How to be a mini J.D. Rockefeller

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Abciximab
Posts: 76
Joined: Wed Mar 21, 2007 7:53 pm
Location: Phoenix

How to be a mini J.D. Rockefeller

Post by Abciximab » Sun Oct 19, 2008 10:46 pm

My wife and I have recently decided we needed to start giving to charity, but we've had a somewhat difficult time finding one we really liked. After a lot of research we came across Kiva.org. This site gives you the opportunity to lend money to people in mostly third-world countries that invest that money in their business to improve their lives. We've loaned money to a baker in Lebanon, a pharmacist in Ghana, a shopkeeper in Afghanistan, farmers in Peru, and others around the world. You don't receive any interest (so it's not an investment), but you could withdraw your money once the loan is repaid. It seems amazing to me, but the default rate on Kiva loans is only 1%. Yes, they actually pay you back.

Us Bogleheads are hardworking and industrious people that know the value of a dollar. And although most of us have seen the value of our investments decrease dramatically lately, we are still very well-off compared to much of the world. Kiva gives us a great opportunity to help those that want to help themselves and invest in their future. I know this is somewhat off-topic compared to other posts, and Kiva has been mentioned here before by other members, but I'm really psyched about this and thought some other Bogleheads out there would be too. Please take a few minutes to check it out. Thanks.

Website - http://www.kiva.org

Very good PBS/Frontline video - http://www.pbs.org/frontlineworld/stories/uganda601/index.html
An investment in knowledge always pays the best interest - Benjamin Franklin

djw
Posts: 1456
Joined: Tue Apr 08, 2008 9:34 pm

I really want to believe, but...

Post by djw » Mon Oct 20, 2008 12:10 am

I really want to believe, but...

There are more than 3,000 websites which claim to be running microfinance operations all over the world. I suspect that many of those sites are not what they appear to be, but I admit that I can't prove it.

I spent some time at the kiva.org site which the OP is recommending. I looked hard for solid evidence that it's definitely legitimate or definitely illegitimate, but I freely admit that I wasn't able to find either.

I checked some of the links in their Press Center and found them less than definitive. Many links are to articles or TV programs which generically praise microfinance without specifically mentioning kiva.org. Some of the quotes attached to the links appear to claim the link will specifically praise kiva.org but sometimes the linked site does not. Some links DO specifically mention kiva.org, but often they're quoting a happy investor like the OP and no reporter has validated the claims made.

I looked at the very long list of "Team members" which at first glance seems very impressive. The list is certainly impressively long and appears to list many, many people who are making this their full time job. Who is paying these people if ALL the money you invest goes directly to the poor borrowers in third world countries? At the very least there must be some angels who are providing funding to pay all of these salaries and operating expenses, but these people are not revealed. Maybe their just shy or want to remain anonymous?

I did a google search for "microfinance scams" and found some interesting reading, including one about kiva.org:
http://appfrica.net/blog/archives/130

Go ahead and criticize me for being skeptical. I can take it. In principle I'd like to support microfinance but I'm not ready to send my money to this organization just yet. Did I mention that nearly all of the dates mentioned at this site are in 2008 and the earliest date is September, 2007? It sounds like they've been around for only one year.

I'll wait awhile to see if they're still around a year or two from now. With all of the people who appear to be running the operation, they seem to be doing just fine without my money.

User avatar
Abciximab
Posts: 76
Joined: Wed Mar 21, 2007 7:53 pm
Location: Phoenix

Post by Abciximab » Mon Oct 20, 2008 12:38 am

It seems your implication is that Kiva is just another scan. I admit, the whole thing seemed a little shady to me at first. Just like giving to any charity organization, due diligence is required, but at some point you just have to have faith that your money is being used properly. You've obviously looked into the operations, as I have, and at least there is a great deal of transparency. I'd like to address a few points you raised:

Large Number of Team Members - All money that is loaned goes directly to the borrower; Kiva doesn't take a cut. True, the borrower will pay interest on the loan to the field partner that originates and collects payment, but these organizations have been thoroughly vetted. This is how the field partners stay in business. Kiva evaluates, monitors, and audits the field partners and allows them to post loans on the webstie. Kiva stays afloat by accepting donations from members/lenders, donations from companies (which are shown on the site), and most recently won the $300,000 prize from the American Express Members Project. Kiva operates solely on donations and takes nothing from field partners or the loans themselves.

