Author Topic: MMM and Kiva  (Read 6889 times)

giggles

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MMM and Kiva
« on: November 16, 2012, 06:25:15 AM »
I have been reading a lot of the charitable giving threads, and it seems like a lot of us participate in Kiva.  Would we like to start a MMM kiva group?

Also, Kiva is running their referral special now - refer a friend and you each get a free $25 loan.  So if you participate in Kiva or are thinking about it, post here so we can refer one another and maybe get our own lending group going!


shadowmoss

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Re: MMM and Kiva
« Reply #1 on: November 16, 2012, 12:04:24 PM »
I have been waiting for my original $100 to be totally repaid and I will draw it out and find someplace else to donate it.  For one thing, I never felt good that to make my $25 loan, they wanted another $15 'donation' to office expenses.  So, you don't really get to just loan out your origianl money, it costs to do so.  Yes, it is 'voluntary' but I always felt like it was expected.  Second, check out the interest the lending institutions charge the borrowers.  It is definitely NOT free interest to them, it is around 30% or more depending on the country and lending institution.  Basically, you are giving a bank in a foriegn country your money free to lend out and make money from.  Also, the people shown may or may not be the actual ones who get the money, the institutions 'showcase' the most photogenic cases and throw the money into their regular pot of money-making loans.

Most of this I found by reading the Kiva site.  A lot of it has been taken down now that the high interest rates and such are being pointed out to the public.  There are other issues I have, like the fact that much is made of the hardship of the weekly trips out to the sites where the loans are made, and the fresh-faced volunteers who blog about the trips out to these site.  I never saw what they were actually doing while out there, just how difficult the trip was and how eager the people were to secure these loans.  Are they collecting the payments?  And, do they collect enough to make the trips worthwhile.  Again, the facts are difficult to find.

I am sorry that I don't feel good about Kiva anymore.  It seemed like such a good way to effortlessly feel good about how I was 'giving' to needy hard-working folks.

Schwartz

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Re: MMM and Kiva
« Reply #2 on: November 16, 2012, 02:43:40 PM »
I'm still not sure how I feel about the whole microlending industry, but let me make a couple of comments on shadowmoss' post:

Interest rates: Kiva does not actually loan money, they match donors with a microfinance institution which provides the loan at the market rate (for which, incidentally, 20-30% is fairly common). The difference here is that the microfinance institution is getting capital a) without having  to do the work of finding investors and b) without having to pay a return to the investors. So don't think of Kiva as giving a zero interest loan, think of it as subsidizing a microfinance institution that provides loans at a market rate to an underserved population

Donation: Since Kiva does not receive a return on the money they invest with these lending institutions, the only way that they are able to sustain their operations is through these optional donations. And keep in mind that even if you don't get to re-lend your entire original amount because you decide to make a donation, that money is turning over more than once, such that your $100 loan may faciliate $300 in loans.

Kiva's boots on the ground: These Kiva employees in the countries where they operate are there build relationships with the microfinance institutions and to provide the personal stories for the cases they present on their site. Their whole brand is built around story and the only way to get it is to trek out to the borrowers and meet them face to face.

kisserofsinners

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Re: MMM and Kiva
« Reply #3 on: November 26, 2012, 02:38:41 PM »
I really like Kiva. What would making a group mean?

Daley

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Re: MMM and Kiva
« Reply #4 on: November 26, 2012, 03:37:27 PM »
Most of this I found by reading the Kiva site.  A lot of it has been taken down now that the high interest rates and such are being pointed out to the public.  There are other issues I have, like the fact that much is made of the hardship of the weekly trips out to the sites where the loans are made, and the fresh-faced volunteers who blog about the trips out to these site.  I never saw what they were actually doing while out there, just how difficult the trip was and how eager the people were to secure these loans.  Are they collecting the payments?  And, do they collect enough to make the trips worthwhile.  Again, the facts are difficult to find.

The info's still there, the usury interest rates charged are just now labeled under the innocuous double-plus-good term "Portfolio Yield" to try and get more people to contribute to the more loan-sharky organizations.

Kiva's not charity. It's usury and commerce tarted up for bleeding heart first worlders like us to feel good about our money and the inequality in the world. If you're going to give money to help people, give money... don't loan it.

Nords

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Re: MMM and Kiva
« Reply #5 on: November 26, 2012, 06:26:21 PM »
Kiva's not charity. It's usury and commerce tarted up for bleeding heart first worlders like us to feel good about our money and the inequality in the world. If you're going to give money to help people, give money... don't loan it.
It's usury by first-world standards, but it's a "below-market rate" in the countries where Kiva does business.

