Author Topic: Kiva Lending - How much is the donation, really?  (Read 16233 times)

arebelspy

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Kiva Lending - How much is the donation, really?
« on: July 09, 2013, 01:14:12 AM »
I know some have issues with Kiva and the tactics their local affiliates use, and we've discussed that elsewhere, but a thought just occurred to me due to another thread.  In this thread, a cerberusss said:
I see your gifts and donations $75 entry -- could that be partly replaced by not doing donations but lending interest-free? I moved 300 to Kiva.org, where it's borrowed out to small business owners in 3rd world countries. I'm losing due to inflation, but that's a small price.

In effect your donation is .. the lost interest you could earn (i.e. opportunity cost)?  By loaning it interest free, instead of earning, say, 7% on that, cerberusss is donating about $1.75/mo. on your $300?  OP would be donating about $0.44/mo. instead of $75/mo.?

Am I wrong in that calculation?  How would you think of a Kiva "donation" of $75/mo - to me, if you're getting it back, you're essentially only donating the interest you could earn, right?

I guess that may be obvious to some of you, I just never thought of it that way.  A $10,000 check to Kiva sounds nice in terms of potentially helping some third world person do whatever (again, other issues that have been previously discussed aside - the fact that interest is charged, so who are you actually donating that to, etc.), but if it's on loans with an average term of 18 months, you're really basically donating more like $60/mo., no?
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Re: Kiva Lending - How much is the donation, really?
« Reply #1 on: July 09, 2013, 02:22:05 AM »
Good point. I hadn't thought of it that way either. One small caveat though- not all loans are paid back or paid back fully. For example, I had one recently where the borrower only paid back $23.75 of the $25.00.  Can't say I minded, but if I had $10,000 in the game....

matchewed

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Re: Kiva Lending - How much is the donation, really?
« Reply #2 on: July 09, 2013, 06:19:43 AM »
But to Arebelspy's point since you only got back $23.75 you "donated" the $1.25 loss and the interest.

I'd be curious to see whether something like Kiva which would in theory be used to generate more money and get paid back to the lender is more effective than say pure donation which has no expectation of generating money.

But back to the original point, yeah I'd say you only "donate" what you don't get back.

mlipps

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Re: Kiva Lending - How much is the donation, really?
« Reply #3 on: July 09, 2013, 08:35:51 AM »
We "donate" to Kiva along w/a few other charities; have about $350 lent right now. I intend to just keep relending the money. I'm not sure it really counts as "donating", but it goes to my charity budget for the month. I've been doing it off and on since high school and from time to time I have lost some money, so if that happens then it definitely counts as donated in my book.

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Re: Kiva Lending - How much is the donation, really?
« Reply #4 on: July 09, 2013, 09:32:44 AM »
When lending on Kiva (with a 0% a donation), the ways to lose money include default, opportunity cost, and currency exchange loss. The last two happen in some cases. In a few cases, I've had the MFI (or even Kiva itself) make up the balance of the loan in the case where the borrower did not repay. Currency exchange loss is dependent on the local currency used, and only kicks in when the loss hits 10%. This risk does not apply when dealing with all MFIs, and you can screen out those where it does apply under "Advanced Options" when searching for loans.

But yeah, opportunity cost represents the biggest possible loss. Though I have had some years where my Kiva portfolio outperformed my 401k (-:

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #5 on: July 09, 2013, 09:50:35 AM »
the ways to lose money include default, opportunity cost, and currency exchange loss

Okay, so total up all those losses and that's the amount you've actually donated, right?  A few percent maybe, of the actual amount you put in.

It just seemed odd to me, when this thought struck me, that I haven't seen it discussed before, your donation is actually pennies on the dollar of what you put in.

Someone earning 50k and "tithing" 10% and using Kiva to do so feels good putting in that 5k, but then they get it back later and really only effectively donated $350, the opportunity cost at 7%.

How does the taxes work with Kiva?  I'm assuming one doesn't write off "donations" to them?
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mlipps

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Re: Kiva Lending - How much is the donation, really?
« Reply #6 on: July 09, 2013, 10:57:47 AM »
the ways to lose money include default, opportunity cost, and currency exchange loss


How does the taxes work with Kiva?  I'm assuming one doesn't write off "donations" to them?

I can't find it on their website now, but I remember in the past reading that you can't write off those losses. I don't see why it can't count as donating if you keep relending the money though and never take it back out.

mlipps

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Re: Kiva Lending - How much is the donation, really?
« Reply #7 on: July 09, 2013, 10:59:06 AM »
Maybe I should clarify that last statement. When a loan is repaid, in part or in full, the amount goes into your Kiva account as a Kiva credit. It doesn't get pushed to your bank account. So, it's easy to keep relending that money, which is what I've done. Total deposits=$250, Total lent=$825. It's pretty cool.

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #8 on: July 09, 2013, 11:42:06 AM »
What's to stop someone from "donating" 10k, writing it off, then pulling it out a few years later?

That seems shady.   I'd be surprised if you could write off Kiva loans as donations.
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matchewed

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Re: Kiva Lending - How much is the donation, really?
« Reply #9 on: July 09, 2013, 12:15:26 PM »
I can't imagine that either.

It's just a P2P lending system which is painted in a more charitable light. I'd be shocked if it was considered a charitable donation as a donation is given with no consideration for return. This is structured distinctly with some consideration of return.

That isn't to say that it is not an effective model at getting short term cash where it may be used best.

mlipps

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Re: Kiva Lending - How much is the donation, really?
« Reply #10 on: July 09, 2013, 12:18:31 PM »
What's to stop someone from "donating" 10k, writing it off, then pulling it out a few years later?

