I have no idea if everyone on this web-site is a Nigerian scam artist, but the idea behind the site is interesting.
I wonder how long the ideas of Muhammad Yunus will remain popular.
http://kiva.org/
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I have no idea if everyone on this web-site is a Nigerian scam artist, but the idea behind the site is interesting.
I wonder how long the ideas of Muhammad Yunus will remain popular.
http://kiva.org/
I don't know a whole lot about that site but i just got done studying about these micro loans. The results have been surprisingly good. Something like an over 90% repayment rate. http://en.wikipedia.org/wiki/Micro_credit
I've made some loans on www.prosper.com, which is similar.
How's your experience been?Quote:
Originally Posted by goofygrin
The Kiva site is basically a donation since you don't personally earn a return. They are claiming some pretty high returns on the site you posted, and only an 8.5% delinquency and 0.04% defaults. On the face of it it looks like a great way to invest, especially if you stick to the low- to mid-risk borrowers.
I'm trying to get setup as a lender, but Nevada residents can't do it for some reason. Arrgh.
I've made 9 loans for $445 a few months ago... just testing the water.
Principal loaned: $445.00
Payment status: 9: Current
Avg. interest rate: 19.93%
Principal repaid: $35.88
Interest & fees paid: $27.69
Service fees: -$0.70
Loan value: $412.16
I've not loaned any more of my money out for a couple reasons:
- 3 year terms are too long. It just gives too much time for people to fuck up again
- lack of good loans. A lot of states have rate caps, and a LOT of people have shitty ass credit and need to just go ahead and shoot themselves. Look, if you've got 32 deliquent accounts, what's one more for $3k?
- poor delinquent support. I had a loan go late, and the group leader is a scumbag and doesn't respond to anyone not in their group. Prosper basically calls a loan default whenever they want and it's a little sketchy as to what happens then.
I will say, the forum at prosperlenders.com really helped me find some nice loans, but you have to have made a loan before you can join there, which sucks, but it keeps the morons out.
A roughly 20% interest rate is usurious in the context of microfinance. I'm sure Yunus would choke... The mechanism he has in place results in hugely high repayment rates. So, if others are instituting similar social safeguards, why the need to go above standard rates? Part of the point is to structure things for success - and to view the loan recipients as "producers" who can succeed when given fair access to capital...Quote:
Originally Posted by goofygrin
Please refrain from talking about what you have no clue about:Quote:
Originally Posted by spindrift
1. Many money lenders charge 20% effective DAILY interest rates. See CGAP research in the Philipines on 5-6 loans. 5 pesos loaned in the morning, 6 repaid that same night.
2. Many non-profit microlenders struggle to keep interest rates under 4% monthly (in local currency). That can easily amount to 20-50% annualized interest rate.
3. Transaction costs in rural parts of the world are very high. Unsecured capital is always going to be charged a higher rate than debt secured by collateral. Part of microfinance is building a credit history so that when you do take out a car or home loan, the rate is a very normal 4-8%.
4. I have personally spoken with many poor ambulantes and street vendors that are paying 80% (or more!) effective annual interest rates on weekly loans. Believe it or not, they know that the interest rates are high but still take the loans. WHy? Because a small entrepreneur has the highest return on their marginal investment (i.e. being able to buy 6 extra packs of cigarettes and 20 more candy bars at wholesale prices in the morning to be sold for a 50% markup).
5. Access to capital is obviously still a huge issue in many parts of the world. Micro insurance and bank re-insurance is arguably a new requirement for capital outreach to succeed. If 97% of loans are paid back, does that mean that the microlender is doing a good job or are there a lot of slightly riskier/slightly poorer clients that are being forgotten in trying to "keep the books clean"???
Bummer, I really dig the concept but it looks like the reality of it is still not nearly developed enough to work well for both parties.Quote:
Originally Posted by goofygrin
People said that about Google stock. :D
20% ain't that bad. i'm charging up to 18% on short term loans (6 months or less)to people where i have collateral to cover double their debt. generally they are wealthy and with nice credit scores....money is getting very expensive at the moment.
-aaron
Something is fishy. Anyone actually wealthy and with assets of the kind you describe has access to money for quite a bit less than you describe. Often pegged to something like LIBOR - but not by multiples ;)Quote:
Originally Posted by gonehuckin
As for the direction of this thread - I think it is pretty interesting. When I think of micro-finance or micro-lending, I think of Grameen. And the social+market approach they take. Not random "moneylenders" on the street. Not loans to random people with no business plan and bad credit history here in the US. In general, these are very small loans to help people pull themselves up by their bootstraps - and usually those loans are accompanied by appropriate social and educational infrastructure to help insure success. It seems the terms is being sadly diluted...
BTW - Washington Cash ( http://www.washingtoncash.org/ ), a group that is the real deal here in the US currently charges prime plus 4 for their basic microloans.
Solidarity groups/village banking/Grameen replicators/etc. != micro financeQuote:
Originally Posted by spindrift
Micro loans are exactly what the term says: micro sized loans!
Microfinance should include both small savings, small insurance programs and small sized loans that serve clients who have a lack of access to traditional credit.
Most microfinance organizations do not work these days on group liability. The Nobel prize for Yunus is a great thing, but there are a lot of different models out there and some of them are very successful (in terms of both social impact and sustainability). As for your comment about "random" people getting loans, I seriously doubt that you have been to rural parts of Asia/Latin America/Africa if you think that is what moneylenders do. And which group do you think it is that gives loans to beggars? They've really got a killer business plan eh?
I know microfinance is getting a really big bandwagon now, but let's try not to idealize everything. K?
Fine. Easy to do, since I've been around it - at least the Grameen model, which is the archetype for what I'm interested in - for a few years...Quote:
Originally Posted by shamrockpow
Personally, I think there is a huge distinction between approaches that enable those without assets to gain the assets needed to become economic producers vs. looking at "the bottom of the pyramid" as a place to suck money out of. Just my personal POV & preference.
Just saw a story on PBS/Frontline about
www.Kiva.org
Looks like a good program doing good for people in poor countries with little other financial options to finance their business.
Thread resurrection as I just gave my second Kiva gift. The other Kiva gift I gave has been repaid almost in full in just 4 months to the loaner and it has been fun for the the loaner to watch the recipients progress.
Anybody else trying out the Kiva style of microfinance?
What about the stuff Shamrockpow is talking about above?
Experiences good/bad since the financiapocalypse sturuck?
If you are interested in Kiva, also check out http://www.vittana.org
They have just started trickling students onto the site - and the few that have posted have funded quickly. But this is a another huge opportunity to use Kiva style "p to p" microfinance to help improve the world. They should have quite a few students listed in the near future. It is worth noting that one of Kiva's founders is an advisor to Vittana.
PS: Turns out shamrockpow raised several good points about cost of capital and microlending interest rates in much of the world. Way more interesting & complicated & challenging than I once thought it was. Figured I'd mention that as long as the thread came back from the grave...
Kiva is a great program in terms of international development. You are empowering economies to grow on their own in developing countries. A friend continues to invest in Kiva and get her money back.
I've been participating in Kiva for several years now. I've had 100% repayment every time.