Kiva is this for real ?

[Esprit]

I received an email via paypalmail. It's about Kiva:

We envision a world where all people hold the power to create opportunity for themselves and others.
Kiva is an international nonprofit, founded in 2005 and based in San Francisco, with a mission to connect people through lending to alleviate poverty. We celebrate and support people looking to create a better future for themselves, their families and their communities.
By lending as little as $25 on Kiva, anyone can help a borrower start or grow a business, go to school, access clean energy or realize their potential. For some, it’s a matter of survival, for others it’s the fuel for a life-long ambition.

100% of every dollar you lend on Kiva goes to funding loans. Kiva covers costs primarily through optional donations, as well as through support from grants and sponsors.

https://www.kiva.org/


At first I thought what a great idea. Get a loan and totally bypass the bank. Now it seems to good to be true it could very well be a scam. Conflicting opinions over the internet. On yahoo answers someone asks if it's a scam and only gets overhyped answers everything is so nice at Kiva wich I do find suspicious.

Best Answer: I've been a lender through Kiva.org for 3 months now. It is absolutely for real, and it is one of the most positive experiences I have had in a very long time. 2 loans I've funded have already repaid, and half a dozen more are on schedule to repay in another month. I have re-loaned the proceeds, but I know people who have taken their money out after a loan repays, so you can do either (or donate it to Kiva to cover expenses, that's welcomed, too!)

I minimize my risk by lending the minimum to a number of borrowers (although some folks prefer to lend larger amounts to fewer borrowers), and I always check out the reputation of the MFI (local microfunding institution that partners with Kiva.org) via the link on the borrower's loan request. If the MFI doesn't seem reliable to me, or if the loan is for something I don't approve of, I won't choose to lend.

I'm giving out gift certificates as holiday and wedding gifts now, and have already signed up 6 new members that I know of. It's an exhilarating feeling to be able to participate in helping someone work to improve their life and community, and when my money is repaid I can take it out if I want. It's totally worth it to me, and it is totally legit.
DianeR

I have been lending at KIVA since last December and have had about 10 loans already repaid. I got a KIVA credit within minutes of being repaid. I currently have about 40 loans being repaid now.
I have given out kiva gift certificates to family and friends and they have not had any problems either.
Kiva joins up with a microlender in a particular country, and some of them are quicker at giving out funds and paying back than others, but all of them are great.

Kiva is NOT a scam. Its the only charity paypal supports by waiving fees.

And a couple more like this.
https://answers.yahoo.com/question/index?qid=20070823064314AAwN6Dq

I found a hot debate here wheter it's a scam or not. Interesting finding if only for the site: Scam.
I'll post a little bit but it's 7 page long if you want to dig in.

StreetCred
StreetCred is offline Scams Newbie

Join Date
Sep 2010
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1

Re: Kiva is a scam.

I have just read this debate over whether Kiva is a scam or not. I have researched Kiva extensively. The truth is, as usual, more complicated.

First of all, the issue of whether Kiva reveals the interest rates the end clients pay in practice is a hot topic, ever since the New York Times published a front-page article discussing an MFI in Nigeria that charges the poor rates of 126%. Three investors were named: Kiva, Deutsche Bank and MicroPlace. Kiva issued a defense of the MFI, then 22 days later severed ties with it. MicroPlace, which is SEC regulated, severed ties immediately. Is this corrupt? Perhaps Kiva could have responded quicker, perhaps they should have done a little more investigation as to the actual rates the poor are paying, especially on their largest single partner at the time, but benefit of the doubt - there is no evidence they were directly benefitting from this.

Their comment about not partnering with institutions that charge exorbitant rates is a little doubtful - the NYT claims the MFI in question was charging rates of 126%, and the stated portfolio yield on Kiva for this MFI was 83% - depends on your view of "high", I personally find this a little questionable, so I chose not to deal with such companies. But it was not hidden, and they did eventually sever the relationship. The article can be seen at:

http://www.nytimes.com/2010/04/14/wo...finance&st=cse

Go to kivafriends.org and look at the debate on this topic. It is quite extensive.

Regarding whether Kiva make profit, this is quite clear from their financial accounts. Yes they do. They publish a surprising amount of data on their website, including salaries of senior management and full financial accounts. I will not explain these in detail here, other than to say they generate a surprising amount of income from Kiva-users, from gift certificates donated back to kiva, interest earned on idle funds and voluntary donations. They also get substantial donations and grants from various corporations and foundations. But they do not lie about this, they publish the information on their website, and I would hesitate to call it a scam, although it is certainly profitable. Some assume, incorrectly, that an NGO cannot be profitable because it has no shareholders - nonsense, as long as income exceeds cost, it is profitable. People may equally assume that because it has no shareholders this profit doesn't belong to anyone but somehow ends up benefitting the poor - not necessarily. It is a common trick to start these sorts of companies as NGOs to avoid taxes etc, and then convert them to for-profit at a later date, at which point the managers often receive shares. Then there are substantial profits. This was the case with the Compartamos IPO in Mexico that caused such an uproar. But Kiva has not done this.... yet, and who knows if they ever will. But innocent until proven guilty, no?