That seems shady.   I'd be surprised if you could write off Kiva loans as donations.

You definitely can't write off the loans themselves. But I thought you were asking if you could write off the defaults or currency losses. Kiva tracks all of that for you in their system. I'm pretty sure you can't write those off either though.

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #11 on: July 09, 2013, 01:21:38 PM »
What's to stop someone from "donating" 10k, writing it off, then pulling it out a few years later?

That seems shady.   I'd be surprised if you could write off Kiva loans as donations.

You definitely can't write off the loans themselves. But I thought you were asking if you could write off the defaults or currency losses. Kiva tracks all of that for you in their system. I'm pretty sure you can't write those off either though.

Okay, so it's not charitable giving, then.  So why do people suggest it as a replacement for charitable giving?
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matchewed

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Re: Kiva Lending - How much is the donation, really?
« Reply #12 on: July 09, 2013, 01:53:20 PM »
I think because the organization goes out of their way to ensure that the individuals taking out the loans represent a more diverse section of businesspeople. They target female entrepreneurs in poorer countries, making the impression that it is charitable, not necessarily charitable giving.

Other than that -
/shrug

mlipps

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Re: Kiva Lending - How much is the donation, really?
« Reply #13 on: July 09, 2013, 01:58:41 PM »
What's to stop someone from "donating" 10k, writing it off, then pulling it out a few years later?

That seems shady.   I'd be surprised if you could write off Kiva loans as donations.

You definitely can't write off the loans themselves. But I thought you were asking if you could write off the defaults or currency losses. Kiva tracks all of that for you in their system. I'm pretty sure you can't write those off either though.

Okay, so it's not charitable giving, then.  So why do people suggest it as a replacement for charitable giving?

Just because I can't write it off on my taxes doesn't mean I can't use my charity budget for it. Like I said, I never withdraw the money, I just keep relending it. I'll probably eventually have to either stop adding money or set up auto lending because I will have so many loans at any given time.

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #14 on: July 09, 2013, 02:19:36 PM »
Just because I can't write it off on my taxes doesn't mean I can't use my charity budget for it. Like I said, I never withdraw the money, I just keep relending it. I'll probably eventually have to either stop adding money or set up auto lending because I will have so many loans at any given time.

That's exactly what I'm questioning though.

Why would you use your charity budget on that?  It's clearly not charity...

Even if you never withdraw it, the principal is still there, and you could withdraw it.  It seems odd to me when I actually think about it, to consider Kiva any sort of charitable giving at all. 

I'm just confused, can you explain why you feel it fits in a budget category of charitable giving?
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mlipps

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Re: Kiva Lending - How much is the donation, really?
« Reply #15 on: July 09, 2013, 02:41:27 PM »
Just because I can't write it off on my taxes doesn't mean I can't use my charity budget for it. Like I said, I never withdraw the money, I just keep relending it. I'll probably eventually have to either stop adding money or set up auto lending because I will have so many loans at any given time.

That's exactly what I'm questioning though.

Why would you use your charity budget on that?  It's clearly not charity...

Even if you never withdraw it, the principal is still there, and you could withdraw it.  It seems odd to me when I actually think about it, to consider Kiva any sort of charitable giving at all. 

I'm just confused, can you explain why you feel it fits in a budget category of charitable giving?

Because it's helping other people.

matchewed

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Re: Kiva Lending - How much is the donation, really?
« Reply #16 on: July 09, 2013, 04:20:21 PM »
So (to use a crappy analogy) you just leave one rope hanging from the tree for people to climb instead of handing out ropes to anyone that needs it.

Daley

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Re: Kiva Lending - How much is the donation, really?
« Reply #17 on: July 09, 2013, 04:44:18 PM »
Even if you never withdraw it, the principal is still there, and you could withdraw it.  It seems odd to me when I actually think about it, to consider Kiva any sort of charitable giving at all.

That embodies one of my key problems with Kiva. It's commerce and investment, not altruistic charity. Ignoring any points on interest rates, commerce and investment can be used for good community-building purposes just like charity can be, which is undeniably a good thing in its most basic form, but INVESTMENT =/= CHARITY. It's not to say that there isn't common ground between the two deeds, but that good is where the similarity ends.

impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #18 on: July 11, 2013, 03:54:07 AM »
Just to clarify -- the only thing you can write off of your taxes are donations to Kiva.org (the organization itself; they suggest a % of your loan these days). Everything else does not count as a charitable donation in the eye of the US gov, since you could get it back at any point (or not lose it in the first place).

As far as considering it an investment... OK, if you're fine with an investment whose max. rate of return is 0%! Personally, I'm with mlipps: it is my goal never to get my money back from kiva, I'll just keep relending (so in effect, I am making myself the manager of my charitable giving). Therefore, I consider it a donation to the same extent that I consider pitching in $20 for a friend in need as a donation. Sure, I can't write it off my taxes, but I do not mean to ever get it back, and it was spent with the intent to help someone else; I do not need the gov to validate what is charitable giving. Similarly, I am my own insurer for car collision, although I do not pay insurance...

If, however, I meant to get back the money, I would not consider it a donation.

grantmeaname

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Re: Kiva Lending - How much is the donation, really?
« Reply #19 on: July 13, 2013, 07:40:18 AM »
Sure, I can't write it off my taxes, but I do not mean to ever get it back, and it was spent with the intent to help someone else; I do not need the gov to validate what is charitable giving.
Doesn't it matter a lot more what happens to the money after it leaves your bank account than how you feel about it?

