Microfinance interest rate discussions usually center on how much and often overlook the question of whether poor microborrowers should pay any interest at all. Kiva's local Field Partners (MFIs) charge interest rates and fees to the borrower in order to cover the cost of their operations. We pass 100% of the money you lend on Kiva to the local Field Partner who administers your loan to borrowers -- we do not charge interest and we do not take a cut. It's like eBay for microcredit. Usually, that interest rate is what pays for the field partner's daily operations. Portfolio yield is defined as all interest and fees paid by borrowers to the Field Partner divided by the average portfolio outstanding during any given year. Kiva will not partner with an organization that charges unreasonable interest rates, and we require Field Partners to fully disclose their rates. To keep financing and salary costs low, SEM raised money from the online microlending portal Kiva at 0% interest, and its three co-founders all went without salaries and volunteered their time. $5.7 Million Lent to … If MFIs borrow at 11%, it implies they must lend at 16% interest to have a 5% interest rate spread like US banks. You get your money back with no interest. Interest Rates. Does Kiva make money off of this interest that borrowers pay? An interest rate of 11% of the loan amount thus covers both these costs for either loan." Q. And all of your concerns are years old, dating back to around that 2009 article you linked. Kiva U.S. differs from the main Kiva program in one important way: in the non-US programs, funds are disbursed and collected by funding partners, who also collect interest for their services. That is incredibly high. He or she ordinarily repays. Their best option is often the local money lender (+100% interest rates). -- 4% loans at risk on "classic" Kiva.org. I am staying with Kiva for now, but will make the interest rate a top criterion in selecting the loans I support. Informal surveys and discussions with MFIs and Kiva fellows show the major banks charge between 8-14% interest. In order to alleviate some of these challenges, Colorado Lending Source has partnered with Kiva to offer an innovative microloan product with 0% interest, no fees, and financing up to $15,000. Kiva does not take a cut, rather, their business operations are funded through donations from various grants, corporate sponsors and foundations. Low Interest Rates; Non-Profit Status; Process Leading Up to Funding; Application; Low Interest Rates. Still, that 0% interest rate makes Kiva a worthy crowdfunding platform for anyone who needs a smaller loan (and can wait a while to get it). Now we have some numbers to apply. Microplace, in the past, paid up to 3 percent interest, but Tuesday it announced a fund that's paying 5 percent. The lender makes the loan to a person you choose. In short, Kiva does not charge the borrower any interest rate, however, their field partners charge the borrower an interest rate. I plan to include some of the criticism that Kiva's faced regarding this interest rate. Apply Now. Assume the average is approximately 11%. Therefore I prefer to focus on a fairly unique situation for a Kiva loan: a Kiva loan product that provides the borrower a lower interest rate because it has been financed by Kiva. The third type of cost, transaction costs, is not proportional to the amount lent. Did you know that in developing countries, informal lending is a very popular way to access money? In addition, our Field Partners’ average return on assets is negative (i.e. 1.01% in November, 2013; Paypal waives all credit card processing fees to Kiva, so there is no additional cost incurred for Kiva by funding with a credit card. OnDeck: Best for repeat borrowing. Kiva does not receive any interest or fees from borrowers. Even though Kiva itself does not charge interest on the loans, the Field Partners charge relatively high interest rates. Here are the results, ranked by what Kiva … Kiva’s Field Partners do usually charge interest though, and the average portfolio yield of our microfinance partners is ~35 percent. No. You give your money to Kiva. Kiva loans have a 0% interest rate and 100% of each loan goes directly to the borrower. We will look at ways to lower our default rates below. Some people will obviously have a higher default rate and some lower. Some Kiva Partners charge the equivalent of 109% APR. Kiva itself does not charge interest rates on its loans; they supply capital to microfinancing institutions for free. The ten field partners with the highest Portfolio Yields. High repayment rates are essential to creating a sustainable, scalable model. Kiva sends it to a microlender. But upvoting for the effort and analysis, although I basically disagree on a few key fundamentals. Visit KivaSort.americancynic.net for a full, up-to-date table. Impossible, right? This rate has been steadily rising. Kiva currently has a 1.1% default rate. Kiva uses a calculation called portfolio yield to express the average interest rate and fees that Kiva borrowers pay to the Kiva Field Partner administering their loan. Kiva itself does not collect any interest on the loans it facilitates and Kiva lenders do not make interest on loans. Does that figure shock some of you? MCDT charges its borrowers 2.5% monthly interest or 30% interest per year, plus other fees. I am currently supporting a Kiva field partner based in Kampala, Uganda called MCDT. The lending process begins with the selection of Field Partners in the 73 countries where Kiva works. They could eliminate interest rates and cover administrative costs with donations, but for economic and ethical reasons they shouldn’t. Not with Kiva Zip. The United States model eliminates the funding partners, so the interest-free funds go straight from the lending platform to the borrowers. Historically, only 40% of Kiva Labs: Social Enterprises borrowers could access unsecured loans, and for those that were eligible, interest rates quoted could be as high as 30%. Commercial Window Covering Specialists since 1995. There are some 0% interest loans on Kiva, including all direct loans in the United States. In addition, we only partner with microfinance institutions and organizations that have a social mission to serve the poor, unbanked, and underserved. Find Kiva Field Partners with the lowest interest rates. Recently Kiva has opened Kiva Zip loans, which are 0% interest loans in $5 increments in either the United States or Kenya. 1a) Interest rates in microfinance are skewed towards covering fixed costs while interest rates in traditional finance are skewed towards covering default risk. But in order to illustrate and briefly investigate the high interest rates charged on some Kiva loans, the table below lists the active field partners with the highest Portfolio Yield (as of January 2018). Such a product is offered at several field partners, including Kyrgyzstan’s MCC Mol Bulak, the partner I am working with as a fellow. Your title is a little disingenuous, because as you know Kiva's interest rate is 0%, what you're really talking about are the MFI's interest rates. The transaction cost of the $500 loan is not much different from the transaction cost of the $100 loan. on average, they are not covering their costs without grants and other subsidies). This script helps you find Kiva Field Partners that charge 0% or low interest. Kiva doesn't pay interest but it does make it easy to give gift certificates. learn more What is Kiva? 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