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Public Service Announcement

I plan to do this once per quarter, as I think it's a very worthwhile project.

Kiva

KIVA.ORG

Now, you can lend as little as $25 to real micro entrepreneurs in developing countries around the world. You're lending to small business people so they can grow, prosper, and lift their communities.

If you're like me, perhaps you have a distaste for most charitable endeavors. Typically, if I like them at all, they'd be something close to home or involve some affinity (such as firefighters across the country giving to the families of 911 firefighter victims). That's cool.

But when was the last time someone offered to pay you back, and actually did it? Really, it's only marginally charitable at all. The borrower actually pays interest. You forego interest, which helps to fund the whole endeavor. Pretty slick, if you ask me.

In 2 1/2 year, Kiva has accumulated 340,000 lenders who have lent out a total of $50 million in 62,000 loans. Loans average $500 each, and the historical repayment rate is 98%. Good job, I say.

I currently have $250 I lend out, which will recycle as payments come in. I plan to add $250 per quarter. I hope you can join me in this worthy endeavor.

Richard Nikoley

I'm Richard Nikoley. Free The Animal began in 2003 and as of 2021, contains 5,000 posts. I blog what I wish...from health, diet, and food to travel and lifestyle; to politics, social antagonism, expat-living location and time independent—while you sleep—income. I celebrate the audacity and hubris to live by your own exclusive authority and take your own chances. Read More

6 Comments

  1. E. Peevie on September 23, 2008 at 21:47

    Interesting. I'm checking out micro-lending as a result of your post. It seems important to make sure that the lending partners are reputable, or micro-borrowers end up paying usurious interest rates.

  2. Matt on September 23, 2008 at 21:16

    If Kiva's safeguards are anything like Prosper.com's you'll be lucky to get your money back.

  3. Richard Nikoley on September 24, 2008 at 09:04

    Matt:

    Prosper is pretty transparent and offers a guaranteed buyback for any sort of fraud. Other than that, lenders make their own creditworthiness decision based on common criteria like credit grade, debt/income, and so on. I have $50 in each of 20 loans on Prosper at an average of around 16%. One is in collection, the other 19 loans have never been late on payments.

    I have $25 each in 30 loans on Lending Club, no collections, no lates. For both, I've been lending since April.

    E. Peevie: Kiva has a rating system for the lending partners from 1-5 stars. I have decided to only participate if the lending partner is rated at least a 4.

  4. Matt on September 24, 2008 at 19:58

    Maybe I need to light a fire under Prosper to take some action, because I've had a really bad experience so far:

  5. Richard Nikoley on September 25, 2008 at 06:17

    Indeed. 35%. Going to be hard to make that up with the returns on the good loans.

    Tell me, did you bid by actually looking at the loan request of each borrower, or did you just set up a portfolio plan and let the system bid for you based on the numbers?

    I did the latter, as I feared that I'd introduce irrational bias if I evaluated manually and I was looking for a random distribution within the portfolio criteria.

  6. Matt on September 25, 2008 at 10:10

    I did all my bidding manually after reviewing the loan requests and questioning the borrowers. I did have a fairly complete set of rules I followed such as no loans to borrowers with less than a C credit grade, no loans over a certain amount, no current defaults, etc. but it doesn't appear to have been a good strategy based on my dismal results.

    I swear, this guy…

    …must have been planning all along to default because he made two payments and then filed for bankruptcy.

    I'm through with Prosper. I'm currently pulling all my remaining money out as it becomes available.

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