If you live in a rich neighborhood and attend a church that does no outreach to less fortunate areas, are you really helping the poor because you send your feelings along with your tithe?

impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #20 on: July 13, 2013, 10:50:23 AM »
Doesn't it matter a lot more what happens to the money after it leaves your bank account than how you feel about it?

If you live in a rich neighborhood and attend a church that does no outreach to less fortunate areas, are you really helping the poor because you send your feelings along with your tithe?

Ah! Yes, of course what happens to the money matters a lot, you're quite right. There are plenty of causes which the government will validate as being "charitable donations" which I would consider not to be so (the church donations in your example would probably qualify for a tax break, for instance). It's obviously a matter of judgment... and I do believe that kiva does good work, so much so that I've volunteered for them for more than three years. I also check their standing on charitynavigator.org yearly or so. Finally, I try to think about what I support (groups rather than individuals, because that's where you support true micro-lending; productive investment projects; women in countries where the gender wealth gap is very large; local economy versus export ventures; etc.) So to me this goes precisely to your point--I try to help where I think it helps most, not where it's tax-advantageous. And I accept that I may misjudge at any step, although I do it to the best of my abilities and available time.

Perhaps the issue here is the notion of "charity," or that of "donation." Putting this money in Kiva is helping people more than giving them charity; I would agree on that. Since my budget is not infinitely extensible, money I use "helping" is no longer available for "giving," so I group it under "donations," but perhaps you feel it is a misnomer? I guess I would accept that, but then my argument is that I'd rather effectively invest in 100 people (at an expected ROI of 0% for me) than ineffectively donate to three of them (at the better ROI afforded by tax breaks). Does this answer your point? I feel like I'm missing something, which is why this answer is way to long :)

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #21 on: July 13, 2013, 11:33:16 AM »
I feel like I'm missing something, which is why this answer is way to long :)

I would just disagree with large parts of that last paragraph, which is where the confusion comes in - we're coming at it from different places.

Putting this money in Kiva is helping people more than giving them charity; I would agree on that.

Tentatively disagree. (There are always exceptions, which is why I can't absolutely disagree, but in general in the types of charity we're talking about and the type of loans Kiva does, I'd disagree.)

money I use "helping" is no longer available for "giving," so I group it under "donations,"

Disagree that they can just be categorized the same (and that's the crux of this thread).  Why not categorize my food budget for the rest of my family as "donations" - as money I use for it is no longer available for giving, and it helps someone else?

They are completely separate things, that may (rarely) end up accomplishing the same goals.

I'd rather effectively invest ... than ineffectively donate

I disagree with which you labeled as effective and which you labeled as ineffective, I'd swap those two (ineffectively invest versus effectively donate).  Would you still rather ineffectively invest than effectively donate?

I also think that one can drastically help and change lives much more than the other, and I think we disagree on which one that is.

Bottom line: loaning money to someone at 0% interest is different than charity.  Putting it as charity on your budget seems odd to me.

I don't have a problem with Kiva, it just seems weird to me to conflate it with charity, once I realized how much you're actually donating (a few dollars of opportunity cost).

It'd be like calling P2P lending charity - "I'm loaning out at 10%, and they are consolidating 18% CC bills, so I'm helping them!  What great charity!"  No.  You may be helping them, that's true.  Kiva may help people, sure.  But in neither case is it actually charity.

If you donated, say 25x the amount to Kiva that you would to another charity, we might be getting closer, if you believe in them as a company and ignore the negatives people have pointed out.  (That may be logistically impossible though... if you tithe 10%, you'd need to donate 250% of your income to Kiva to achieve the equivalent result.)
« Last Edit: July 13, 2013, 11:35:19 AM by arebelspy »
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impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #22 on: July 13, 2013, 12:21:27 PM »

I disagree with which you labeled as effective and which you labeled as ineffective, I'd swap those two (ineffectively invest versus effectively donate).  Would you still rather ineffectively invest than effectively donate?


Of course I'd rather effectively donate than ineffectively invest. Out of curiosity, why do you think kiva is ineffective? My apologies if that was mentioned on another thread, but I'm new here and searching "kiva" returns too many answers. I'm aware of some objections, and even agree with some of them, but on balance I still think they do a lot of good. However I try to review this belief regularly.


Bottom line: loaning money to someone at 0% interest is different than charity.  Putting it as charity on your budget seems odd to me.


OK... I can live with semantic precision :)

In fact, my "Putting this money in Kiva is helping people more than giving them charity" was poorly phrased--I meant "putting money in Kiva is helping people, but doesn't qualify as giving them charity"; I was not comparing both practices.


It'd be like calling P2P lending charity - "I'm loaning out at 10%, and they are consolidating 18% CC bills, so I'm helping them!  What great charity!"  No.  You may be helping them, that's true.  Kiva may help people, sure.  But in neither case is it actually charity.


I disagree with the analogy, because no money is ever coming back to me. I said ROI 0% in my most recent message, but it's actually (100%), since I will never take this money back. This is not the way everyone does it, but it is the way I and others do it.

If someone, as you seem to describe, lends money through Kiva, gets the money out when paid back, and feels both smugly charitable about it, and morally exempted from further giving... Then yeah, that person is fooling themselves.

grantmeaname

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Re: Kiva Lending - How much is the donation, really?
« Reply #23 on: July 13, 2013, 12:27:49 PM »
impaire - This and especially this thread have some good prior discussion of microlending vs. charity.

impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #24 on: July 13, 2013, 03:39:40 PM »
impaire - This and especially this thread have some good prior discussion of microlending vs. charity.

Damn, those are meaty. Going through "Your Mustache might be evil" right now... Lots of good things, but it will take me forever to process.

