Questions for Kiva Fellows

Discussion in 'Kiva | Loans That Change Lives' started by giblet, Sep 21, 2011.  |  Print Topic

  1. giblet
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    giblet Silver Member

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    As I mentioned in another thread, I'm a former Kiva Fellow (http://www.kiva.org/lender/lina) -- I worked at a microfinance organization in Cambodia last year and liked the country so much that I ended up staying. I'm still in close contact with my microfinance organization as well as many other Kiva Fellows, so if you have any questions about the fellowship, microfinance or Cambodia, please ask away!

    If I can't answer your question, I'll try and find someone that can, and I suspect that we may get a few more Kiva Fellows on this thread eventually. :D
     
  2. aussieflyer
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    aussieflyer Silver Member

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    Would love to hear some success stories you personally encountered in your time with Kiva.

    Recently joined and loaning as much as I can. First hand happenings can't be beat!
     
  3. giblet
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    giblet Silver Member

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    Lots of success stories, but small, incremental successes. Most loan recipients in Cambodia pay off their loan quickly and often take out a larger loan soon after. Often, they use their profits to make repairs to their homes. This may not seem like a huge success, but for a family that has lived without a toilet, getting one is a very big deal!

    I met one man named Veasna who at the age of 21 took out a loan to build a house for himself and his mother and sisters. I got to see the house near the end of the building process -- he was building it himself. I also got to see the house they were currently living in and the difference was stark. The new house was made of brick while the old one was wood and falling apart. Veasna took out two loans to finish building the house and paid both of them off successfully. His plan was to take out a third loan to build another house to rent. More about this loan here (and a picture of the new house!): http://www.kiva.org/lend/167526 I liked working on loans like this because I could see real, tangible results. The family now had a good house to live in that there is no way they would have had otherwise. Veasna got to go from being a laborer who worked on houses to building one of his own for his family.
     
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  4. jbcarioca
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    jbcarioca Gold Member

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    Many of us have strong ideas about the purpose for which a loan is made and want to choose education loans, for example, or only make loans for agricultural projects, and so on.

    In my own case I have tended to follow my old habits and principles so i lend almost entirely for some small business purpose and rarely lend to, say, make housing repairs or improvements.

    Your last post is making me think about my habits and wonder if I should broaden my horizons. Would you like to comment on that? How would you make portfolio allocation decisions?
     
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  5. miles and smiles
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    miles and smiles Gold Member

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    Hi Giblet,
    I think it would be great if you would also provide links to some of the updates and other writings you did about Cambodia last year. I enjoyed them and learned a lot.
    Glad to see this thread. I hope other Kiva fellows join in.
    Folks who want to know more about Kiva's program for fellows can learn more here:
    http://www.kiva.org/fellows
    Maybe someday Milepoint will be able to sponsor a Kiva Fellow. We can certainly contribute the miles to get a Fellow to his/her posting, like the Flyertalk team did for giblet to get to Cambodia last year.
     
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  6. milchap
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    milchap Gold Member

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    In my novice lending, I have avoided making housing (infrastructure loans). I now have to seriously rethink my strategy given giblet's feedback.
     
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  7. Tenmoc
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    Tenmoc Gold Member

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    Thank you Giblet for sharing here. My first Kiva loan was to Cambodia in March of this year.
     
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  8. giblet
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    giblet Silver Member

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    Here are two articles I wrote for the Kiva Fellows blog:
    Have you eaten rice? Saying hello in Cambodia

    Silk weaving in Cambodia: An age-old tradition struggles to survive

    I also kept a blog while I was a fellow, where you can find links to the borrowers that I visted: http://linakiva.blogspot.com/
     
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  9. Toula
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    Toula Gold Member

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    I have always had the same tendency. However I now feel very differently after just reading this thread. I should have known better having visited 3rd world countries and seeing how they live.

    It's great to think that someone who is only 21 is enough of an entrepreneur that he has positioned himself to have a roof over his head and started to build his own real estate empire.
     
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  10. giblet
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    giblet Silver Member

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    I can only comment based on what I know from Cambodia, but to me, it seems like it almost doesn't matter what the loan is officially for. All of the loan recipients have small businesses of some sort, so whether the loan is officially meant to fund the business or fix their house, it's likely that both are going to get done if at all possible. Most families pool their resources, often with extended family members or adult children and then allocate money for whatever is most needed. I met many women that were taking out loans for an adult child's business or the other way around. I prefer to fund food-based loans, but I do realize that often times only a portion of the loan money goes to the food business -- I met many entrepreneurs who were running four or five businesses at a time! For example, a man might be fisherman during the rainy season and a moto driver during the dry season and his wife sells noodles in town in the morning, and in the afternoon operates a general store from her house where she also grows rice during part of the year.