Short Time in Existance - Kiva has been operational for about two years. The field partners that manage the loans have been operating for much longer in most cases. You can see all the information about each partner including date founded, total loan number, loan default rate, average interest rates, and more. Kiva simply acts as an auditor and provides a forum for microfinance organizations to post loan information on the internet.

Your skepticism is well-founded, and there's bound to be plenty of fraud and abuses when dealing with small charity organizations in sub-Saharan Africa or extremely poor countries in Asia. But I feel comfortable using Kiva because I know they send their people all over the globe to audit and verify that my money is being used properly.
An investment in knowledge always pays the best interest - Benjamin Franklin

User avatar
tfb
Posts: 7736
Joined: Mon Feb 19, 2007 5:46 pm
Contact:

Re: I really want to believe, but...

Post by tfb » Mon Oct 20, 2008 1:28 am

djw wrote:I looked at the very long list of "Team members" which at first glance seems very impressive. The list is certainly impressively long and appears to list many, many people who are making this their full time job. Who is paying these people if ALL the money you invest goes directly to the poor borrowers in third world countries? At the very least there must be some angels who are providing funding to pay all of these salaries and operating expenses, but these people are not revealed. Maybe their just shy or want to remain anonymous?

Did you look at the supporters list? Many foundations gave Kiva grants.
Harry Sit, taking a break from the forums.

User avatar
nisiprius
Advisory Board
Posts: 34319
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Post by nisiprius » Mon Oct 20, 2008 4:59 am

That's interesting. Thanks for mentioning it. We're not looking to increase our charitable giving but I'm filing it mentally in my "something to think of" compartment.

I'd be worried about the possibility of a scam but I always worry about whether what charities are really doing matches what you imagine they're doing.

By the way I have a flat rule that I will drop any charity that sends me a mailing piece containing a fake snapshot (look for the halftone dots!), a fake newspaper clipping, or a fake Post-It note with fake felt-marker initials. I've dropped some very worthy causes because of it. I always send them a letter explaining why, and sometimes I get non-boilerplate-looking replies that amount to "we do it because it works." And "we don't expect anyone to believe they're real so it's not dishonest." Yeah, right.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Bylo Selhi
Posts: 1024
Joined: Mon Feb 19, 2007 10:40 pm
Location: www.bylo.org in the Great White North
Contact:

Post by Bylo Selhi » Mon Oct 20, 2008 8:40 am

From our sister forum in Canada (you have to be registered in order to access the SoapBox sub-forum from which the following is copied):
Well, there's no crisis in the world of kumbaya microcredit finance. Last night Kiva.org informed me that half of the two loans* I made earlier this year have now been repaid ahead of schedule and the money is sitting in my account.

When I went to relend it, the site said there were no open loan requests in the system -- all requests had been fully funded. :D

* I helped fund loans to a guy who wanted to expand his fresh fish market in Sierra Leone and to a group of women who wanted to expand their poultry farm and store in Uganda.

If Kiva was a scam, why would they refuse new money?

taxman
Posts: 424
Joined: Sat Jul 26, 2008 1:40 pm

Post by taxman » Mon Oct 20, 2008 8:56 pm

Bylo Selhi wrote:From our sister forum in Canada (you have to be registered in order to access the SoapBox sub-forum from which the following is copied):
Well, there's no crisis in the world of kumbaya microcredit finance. Last night Kiva.org informed me that half of the two loans* I made earlier this year have now been repaid ahead of schedule and the money is sitting in my account.

When I went to relend it, the site said there were no open loan requests in the system -- all requests had been fully funded. :D

* I helped fund loans to a guy who wanted to expand his fresh fish market in Sierra Leone and to a group of women who wanted to expand their poultry farm and store in Uganda.

If Kiva was a scam, why would they refuse new money?
a tactic called "baiting" if true. Trust your instincs............RReagan quote IIRC was "trust .....THEN VERIFY! Any place looking for "donations" in my book has overhead..............like Red Cross, Salvation army, St Vicient de' Paul :lol: +"feed the children".........but paying the upper mgt. insiders 250k-500k a year disqualifies them in my book. :shock: Just my .02

Post Reply