Thanks for the links, I know it's annoying to act as a search engine for the less-gifted amongst us and I appreciate the charitable gesture!

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Re: Kiva Lending - How much is the donation, really?
« Reply #25 on: July 13, 2013, 03:43:58 PM »
Those two are pretty buried and hard to find. I just remembered the titles because I participated in them the first time around. Hopefully you find them as interesting as I did!

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #26 on: July 13, 2013, 03:52:11 PM »
Yeah, this thread may be a little redundant, I had just never seen the actual "donation" part of Kiva broken out as an opportunity cost and what that translated to in dollar amounts, as in the OP.  The general idea of it has been discussed.
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Re: Kiva Lending - How much is the donation, really?
« Reply #27 on: July 13, 2013, 04:20:35 PM »
I wasn't saying they were redundant. I was saying they are good, similar discussions that would probably interest him. This is a different discussion along the same lines.

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Re: Kiva Lending - How much is the donation, really?
« Reply #28 on: July 13, 2013, 04:26:04 PM »
I know you weren't saying it, I was just admitting it might be, after going back and skimming some of those threads.  :)

My memory dulled after a year, apparently. 
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Re: Kiva Lending - How much is the donation, really?
« Reply #29 on: July 13, 2013, 05:51:01 PM »
That's exactly what I'm questioning though.

Why would you use your charity budget on that?  It's clearly not charity...

Even if you never withdraw it, the principal is still there, and you could withdraw it.  It seems odd to me when I actually think about it, to consider Kiva any sort of charitable giving at all. 

I'm just confused, can you explain why you feel it fits in a budget category of charitable giving?

So your confusion is that different people might have individualistic definitions when it comes to an abstract moral concept?  ;)

I too wouldn't have a problem with considering Kiva charity even though the principal is accessible to me.  The point of charity is helping non-reciprocally rather than sacrifice.

I would also consider volunteer work to be charity even though it doesn't cost me a thing.  Sometimes I do free tax returns for low-income people.  However, if I were receiving, say, credit for a college internship for it, it would seem less like charity to me.  I don't feel like I have to sacrifice for it to be charity, but I can't receive anything in return.  The possibility that I could have gotten a paid internship instead doesn't change it for me, so, again, sacrifice is not the key component.
Another way of thinking about it: the IRS lets you deduct costs associated with volunteer work (if you itemize).  Hypothetically, I would feel comfortable deducting costs if I weren't receiving credit for an internship, but not if I were.
What about if it just looks good on my resume or is valuable work experience?  While the crux is that I'm not doing it with the goal of personal gain in mind, I guess general, vague benefits don't disqualify it for me.

What about when you give clothes to Goodwill?  You don't want them any more, so you're not "losing" anything the way you do when you give money to a (non-Kiva-type) charity.  Yet most people would consider that charity and so does the IRS.

Then there are people who donate enormous amounts of money and get their names on buildings or schools, etc.  They get enormous gain in terms of social standing and ego satisfaction.  Plus, at that scale, it may be directly responsible for improving their quality of life by making the population more prosperous/educated/safer.  Whereas, in a sense, they wouldn't have gained anything from spending the money or putting it in stocks because they already have more money than they could possibly spend in their lives.  It's a donation, it's an investment, it's charity.  To my mind.  So my definitions aren't mutually exclusive.

ARS, it seems like you might not even consider Kiva charity regardless of what happens with your personal principal, because the company is lending it to individuals and charging them interest rather than donating it.  (edit: nevermind, looks like there have been other threads about that so you've probably already thought about it.)

To muddy things up even more, there is a Kiva-type lending organization that pays interest.  It's called microplace.  I would consider that an investment, maybe "socially-responsible investing," and evaluate it in terms of risk and benefits.  I got one when they were doing a free promo, so it's definitely not charity in my mind because I'm so obviously benefiting from it and in fact did it specifically with an eye towards the gain I would receive.  (To be clear, the promo was that just by signing up and choosing a charity, some sponsor company put in $25 on my behalf.  When the term is up, I'll "get back" the $25, plus I've been getting interest in the meantime.)

money I use "helping" is no longer available for "giving," so I group it under "donations,"

Disagree that they can just be categorized the same (and that's the crux of this thread).  Why not categorize my food budget for the rest of my family as "donations" - as money I use for it is no longer available for giving, and it helps someone else?

Most people have a sense of how far away someone has to be from them socially for it to be considered charity. There's:
self-interest = self-interest
immediate family or friends = affection
extended family or neighbors = favor
strangers = charity
Of course, it's specific and emotional so you couldn't apply rules to it across the world. For some people a cousin is immediate family.  Or if a parent abandons a child and then the child takes care of them later in life, that might be charitable.

As much as I like counterexamples in a philosophical debate this one was a little silly.  There are obviously a lot of conditions--other than the one you originally brought up which was what impaire was discussing--that have to be satisfied before something is considered charity.  I get tired of the idea that complexity = inconsistency = hypocrisy (and that hypocrisy = bad, but that's a tangent).  Ethical reasoning requires discernment and nuance.  Just because a category isn't so broad and binary that we could teach a protozoa to make the distinction, that shouldn't be identified as a problem.


matchewed

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Re: Kiva Lending - How much is the donation, really?
« Reply #30 on: July 13, 2013, 06:10:20 PM »
I agree with arebelspy, why is letting someone borrow money charity? You mention the concept of non-reciprocity yet you get (some) of your money back. That's fairly reciprocal in that I give you money and you give it back.

When I give clothes to Goodwill I do not get them back. When I donate my time for others I do not get that time back. So why is it when I let someone borrow money only to have them pay me back it is considered charity?