The highest salaries are just over $130.000 with perhaps another $15.000 in "other remuneration" - this is on their website in the Help section > other Kiva information > "can I see Kiva's audited financials", then download the PDF files. It is all there. Net assets grew by nearly $1m in 2009, by the way.

Regarding whether the MFIs acting as the intermediaries between Kiva and the micro-borrower make profit, there is valid cause for concern. 60% interest rates were cited in this blog - dream on! Some MFIs are charging way more than this. See LAPO, Tujijenge (portfolio yield is 98% on Kiva website) etc. Often this is closer to 100%. Kiva do quote the interest rate charged, but in a weird way. They quote the portfolio yield of the MFI. This is essentially the average interest rate the MFI charges to all its clients. The problem is that this is not necesssarily the same as the rate loans sourced from Kiva are charged at. You would expect (or hope) that an MFI that receives funds from Kiva at 0% passes on this financial saving to the borrower by way of a reduced interest rate. This need not be also at 0%, but at a reasonable rate to cover the costs of operations and make a REASONABLE profit, debateably. What is interesting is that not only do Kiva NOT cite the actual interest rate charged, but they apparently do not even know what this is. See the kivafriends blog for more information. But even if they do just take money at 0% and the MFI lends it at whatever rate it chooses, it is hard to call this a scam, as Kiva does not profit directly from this and does state the average portfolio yield statistic. Kiva users are slowly waking up to what this statistic means. Some are moaning about the high portfolio yields, and voting with their feet - cool. The expensive MFIs will simply get fewer and fewer funds offered to them.

Where I think there are grounds for genuine concern is in the actual business model. Kiva claims to be a peer-to-peer lending platform, but it does appear a little strange that while they can explain the loan amount, term, show a photo of the client, write a little story etc, they are unable to explain what the interest rate is, and rely on the average rate for the whole bank. One possible, unverified, explanation of this is that it is not actually a peer-to-peer, but a peer-to-MFI. This would explain how it is that some loans have already been issued before the funds arrived from Kiva. Kiva users may essentially post-finance an existing loan. It would also explain why the average portfolio yield is used, instead of the actual interest rate on a specific loan. Perhaps Kiva users are in essence financing at 0% the MFI, and the MFI is somewhat arbitrarily submitting a bunch of stories and photos to support the money raised? Who knows, but this is where I personally think it is a bit questionable. I have tried to investigate this further, but it is hard.

What is for sure is that this is a profitbale instituion, according to my estimates Kiva generates about $8 in donations/earned income/gift certificates from users for every $100 lent (from their financial statements published on their website). The amount lent increased from $50m to $100m from Nov 2008 - Nov 2009, implying that they did about $50m of new loans in 2009, during which period they earned about $4m from these three sources of income according to the audited financials. So volume is key. And note that this excludes the corporate donations. It is also true that some of the poor borrowers do pay quite surprisingly high interest rates, although to be fair, Kiva never denies this.

I have enjoyed reading this blog, with some amusing insults traded, and I could not help feeling some sympathy for gumby, who is NOT an idiot. But I would urge people to have a good look at the financial statements of Kiva before jumpting to conclusions. I have some serious concerns about the company, and have largely stopped using it, but I would stop short of calling it a scam, and I am actually quite impressed with their transparency if you can be bothered to look for it. It could certainly improve. I hope that the bad publicity generated by being named and shamed on the front page of the NYT acts as a wake-up-call for them to make some needed improvements, but on balance, I think they probably do contribute to poverty reduction, but in a far smaller way that they, and the microfinance community at large, would have us all believe.

If an individual believes in the core concept of microfinance, then there are not many other alternatives to invest as a private person. MicroPlace was mentioned in the blog, but was also mentioned in the NYT article, and there is way less information available on their own website, which makes me more worried. Many of the biggest MF funds invested in this Nigerian bank also, and their own due diligence procedures are fairly limited. MyC4 is interesting, as it is more transparent with the actual interest rates, and it is for-profit (which is unusual). The more fundamental question is whether microfinance works at all, and a recent book by Milford Bateman casts some pretty serious doubts on this - the actual tangible evidence of poverty reduction in rigorous, unbiased, independent academic studies is pretty sketchy, but that is a whole new debate!

Personally I think Kiva does face some serious questions, I agree with some of the concerns cited here, but I think it is worth digging a little deeper, and I would hold back on using the word scam for now.

For more information on how to make a load of money for private shareholders while operating a supposed not-for-profit NGO, see:

http://www.microfin.com/compartamos.htm

Anybody know about this? Does'nt sound all perfect to me...