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Micro loans build local economies Options
progpen
Posted: Friday, March 18, 2016 6:49:39 PM

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Kiva is one of several micro finance institutions that I've found over the past 5 years. Micro finance plays a very large part in the local economies, especially in developing countries, because it fills in where traditional lenders cannot or do not want to go.

I've been a member of Kiva for several years now and have loaned approximately $800 (based on deposits totaling $325). The default rate on my loans over these past years has been 0% (so no defaults out of more than 30 loans). I have loaned to entrepreneurs in 16 countries and to people whose work ranges from construction, to blacksmith to cobbler to weaver.

I have never loaned more than $25 to any one entrepreneur. With thousands of other lenders globally, we collectively provide the loans to these people. The average loan size (what is loaned out to the entrepreneur) is $411.21

https://www.kiva.org/about/how
https://en.wikipedia.org/wiki/Microcredit
http://www.economicswebinstitute.org/glossary/microfinance.htm

From Wikipedia:
Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment and a verifiable credit history. It is designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities by extension. In many communities, women lack the highly stable employment histories that traditional lenders tend to require. Many are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million men and women held microloans that totalled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.

One thing that struck me when I first got involved with Kiva is that the repayment success rate is better than any traditional lending institution. The poorest people, with no collateral, rarely with a stable income are able to compile a better repayment success rate for the micro finance institutions than any of the largest lending institutions in the world can attain.

Nolite te bastardes carborundorum
Drag0nspeaker
Posted: Saturday, March 19, 2016 7:19:29 PM

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Joined: 9/12/2011
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Location: Livingston, Scotland, United Kingdom
That's really interesting.

Especially the default-rate! As you don't quite say, these people with almost nothing seem more honest than . . . Silenced

The loans seem hardly worth it - an average of $400 - but I can imagine in an economy in which most people earn $2 per day, it is enough to make a flying start, to get the materials to put together a regular income.


Wyrd bið ful aræd - bull!
Hope123
Posted: Saturday, March 19, 2016 7:40:53 PM

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Location: Burlington, Ontario, Canada
Very interesfing indeed, Progpen, and worth looking into. How did you get into that?

Elitism is the slur directed at merit by mediocrity. -Sydney J. Harris, journalist (14 Sep 1917-1986)
progpen
Posted: Saturday, March 19, 2016 11:23:39 PM

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Joined: 10/2/2015
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Location: Haddington, Scotland, United Kingdom
I found Kiva by accident when I was trying to find presents for my kids that weren't the gift wrap kind. I have given presents from Heifer International but I like making loans and 'gifting' it to my kids.

Nolite te bastardes carborundorum
progpen
Posted: Wednesday, March 7, 2018 3:57:08 PM

Rank: Advanced Member

Joined: 10/2/2015
Posts: 1,837
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Location: Haddington, Scotland, United Kingdom
Just wanted to update on this as I've been lending since June 2013 and it is an efficient and effective way to effect change as well as it being pure capitalism.

The way Kiva works is a lender (you) create a Kiva account and then make a deposit, 25 dollars for example. You can also make a donation to Kiva, but that is not covered here. Once you have a balance you can search for loans to participate in. Since you are one of thousands of lenders, the 25 dollars that you have is added to what other lenders are providing. This then adds up to full funding for many if not most of the loan seekers. Once you have lent that 25 dollars you can wait until that loan is repaid and then reloan the same 25 dollars, or you can deposit another 25 dollars and find another loan seeker. This is how I've lent more than 3 times the amount that I've deposited over the years. If, after you've participated in as many loans as you want, you would like to stop lending you can do so. As your loans get repaid you will then have a positive balance in your account that you can eventually withdraw.

As mentioned previously, the default rate on these loans is far below that of the banking and lending industry. Even so, you are lending money and there is the possibility of default. Out of 40 loans I've had 2 defaults, but I am usually searching out loan seekers in conflict zones and where it is often dangerous to start or keep a business.

Nolite te bastardes carborundorum
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