I'm not saying they're not doing good, I'm not saying they aren't alternatively running a charity, but why are we equating lending with charity?

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #31 on: July 13, 2013, 06:49:54 PM »
I too wouldn't have a problem with considering Kiva charity even though the principal is accessible to me.

I don't either, but the dollar amount of the charity is what's in question.  If you read the OP, and thread title, the question at hand is less about if Kiva is charity or not.

If you donate $1000 and then get it back after a year, what would you consider that charitable amount to be?

I agree with arebelspy, why is letting someone borrow money charity? You mention the concept of non-reciprocity yet you get (some) of your money back. That's fairly reciprocal in that I give you money and you give it back.

And even if you don't personally take it back (out of Kiva, you leave it in forever), the person still has to pay it back, and then you lend it to someone else.   Maybe you think it is charity (like impaire) or maybe you don't (like matchewed).  But I don't think the "I'll never take it out" is relevant.  If you take it out, or don't, the bottom line is that it is a loan to someone that they have to pay back.  Is that considered charity?  Again, maybe, maybe not.

If it is though, what is the actual dollar amount of that charity?
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Re: Kiva Lending - How much is the donation, really?
« Reply #32 on: July 13, 2013, 07:32:13 PM »
I agree with arebelspy, why is letting someone borrow money charity? You mention the concept of non-reciprocity yet you get (some) of your money back. That's fairly reciprocal in that I give you money and you give it back.

That's why I used the phrase about the principal still being accessible but I guess I wasn't really clear.  I'm talking about the situation people were talking about where they had no intention of ever taking that money out of Kiva's circulation.  Just the fact that it's accessible doesn't negate it for me.  I agree that if, for example, you lend a friend money and they pay you back without interest, that's not reciprocal.
Hold up, I just re-read what you said and had to go look up "reciprocal."  Okay, maybe I'm misunderstanding the word or I should put it differently, because what I'm trying to talk about is when something is reciprocally beneficial.  If I lend someone money and they pay me with interest, that's reciprocally beneficial.  They get the use of the money; I get the interest.  If I lend someone money and they pay me back without interest, that's only benefiting them.  They needed money temporarily and they got it.  I don't benefit from the transaction.  It's one-sided, so that's why I said it's non-reciprocal.  Maybe there's another word that would be more accurate.

There are three ways a transaction can go:
1. You benefit from it.  Either you get a literally greater value than you put in (e.g., principal + interest) or you get something you personally value more (e.g, food in exchange for money).
2. You don't benefit by it.  E.g., a loan is paid back with no interest.
3. You lose by it.  I.e., you end up with less than you started.

I'd define #3 as a sacrifice and I don't think it's necessary for charity.  I would qualify Goodwill donations as #2 because I didn't start with something of value and lose it.  Old clothes that I can't wear don't have value to me.  (My frugality means I don't get rid of clothes until they're absolutely useless to me; others may approach it differently which would change its category.  Might be #3 if you would rather keep the clothes but feel obligated to give them to the more needy.  Or you would otherwise make the effort to sell them on ebay (which I can't be bothered to).  Might be #1 if they're absolutely useless to you and you get a tax benefit.)

Like I said, I was thinking of situations where people intended to never take the principal back making it..maybe not an out-of-the-ballpark #3, but more like a #3 than a #2.  I think charity can't be #1 (this is personal; if the person in the above example thinks giving useless clothes to goodwill in exchange for a tax deduction is charity I'm not going to argue with them).  But I can see how #2 could be.  For example even if my old clothes are useless to me, dropping them off in the goodwill box on my walk to work creates value in a way that dropping them in the trash doesn't.  Even if the Kiva contributor at some point in the future takes the principal back, making it more of a #2 transaction, it created value.  I don't claim to currently have a comprehensive explanation of what other mysterious factors make something a charitable transaction, I'm just arguing that being a #2 doesn't rule it out for me. 
 
Anyway, so I was wondering if ARS would consider Kiva itself a charity and if not if the lack of sacrifice on the part of the organization is his objection.  Personally I'm thinking charitability has to do with my actions, not the actions of the organization.  I can give to a non-charity and still consider it charity on my end.

edit: because e.g. and i.e. are not interchangeable
« Last Edit: July 13, 2013, 07:38:10 PM by sheepstache »

matchewed

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Re: Kiva Lending - How much is the donation, really?
« Reply #33 on: July 13, 2013, 07:51:03 PM »
I'm just personally trying to wrap my head around how people can equate "I'll let you borrow $100 if you pay it back (maybe)" with "let me give you $100." We're also dealing with the concept of donation here, not just charity. Donation has the idea of no return considerations. It is just swell that someone may use Kiva for charity, but let's not say it is donation when you receive the money back, the actual act of using Kiva for charity undermines the concept of donation as it has built in return considerations since it is a lending service.

*Edit* Again I'm not against Kiva, it is a valid charity. I do not know if you can define it as donation without some pretty fancy language dancing.

impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #34 on: July 14, 2013, 04:17:17 AM »
ARS - you and GMaN have convinced me not to call it "charity"... So there's that.

I also never felt like I was giving to any individual borrower, just to the ideas that Kiva stands for (so, to "Kiva," not to this or that group of borrowers or to this or that field partner). In fact, that is part of the appeal for me, you're empowering people to change some aspect of their life, but you forfeit any kind of moral claim over them. The last part is somewhat unexamined, it's a personal hangup rather than a moral stance ("projecting" myself in others' situation, I would be more comfortable receiving a loan than a donation; however, I understand that there are situations where the loan approach is completely inappropriate.)

