedom to choose is what makes kiva so successful – lenders feel empowered. if we were to remove allowance for biases – then kiva could just post borrower stories, but have lenders lend to a common pool instead of a specific borrower. but that, though more equitable, will unfortunately generate less lender interest, and ultimately less funding.

to the borrower however, it isn’t much of a problem since they will get funding anyway. having the MFI improve/refine their content to be more attractive to lenders is not a bad thing – since that will generate more lender activity on kiva and more funding in the long term (not a zero sum game). and whether or not they have integrity in improving their borrower profiles (i.e. not embellishing or making stuff up) is out of our hands

however, what I do have issue with is if an MFI has a kiva specific product. my MFI, XacBank, in Mongolia has exactly that (i think it’s the only MFI right now). but basically, kiva’s 0% interest rate allows my MFI to return 9% of interest paid to the borrower at the end of the loan term. but since my MFI pre-disburses the loan before getting fully funded on kiva, they’re essentially promising the borrower a certain product (9% int back) but are not absolutely guaranteed that they will get kiva funding (0% interest) for it.

so far none of our loans have expired w/o getting funded, but i’ve asked my kiva coordinator what will happen if it does happen. she said, she will just repost the loan the next month. i then asked – what happens if the loan was disbursed more than 30 days before the new reposting since that’s not allowed (i think this will be the case since loans are on the site for 30 days), she said she might try asking kiva to make an exception. i don’t think that will happen though. what i think will happen is that a) my MFI will have to tell the borrower that they can’t get the 9% back even though they’ve already taken out a loan, or b) fund that borrower’s 9% interest back themselves. option b) isn’t that big of an issue if they have to cover just a few borrowers each month, but if too many loans start expiring before getting funded, my MFI may have to stop offering a kiva-specific product due to the volatility of funding. (which isn’t what any of us want!)

so i guess the takeaway here is – as kiva continues to scale up, it needs to properly manage and regulate the amount of credit it is extending to MFIs, such that supply (of loans posted) never exceeds demand by too much, and hence keeps the % of loans expired at a low constant.

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will write about my last 2 days soon! think: bizarre.

p.s. only after posting do i realize automatic ping / linkbacks occur. wth!

Written by j

October 31, 2009 at 1:37 pm

Posted in Kiva