    I also know that a lot of times the issue is one of categorization -- we had this problem at Maxima. If a woman was taking a out a loan to buy a moto so that she could take her noodles to market every day, that would be categorized as a transportation loan, even though in reality the loan was for her food business. Same with construction loans, although it might be categorized as home repairs, in many cases the businesses are also being run out of the home, so it's just as much a business loan as a home loan.

    Many people don't like funding housing loans or transportation loans men with stern faces who have taxi businesses, but the fact is, these loans have been vetted by the microfinance organizations and although they might not be as appealing to us as lenders they are still just as worthy!
     
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  11. milchap
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    milchap Gold Member

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    I appreciate this feedback. Thanks for the scoop from the front line. :)
     
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  12. milchap
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    milchap Gold Member

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    I have a question about the interest rate that field agencies charge to their clients.
    It seems to me to be quite high.
    Can you explain to me why such high interest is charged to clients?
    I just want to understand this aspect of Kiva.
     
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  13. giblet
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    giblet Silver Member

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    Kiva actually has some good info on this: http://www.kiva.org/about/microfinance#interestRatesAreHigh

    Lots of issues contribute to high interest rates at MFIs. At the MFI I worked at, they would have to go to the clients' houses every month to pick up payments -- each loan officer could only meet about seven or eight clients per day.

    Imagine if your credit card company had to do that? Interest rates would be really high! At my MFI they offered a lower interest rate if the client would bring their payments into the MFI's branch office once a month, but many clients preferred not to do this.

    Also, most clients are pretty high risk, so they have to account for that in the interest rates. Most microfinance organizations in developing countries are also not the most streamlined organizations so that also contributes (and that's what Kiva Fellows try to help with during their time at the MFIs).

    Personally, I think microcredit can be better understood when you look at them as a strictly financial service -- like the credit cards that are offered to those with no credit/bad credit. Those cards often have rates of 30% but can be useful for some individuals to build credit or in case of emergency. Microfinance loans are similar. Luckily the interest rates go down as there is more competition and as the microfinance organizations become more efficient.
     
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  14. jbcarioca
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    jbcarioca Gold Member

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    Good points. The bad/no credit credit cards are a good example. I have done quite a lot of consulting work in that industry. In most LDC's credit card rates are very, very high even for good customers. In Russia and Brazil, for example, average rates are well above 100%, giving astronomically high yields. In most LDC's credit to people like typical ones we fund in Kiva is unavailable at any price.

    In addition even in the US, a highly mature market no/bad credit cards almost always have fees that are outside the APR calculations, like annual fees, late fees etc that bring the actual portfolio groos yield up to 40-50%. Every time there is a new regulation to reduce abuse they find a new way to raise customer costs.

    IME good microlenders do not ever do such things. They do have those very high servicing costs and high funding costs too. Borrowers also get sound financial advice taht helps them manage better, one of the reasons why many prefer the personal visits, even when it costs them more.
     
  15. milchap
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    milchap Gold Member

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    Good info on the credit situation. Thanks.
     
  16. giblet
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    giblet Silver Member

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    Good point! Credit cards in other countries (like the UK) have much higher interest rates. The US has deceptively low interest rates because of all of the other fees. This makes Americans think that 20-30% interest rates are very high, when in reality that's a realistic rate to cover costs.

    My MFI never used any of these sort of tactics to raise customer costs. In fact, when a customer defaulted they would write it off rather than go to court or try to seize their house (but don't let the word get out about that!) I think ultimately, they do care a lot about their borrowers and their success.
     
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  17. jbcarioca
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    jbcarioca Gold Member

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    That is the only point so far with which I disagree. Such portfolios are very rarely disclosed independently. I have worked on many of them, to my discredit. The typical ROA for such portfolios is usually 10% or better. As is often the case to poor and/or uneducated pay much more for the same thing that do the wealthy and/or well-educated. That is one reason why micro-lending even Grameen itself operate in developed countries like the UK and the US. Poor people do get ripped-off by major financial institutions.
     
  18. giblet
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    giblet Silver Member

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    I believe you -- I don't know much about the operating costs of financial services in developed countries!
     
  19. jbcarioca
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    jbcarioca Gold Member

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    You still make very valid comparisons because both the problems and abuses are quite similar IME. I find that strange, especially after working in both areas for a few decades. The work I admire is that that you and others like you do with MFI's that are themselves very dedicated to doing good while increasing the dignity of the lives of people around them.
     
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