I'm not so sure that giving money is better than lending it out-- just different.  I've been investing my money with local entrepreneurs, and as near as I can tell they're creating jobs and helping more people than are being helped by the food bank and the homeless shelter.  (Of course the entrepreneurs are highly unlikely to hire from the people who are using the food bank and the homeless shelter.)  The entrepreneur gives someone a job for a year or two with the prospect of becoming a self-sustaining continuing enterprise.  The food bank and the homeless shelter help someone for a month or two and then stand by for the prospect of helping them again if they don't reach their own self-sustaining job.  They're both very different "business models".

I know it costs a lot less to "save" the life of a child in Africa than it does to float a microloan to the child's family.  But which is more likely to be a self-sustaining solution?

Peter Singer raises these philosophical issues (since he's a philosopher) in "The Life You Can Save".  The most important thing I learned form the book is that there are no easy answers, and I suspect that the Kiva situation also falls into that category.
http://the-military-guide.com/2012/11/22/book-review-the-life-you-can-save/

And yes, I timed that post to kick off the holiday giving season...

Bostonia

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Re: MMM and Kiva
« Reply #6 on: November 26, 2012, 08:37:35 PM »
I've been giving/contributing/being used by Kiva for a couple of years now.  I read your comments and think "great...I've wasted good karma".  Seriously makes me question my good intentions.

Daley

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Re: MMM and Kiva
« Reply #7 on: November 26, 2012, 09:53:56 PM »
It's usury by first-world standards, but it's a "below-market rate" in the countries where Kiva does business.

No, it's usury by any means of moral, ethical and historical practice the world around. Just because it's being lent at a "below-market rate" in a corrupt third world country where everyone with money is making usurious loans doesn't magically make it right, it just means you're using flawed logic to allow the continuation and participation of the practice in a way that lets you ignore that you'd never be willing to subject yourself or your family to those lending conditions so you can sleep at night.

I'm not so sure that giving money is better than lending it out-- just different.  I've been investing my money with local entrepreneurs, and as near as I can tell they're creating jobs and helping more people than are being helped by the food bank and the homeless shelter.  (Of course the entrepreneurs are highly unlikely to hire from the people who are using the food bank and the homeless shelter.)  The entrepreneur gives someone a job for a year or two with the prospect of becoming a self-sustaining continuing enterprise.  The food bank and the homeless shelter help someone for a month or two and then stand by for the prospect of helping them again if they don't reach their own self-sustaining job.  They're both very different "business models".

You're right, charity and lending are two different acts. It doesn't mean that a greater good can't (or shouldn't) be wrought from either act, but it doesn't change the fact that they're two different acts. Charity is not business and lending is not philanthropy. Kiva tries to present both as the same act (as Giggles has demonstrated in their OP), and takes advantage of people incapable of understanding that distinction for the purpose of perpetuating corrupt and unethical business practices in third world countries by convincing people who have guilt complexes about their first world wealth and selfishness that they're somehow "making a positive difference in the world".

I also note that you said you invest locally. This means any lending you're providing is most likely done so under the restrictions and guidelines of United States and Hawaiian law. Your investments are having a positive net effect on your community, and as such your money is doing good work, but it's still business, and business at rates that you'd most likely find acceptable to participate in yourself. That means you're a kind and wise investor. Although it speaks well towards your overall character, it ultimately does little to sway my opinion of you as a philanthropist as it fails to demonstrate the act of charity. Your giving to the Fisher House and the Wounded Warrior Project, however, does. Although the two acts are not necessarily mutually exclusive, the wicked acts of one can still taint the virtue of the other. In all things, balance.

I know it costs a lot less to "save" the life of a child in Africa than it does to float a microloan to the child's family.  But which is more likely to be a self-sustaining solution?

Neither. Both approaches are fundamentally flawed as both acts do little to address the root problems to those issues. They're bandage feel-good acts that do little to foster genuine improvement and support of an ailing foreign community. Perpetuating the status quo of a region full of suffering by feeding starving children GMO peanut butter and B vitamins through charity or giving that child's "entrepreneurial" father a loan for 75% of his family's net worth at 40% interest through conducting business rarely reduces their overall suffering, and can sometimes prolong it... and it does little to address the ills of the society that has contributed to the root cause of their plight, but it does sometimes perpetuate it further.

