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Help People Help Themselves With Kiva

by Peter Renton on December 27, 2010


Kiva - loans that change lives

In our family this is the week we always do some charitable giving. This last week of the year is the perfect time to ramp up your donations so you can still take them as a deduction on your 2010 tax return. If you leave it until next week then you will not be able to deduct your donation until you do your 2011 taxes.

This year we are also including Kiva as part of our year end donation program. Kiva is the leader in the non-profit segment of peer to peer lending known as micro lending. Kiva provides interest free loans to predominantly female (around 82%) entrepreneurs in third world countries. These are often people that have no other way of raising money and without Kiva might never get their small business started.

Check out some of these impressive numbers from Kiva. As of this past weekend over $180 million in loans have been made through Kiva, with an average loan size of $381.67. Compare that to an average loan size of around $6,500 with Lending Club or $4,400 at Prosper and you can see why they call it micro lending. But Kiva has something that Lending Club and Prosper can’t match: a 1.1% default rate on ALL loans (around 250,000 loans). That number is so impressive and gets to the heart of why Kiva is so successful. They have field partners on the ground in 57 countries making sure these loans are legitimate. Many of these field partners have processed thousands of loans with ZERO defaults.

Now, keep in mind when you lend money through Kiva you cannot take a deduction for the money you are lending. You are, in essence, simply providing an interest free loan. But these loans can make a huge difference which is why I have included them in my year end charitable giving. I have lent money to a farmer in Sudan, a taxi driver in Bolivia, a general store owner in the Philippines, chicken farmers in Uganda and many more. These people typically pay back their loans within 6-18 months and as your repayments build up you can lend the money out again.

Kiva is one of those organizations that is really making a difference. If you like peer to peer lending as I do, I urge you to setup a Kiva account and put some money to work helping people help themselves.

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Dan B December 28, 2010 at 1:49 am

Well, we don’t really know what their default rate is. I believe that the local organizations through which the actual loans are disbursed fund some sort of “rainy day” fund that covers defaults. An alternative to Kiva would be http://www.microplace.com which does essentially the same thing……….& pays interest back to us from 1-3.5% annually. So it’s not a “charity” but certainly an alternative. And Microplace claim never to have suffered a default specifically because of what I’ve explained above.

Despite the fact that Microplace is owned by Paypal (a company that I have history with & despise) it’s something to look into if one is in a “do-gooder” mood without necessarily wanting to just give money away, like with Kiva.

peter December 28, 2010 at 10:42 am

Dan, We may not know what their actual default rate is but from a lender’s perspective it is very, very low. I have been lending money on Kiva for a couple of years now and never had a default. I will also check out Microplace – it sounds like a good hybrid between Kiva and the for profit lenders like Lending Club and Prosper.

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