To return to the OP, if you put in $25 and never take it back, but keep relending it until it's entirely eaten away by non-repayments, currency costs, and occasional donations to Kiva, then I guess the donation is $25 over the life of the loan, but to each individual borrower, it may only be the savings versus not getting a loan/getting it at local rates. If you get the money back... You have that case thoroughly covered I believe.

sheepstache

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Re: Kiva Lending - How much is the donation, really?
« Reply #35 on: July 15, 2013, 12:19:27 AM »
I'm just personally trying to wrap my head around how people can equate "I'll let you borrow $100 if you pay it back (maybe)" with "let me give you $100." We're also dealing with the concept of donation here, not just charity. Donation has the idea of no return considerations. It is just swell that someone may use Kiva for charity, but let's not say it is donation when you receive the money back, the actual act of using Kiva for charity undermines the concept of donation as it has built in return considerations since it is a lending service.

*Edit* Again I'm not against Kiva, it is a valid charity. I do not know if you can define it as donation without some pretty fancy language dancing.

Well, this is kind of where my pet peeve of oversimplifying ethical stuff comes in.  You're going to be at it a long time trying to wrap your head around two different things being the same thing :)  But, I listed them as different things.
If someone said both bicycles and electric bicycles are mustachian forms of transportation, they're not trying to convince you that bicycles and electric bicycles are the same thing or saying that they are both equally mustachian.
That my position takes a few more sentences to explain than yours doesn't mean it's "language dancing."  It doesn't make it worse, or better, than yours.  Or maybe that was unrelated to what I was saying since you switched to talking about donations, in which case never mind this last bit.

I too wouldn't have a problem with considering Kiva charity even though the principal is accessible to me.

I don't either, but the dollar amount of the charity is what's in question.  If you read the OP, and thread title, the question at hand is less about if Kiva is charity or not.

If you donate $1000 and then get it back after a year, what would you consider that charitable amount to be?

Aw, but, well, I even quoted the part where y'all were discussing that.  I thought I could join in your reindeer games.

Seriously, though, it doesn't make sense to think about the charitable value before nailing down whether you think it's charity.

It's an interesting situation.  Like putting a time machine inside the Tardis.  Is Kiva a charity.  If not, can giving them money still conceivably be making a charitable donation.  Then you have to decide if infinitely lending, rather than giving, money to Kiva can be considered charitable.  If you don't think Kiva is a charity, you probably don't think lending them money with the intent to take it back is charitable, because it's the same model (assuming their interest rates cover operating expenses).

If you fundamentally don't think that the original situation that you proposed is charitable, then there's no dollar value to the charity.  Moot point.  Problem solved.

If you do think that it's charity and you just want to know what the person should put on their budget, that's easy.  It's the amount they're out of pocket.  Like everything else on their budget.  If they buy $100 worth of food but used coupons and only paid $50, they put $50 on their spreadsheet.  You don't mess around with opportunity cost.  If they buy peanutbutter a week before they absolutely need it, they don't tell people that they paid the cost of the jar + opportunity cost of missed interest.

Same for cases where you explicitly intend to take the money back after a year.  If you've got a low-interest CD even though you had an opportunity to get a higher-interest CD, you don't count the difference in interest as an expense.  It doesn't become an expense if it's for selfless reasons.

It's quite possible some corporations, acting on a large scale, get write offs for loaning money to non-profits.  I'd defer to IRS regs in that case.



The post you referred to in the other thread was, I thought, more about the psychological aspects of giving.  It brought up the idea of whether one's charitable instincts could be mollified by a kiva loan in perpetuity rather than regular donations.  I sort of assumed you were asking about that too but I guess not.
Personally I don't judge the value of the food in my kitchen by what I told people I paid for it. 
Both you and Grant brought up the real value created by a person's charitable actions.  And I think this is an important issue to a lot of people.  I actually wrote this whole huge thing on it but I'm not going to post it because, with the amount of time I have to put into it now, it's not super conclusive.
Actually, okay, I did like the kind of ridiculous bit I wrote about Kiva using the axiom of infinity so I will include that :)

Quote
Optimistically, your donation is creating value.  If Kiva lends it at 5% or 45% or whatever, supposedly it is creating even more value than that to the person who decided it would benefit them to take out the loan.  If you buy a stock, you get a certain number of dividends in the first quarter.  You keep the stock, reinvesting the dividends, and it gets dividends again the next quarter.  What is the value of the stock if it compounds infinitely?  Its value is infinite.  Of course, we know some infinities are bigger than others.  The value of your donation is infinite, but still not as big as the Gates Fund.
No, wait, what I mean is: Your donation is infinite, but a smaller infinity than if you lent $75 to one person one month, they pay it back, then in the second month you lend that first $75 to a 2nd person and a second $75 to a third person, and so on.
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arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #36 on: July 15, 2013, 12:27:27 AM »
Seriously, though, it doesn't make sense to think about the charitable value before nailing down whether you think it's charity.

In general, sure.  In this case, no, because we've had other discussions about if it is or not, the point of this discussion was under the hand waving assumption that it IS, how much is the actual donation.

So we're granting as a premise that it is charity - now I want to discuss the actual value of that donation.

We've had that discussion.  And if you want to continue it, I'm fine with that, go to one of those threads.  :)

This thread drifted that way, as there is obvious overlap in the question, but does that make more sense now with that explanation of the distinction between this thread and the others, and why figuring out if it is a charity first is not relevant?