Peter Singer raises these philosophical issues (since he's a philosopher) in "The Life You Can Save".  The most important thing I learned form the book is that there are no easy answers, and I suspect that the Kiva situation also falls into that category.
http://the-military-guide.com/2012/11/22/book-review-the-life-you-can-save/

And yes, I timed that post to kick off the holiday giving season...

I don't necessarily disagree with your or some of Singer's points, but if one just drives himself to conduct all his affairs with others the world around in a manner that he wishes them to be conducted with himself while being grounded in the spirit of love and respect, a lot of gray and these "difficult" questions just melt away. If you don't like something, stand your ground and don't make excuses. As a community, when we call debt an emergency, declare high-interest credit cards a bad idea, mock payday loans and outfits like Western Sky, and warn off loan sharks, Kiva ceases to be a difficult question with no easy answers. It is an organization facilitating business, and is doing so with for-profit banks lending money at rates that would not be tolerated by the majority of this community, and by their nature designed to consolidate wealth. There is no charity.

If you want to lend money to do good and build up a community, conduct that business and lend that money responsibly and ethically. If you want to give money to do good and build up a community, give that money whole-heartedly in a way that helps empower the people receiving that money in a responsible manner. Do one, the other, or ideally both... but don't do one and say it's the other. If you lie to yourself at such a basic level, your entire endeavor towards doing good can be easily jeopardized. Remember, these are tools that can potentially enact good, they are not the embodiment of good itself.

I've been giving/contributing/being used by Kiva for a couple of years now.  I read your comments and think "great...I've wasted good karma".  Seriously makes me question my good intentions.

Don't let this discourage you from doing good and righteous things with your money, just let it be a learning experience to better help you to do the right thing in the future.

giggles

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Re: MMM and Kiva
« Reply #8 on: November 28, 2012, 08:25:21 AM »
I am happy with Kiva, and wanted to connect with other MMM readers who are also involved.  Setting up a group just takes a few mintues and would be a good way to connect us on the site. 

I am happy with the model of Kiva, esp after reading The Road to Hell
http://www.amazon.com/The-Road-Hell-Ravaging-International/dp/0684828006

Sylly

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Re: MMM and Kiva
« Reply #9 on: November 28, 2012, 09:51:19 AM »
When I looked at Kiva, I wasn't impressed by the high interest rates the lenders were actually charging. I did however, find that Kiva had partnered with Novica, who does in fact claim to give no interest loans to their artisans. I believe Novica had started doing microlending with their artisans before they partnered with Kiva, so they may be the exception to the rule when it comes to Kiva's lenders.

I've considered lending through Novica to support artisans who are doing mostly traditional work, as I personally believe in helping to preserve such traditional / cultural arts & crafts. I have yet to see any negative to this effort; however, my encounter with Kiva kind of puts a doubt on my mind on the whole microlending practice.

Does anyone else here have any experience with microlending to Novica artisans, or thoughts on the pros/cons of such microlending for commercialized artwork/craft in general? It seems like a good cause, but I do take the stories with a grain of salt, which is why I haven't actually pulled the lever and participated.

Chris

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Re: MMM and Kiva
« Reply #10 on: November 28, 2012, 11:09:48 AM »
It's usury by first-world standards, but it's a "below-market rate" in the countries where Kiva does business.

No, it's usury by any means of moral, ethical and historical practice the world around. Just because it's being lent at a "below-market rate" in a corrupt third world country where everyone with money is making usurious loans doesn't magically make it right, it just means you're using flawed logic to allow the continuation and participation of the practice in a way that lets you ignore that you'd never be willing to subject yourself or your family to those lending conditions so you can sleep at night.

Providing services to people costs money. I often pay FedEx 40% of a package's value to ship a package somewhere. Am I being ripped off? No! It costs a lot of money to move low-value things to far away places. Similarly, the cost of servicing small loans is high (in percentage terms). Sending a loan officer out on a dirt bike to collect $30 every month for 2 years isn't free. That guy needs to be paid. The gas needs to be paid for. Someone needs to be paid to keep the records. And on top of all that, high inflation rates need to be combated. If the institution made a 0% interest, no-fee loan, they will eventually go out of business based on inflation erosion alone. Remember, the inflation rate in the developing world isn't the same as that of the developed world. The interest rate could need to be 10% just to break even (assuming 0 other transaction costs).

Businesses, both large and small, need access to capital.  It enables them to expand and it enables them to make bulk purchases of inventory to increase their profit. Microfinance institutions aren't banks. They're serving a population that is ignored by traditional banks.  Many operate similar to not-for-profit institutions. They not only make loans, but provide financial education, business classes, and savings programs for the community. 

