When is a Loan Declared in Default?

Discussion in 'Kiva | Loans That Change Lives' started by Explore, Jul 19, 2015.  |  Print Topic

  1. Explore
    Original Member

    Explore Silver Member

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    I've loaned almost $60K over the past few years to a couple of hundred groups and individuals, all assigned to the Milepoint team. According to Kiva, my default rate is zero, and currency loss is 0.19%. Now I am very careful who I loan to, but that seems almost too good to be true. I'm curious - how long after the official payback period is a loan declared in default?

    Thanks.....
     
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  2. YULtide

    YULtide Gold Member

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    According to Kiva's help pages....

    In my experience, this is not always applied consistently, but in general once a loan is 6 months past due it should be shown as defaulted unless Kiva is pretty certain that the loan will be paid back. For example, the delinquent loans from SEDA in Vietnam will almost certainly not be defaulted because there is a specific issue being worked on. Then again, I have had defaulted loans repay up to 18 months later.

    For more detail see:
    http://www.kiva.org/help/solution/how_does_kiva_define_default
     
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  3. estnet
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    estnet Gold Member

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    I have a few loans in countries affected by Ebola. Kiva initially said there was a moratorium rather than forgiving loans until the situation could be further assessed, but no updates since then.
     
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  4. YULtide

    YULtide Gold Member

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    Something to bear in mind is that there are two reasons for delinquency. The obvious is that for some reason the client is behind in making payments. But for a variety of reasons filed partners can get behind. Sometimes this has to do with liquidity problems, but sometimes the issue is regulatory. We've seen a number of cases recently where field partners are suddenly stopped from sending money outside their countries, for example. It seems that when the problem is with the field partner the loans are less likely to be defaulted if the underlying issue is something that looks like it can be resolved, even if it will take some time.

    A perfect example is the Peruvian lender Microfinanzas Prisma. They are working on repaying outstanding loans, but all their loans are long delinquent. According to what Brandon has told us they are sending $20k per month, with a current outstanding balance of $113k. I did get payments at the beginning of June and the beginning of July, so I feel comfortable that the funds will all come in.
     
  5. milchap
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    milchap Gold Member

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    Brandon did state that we should expect defaults from Brac Liberia and Brac Sierra Leone. I have ten loans and have no expectations of any repaymehts. The epidemic was force majeure; my hope is that the survivors rebuild their lives and communities

    "BRAC Liberia & BRAC Sierra Leone: We gave these Field Partners a grace period through this month due to the Ebola crisis, and have been working with them to reconcile their repayments and process defaults in the meantime. We're hoping to have that process done soon, but we expect a very high amount of defaults given the impact of the epidemic.."
     
    Last edited: Jul 20, 2015
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  6. YULtide

    YULtide Gold Member

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    Speaking of force majeure, I expect the vast majority of my loans in Nepal to default eventually after the earthquake. That said, I was prepared for a lot of defaults after the typhoon in the Philippines a couple of years ago, but hardly had any. There is just no way to know. Best to be prepared to lose everything after such an event and any repayments come as a bonus and a sign that people are beginning to rebuild their lives after such devastation.
     
  7. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    That's impressive. Definitely don't join me on my loans if you want to maintain those stats. I have loaned a little over $11k and the default rate is 2.1% with a total dollar loss (due to defaults) of $200. Of my remaining 30 loans, 13 (or 41%) are delinquent, so I expect the numbers to get worse. A significant contributor to my loss rate is this (former) partner: http://www.kiva.org/partners/128

    (those $200 aren't really a big deal for me personally)
     
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  8. miles and smiles
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    miles and smiles Gold Member

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    In my experience, Kiva is consistently inconsistent with defaults. I have had loans default that had made payments within the last six months. I also have loans more than 2 years delinquent that have not defaulted. For me, the longer term delinquencies are usually because the field partner is in trouble.
     
  9. satman40

    satman40 Gold Member

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    You guys are all lucky.

    Most people spend more than they make, and that is how you saved yours.

    Never loan money, but then this is an investment, and you never lose on an investment until you close it out.
     
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