If you do think that it's charity and you just want to know what the person should put on their budget, that's easy.  It's the amount they're out of pocket.  Like everything else on their budget.  If they buy $100 worth of food but used coupons and only paid $50, they put $50 on their spreadsheet.  You don't mess around with opportunity cost.  If they buy peanutbutter a week before they absolutely need it, they don't tell people that they paid the cost of the jar + opportunity cost of missed interest.

Same for cases where you explicitly intend to take the money back after a year.  If you've got a low-interest CD even though you had an opportunity to get a higher-interest CD, you don't count the difference in interest as an expense.  It doesn't become an expense if it's for selfless reasons.

(Emphasis mine.)

Really?!  So I can donate 100k to Kiva in 2013, earn 0% on it, and get it paid back next year in 2014 and, in your mind, the amount of my charitable donations over the two years was an average of 50,000/year?
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Re: Kiva Lending - How much is the donation, really?
« Reply #37 on: July 15, 2013, 01:59:09 AM »
It seemed to me like you were trying to determine whether you could take a write off or not effected whether it was charity or not.  Like, Matchewed feels that you have to lose something for it to be a donation, so calculating opportunity costs might make sense, but that's not how I would approach it. 

To be clear, the sentence you quoted wasn't intended to be about Kiva.  I'm saying that the concept of lending money as a form of charity has to be decided first.  That is, situations where you loan money to charities.  It just so happens that we happen to be having a meta conversation since Kiva is also in the habit of lending money.  So you have to answer the question either way.  Like, say the Red Cross offered "take backs" where you could specify that you might need your money back at some point and at that time they could take the amount of your principal from somewhere else in their coffers.  Or you could loan them a CD that you bought, giving them the interest.

(So, my whole initial post was about that, not about Kiva, which was why I was surprised that you called out that one sentence where I said I thought Kiva could be charity.  I can see how that was confusing.  I just figured it made sense to acknowledge that I thought Kiva itself could be a charitable organization since I was going on to talk about lending being potentially charitable.  And I guess I thought that's what everyone else was talking about as well.)

If you do think that it's charity and you just want to know what the person should put on their budget, that's easy.  It's the amount they're out of pocket.  Like everything else on their budget.  If they buy $100 worth of food but used coupons and only paid $50, they put $50 on their spreadsheet. 

You don't mess around with opportunity cost.  If they buy peanutbutter a week before they absolutely need it, they don't tell people that they paid the cost of the jar + opportunity cost of missed interest.

Same for cases where you explicitly intend to take the money back after a year.  If you've got a low-interest CD even though you had an opportunity to get a higher-interest CD, you don't count the difference in interest as an expense.  It doesn't become an expense if it's for selfless reasons.

(Emphasis mine.)

Really?!  So I can donate 100k to Kiva in 2013, earn 0% on it, and get it paid back next year in 2014 and, in your mind, the amount of my charitable donations over the two years was an average of 50,000/year?

Emphasis and paragraph reformatting mine.  I was just saying that whether you take it back or not, you don't count opportunity costs.  Out-of-pocket costs is only mentioned in the context of when you explicitly don't plan to take it back.  If you do, it's more like a CD purchase and most people don't list those as expenses. 
I suppose if you put it in to Kiva without planning to take it back but then you do, it gets counted as income when you get it back.  And you have to run down the street publicly flagellating yourself for being a terrible person.

This is where the nature of charity comes into it for me and you have to consider that rather than just making a yes/no decision.  It does seem like a different type of charity.  You keep insisting that it's a bookkeeping question, but you clearly have a moral reaction to what you believe is the misrepresentation of one's charitable giving.
Personally, if I lent a friend money and expected them to pay me back, I'd list it as an outstanding loan on my spreadsheet.  If I lent it to Kiva and wasn't sure whether I'd ask for it back, I'd probably still list it as an asset, same as when I move money to a separate bank account.  That is for my own moral accounting.  I suspect though that if I went into bankruptcy, the court wouldn't consider it an asset.   

tl;dr: a loan to charity that you intend to take back has exactly 25.5% of the value if you had donated it outright, except if you did it in a month with the letter A in it, in which case you take 30% but have to bump it to the next fiscal quarter.

sheepstache

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Re: Kiva Lending - How much is the donation, really?
« Reply #38 on: July 15, 2013, 02:58:47 AM »
I guess what I'm assuming here is people are calculating opportunity cost because they think they have to lose something for it to be charity.  I don't, so I don't bother calculating opportunity cost.

If I had to take the question backwards--if there's no cost then it's not charity--I might conclude that it's not.  Because of how I psychologically calculate opportunity cost.  Like, say hypothetically I had my emergency fund in an interest-free account.  I might compare that to, say, savings bonds and therefore say, okay, I'm spending 1.76%, variable, per month, on the balance to have my savings account immediately accessible.  I'd compare it to some other cash-like asset.
But the Kiva money would otherwise be extra money, in which case I'd put it in an index fund, but in that case I'm prepared for wipe-out scenarios, so I don't really use the ~7% opportunity cost other people do.  It's 0%.

A simpler reason: I don't list opportunity costs for everything else and it would be inconsistent to list it solely for the purpose of making me look charitable.
 
What about this scenario: say I was giving $75 every month to a charity.  Then I find out the local branch needs a van on Tuesdays.  I loan them my van since I wouldn't be using it anyway.  They come pick it up and drop it off.  They pay for gas.  Let's say van rental would have cost them $75 each time.  So I decide to stop donating the $75.  Because I've come up with a mustachian, more efficient way of doing the task, that is, of doing good.  Rather than just throwing money at the problem.

(Yeah, yeah, the IRS probably says I can take a deduction on wear and tear but let's be real, most people, including me, don't think in terms of wear and tear.)