I've met and talked with entrepreneurs who have taken out loans from microfinance institutions. They're quite pleased with the services they are receiving, and prefer the MFI to a traditional bank. They are enabled to launch or expand a business, employ people, and bring added value to their community. If you live in certain parts of the US, you can even go visit an MFI yourself and see how they operate.

kisserofsinners

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Re: MMM and Kiva
« Reply #11 on: November 29, 2012, 01:58:56 PM »
I've been giving/contributing/being used by Kiva for a couple of years now.  I read your comments and think "great...I've wasted good karma".  Seriously makes me question my good intentions.

I wouldn't be to hard on yourself. Yes, some people have strong opinions. Nothing is perfect. For me personally i find it being a good option given the location and it feels like a hand up VS a hand out. I'm more in line with Nords opinions. It's pretty easy for us to get really uptight about the numbers. To me the part that seems reasonable is that people are willing to borrow more after they pay back their first loan.

I think it works very well for what it is. If you dropped it in LA or whatever, it's totally a gauging payday loan BS thing. I think it's easy for westerners to look at number that would make us uncomfortable and think it's abusive. To the people it's actually effecting it's a life changing blessing. I *do* feel good about it, even after i looked up all the info.

Look at the data and make the choice for yourself.

Daley

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Re: MMM and Kiva
« Reply #12 on: November 29, 2012, 09:05:23 PM »
I think it's easy for westerners to look at number that would make us uncomfortable and think it's abusive. To the people it's actually effecting it's a life changing blessing.

That's a slippery slope argument, Kisser. It's just as easy for you to get away with claiming that because you're just as disconnected from the culture and society you're pumping that money into... and that's part of the core problem. You don't know what the group of people you're trying to help actually needs because you aren't a member of that community... and that's why Chris' argument is so flimsy as well. Nobody who's actually a part of a community would need to spend those sorts of hours or use those resources to provide reasonable loan rates. It's the same sort of sloppy "aid" that's lambasted so heavily by Maren in The Road to Hell.

When the idea of 65% interest rates sound like a reasonable thing to charge people in an area, you're clearly missing the larger picture. WHY is a 65% interest rate loan reasonable to charge some people but not others? Then you trot out the BS excuse of, "Well, it takes time and money and traveling distances and the government and money is unstable and blah blah blah." You ever stopped to ask yourself, "What might benefit this community I want to put money into more: Enabling foreign organizations to make loans with usurious interest rates, or building the infrastructure and help provide the education necessary to allow the people to be self-sufficient enough that they don't need crooked foreigners or corrupt locals taking advantage of the instability in their region to line their own pockets."

High interest rates are high interest rates. If the rates are that high, the community clearly needs a different kind of help than the sort you're providing. These rates are either acceptable and tolerable within your community as well as a foreigner's, or you're a hypocrite. So long as you have a double standard, your attempts at doing good are irrevocably tainted.
« Last Edit: November 29, 2012, 09:09:50 PM by I.P. Daley »

Chris

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Re: MMM and Kiva
« Reply #13 on: December 03, 2012, 02:11:41 PM »
"What might benefit this community I want to put money into more: Enabling foreign organizations to make loans with usurious interest rates, or building the infrastructure and help provide the education necessary to allow the people to be self-sufficient enough that they don't need crooked foreigners or corrupt locals taking advantage of the instability in their region to line their own pockets."

What foreigners? Microfinance institutions are largely local affairs, and operate with a social mission. Multiple agencies audit MFIs and Kiva drops MFIs that do not comply. Also, assuming that locals are corrupt is pretty insulting.

High interest rates are high interest rates. If the rates are that high, the community clearly needs a different kind of help than the sort you're providing. These rates are either acceptable and tolerable within your community as well as a foreigner's, or you're a hypocrite. So long as you have a double standard, your attempts at doing good are irrevocably tainted.

Surely, if there were a way for a group of individual Americans to reduce the inflation rate in a foreign country, that would be hugely beneficial to that country's inhabitants (particularly the poor). But until such a mechanism is discovered, businesses need access to capital markets. Foreigners chipping in to build a school is fine, but it's pointless if the families of the kids can't afford to let them go to school.

grantmeaname

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Re: MMM and Kiva
« Reply #14 on: December 03, 2012, 02:18:28 PM »
What foreigners? Microfinance institutions are largely local affairs, and operate with a social mission. Multiple agencies audit MFIs and Kiva drops MFIs that do not comply. Also, assuming that locals are corrupt is pretty insulting.
Only if you lack the reading comprehension to realize what he was really saying. I don't feel insulted in the least.