It doesn't make sense to me to try to figure what the dollar amount of charity is here.  Sure, it seems like the equivalent of $75, but I'm not out of pocket, nor would I list it as an expense on my budget.  It's not volunteer work because I don't do shit.  Yet if someone asked me if I did anything for charity, I would reply 'yes.'

So, if you want to list the expense as opportunity cost, that's fine, but I'd want you to figure out what your moral reasoning for that is.  If you're calculating opportunity costs for the sole reason of being able to call it charity and if a key reason you call it charity is because it's costing you something, that's circular so I think you're fooling yourself.  For me, I wouldn't list any cost, but that doesn't mean I would think a loan to a charity isn't charity.

That's my take on it.  But as you can see, I can't tell you what it costs without explaining my own moral framework.  Cerberuss quite possibly has a completely different framework.  Or he didn't mean by "small price" that he was actually proposing it be listed as a charitable expense.  Or he was downplaying the role of charity entirely, perhaps thinking of it only as a sop for one's conscience.

impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #39 on: July 15, 2013, 03:00:41 AM »

tl;dr: a loan to charity that you intend to take back has exactly 25.5% of the value if you had donated it outright, except if you did it in a month with the letter A in it, in which case you take 30% but have to bump it to the next fiscal quarter.

Sorry, I just cannot see how you can compare a month with the letter A in it to a month without, especially in the context of international exchanges. Seems to me you're being seriously linguicentrist in your assumptions.

+1 on the rest, though.

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Re: Kiva Lending - How much is the donation, really?
« Reply #40 on: July 15, 2013, 05:36:01 AM »
It's an English-language site.

impaire

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Re: Kiva Lending - How much is the donation, really?
« Reply #41 on: July 15, 2013, 07:49:27 AM »
It's an English-language site.

Can't tell if sarcasm is adversarial... or cooperative.

Damn! You got me out-sarcasted pretty rapidly on this one. I will strive to do better next time.

arebelspy

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Re: Kiva Lending - How much is the donation, really?
« Reply #42 on: July 15, 2013, 09:32:26 AM »
THey key reason I'm calling it charity is not because it has opportunity costs, but because we decided to hand waive that as a premise and assume it is charity.

The reason I want to calculate opportunity cost (or some other method) is to determine the amount of that charity.

Yes, there is a point to determining so, IMO.  You may say a vague "I'm helping charity" is good enough, but many have set goals or thresholds for charity that they like to do (often demanded of them by their religion).

People can do whatever they'd like, and I don't care.  But if I set a goal to donate $X or Y%, then I'm going to need some way to actually calculate the value of that.

Your van lending wear and tear may be a smaller dollar amount, but what if I donated one of my rentals to a needy family for free loading for the year.  I'd like to put a dollar amount on that, whether or not I try to deduct it from my taxes, simply to make sure I'm still donating enough on top of that to reach my goals.

Can you not see why one would calculate the value of a donation and wonder how much a Kiva donation is, given a desire to want to donate at least $X?
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Re: Kiva Lending - How much is the donation, really?
« Reply #43 on: July 15, 2013, 10:08:31 AM »
Sheepstache, your van example simply cannot translate into what you do at Kiva. Yes, money can be a tool, but money is also the bottom line. With the van example, you may stop donating $75 a month, but you lend the van so they don't have to rent at $75 a day four times a month. That act financially benefits them $225 a month. That's quantifiable charity because you're positively impacting their bottom line and preserving their existing resources. Now let's take your analogy one step further. You're donating $100 a month and you have a car. You find out that the charity needs to rent a $20 car four times a month, so you loan your car and stop paying the $100. Are you still participating in charity, or have you now turned your personally defined charitable dealings into an exploitative setup that benefits yourself? You can still claim you're acting "charitably" when you talk to others... after all, they've gotten the car, but you're now keeping $20 a month they no longer receive.

Now, you've posted very eloquently to defend your logic (even if I don't agree with it), but you've yet to address one thing:

Even if you leave the money in Kiva and never plan to take it back out, in order for it to continue "helping others", it requires that the recipients of your money repay you so as you can loan it back out again. Even if you never personally count that money in your personal bookkeeping again, it is still your money legally, and you retain control over where it goes and the ability to collect it back from those who receive it. Even leaving it in Kiva, in order to keep that money active, it requires that you exercise those powers.

This expectation of equal or greater financial return simply cannot be escaped. You can utilize semantics and split hairs as much as you like to try and redefine the meaning and concept of charity within your own mind while ignoring the reality of your control over that money, but the inherent nature of microlenders, loans and how Kiva operates flies directly in opposition to what charity truly is. You can claim that losses to defaulted loans are somehow giving people money, which is sort of true in a roundabout fashion, but forgiving debt still isn't the charitable act of giving money without any expectation of return... it is a necessary act to reconcile bookkeeping on a financial transaction where there was an expected return.

I could set up a 501(c)(3) to help financially empower young Sicilian men with crooked noses to aid the down and out with investing in equine sports, and promise that your money lent can continue to help others do the same as it gets paid back... it'd be the exact same financial setup as Kiva, but somehow I doubt you'd call that charity. Just because the verbiage in the sales pitch and your yak-farming recipients half-way around the world makes you feel good about your participation doesn't change the nature of the transaction over from financial commerce to charity.

Even assuming the initial thrust of this thread and arguing that Kiva is, in fact, charity due to their 501(c)(3) status... nobody can produce solid, defensible numbers (including yourself) on what, if any, of the money given to them for microloans can be considered as genuine charitable contributions. This is an impossible feat to calculate because Kiva loans cannot be quantitatively defined as charity. They may make you feel all gooey inside, but they remain loans.