Experience with Kiva or the like?

[Kevin]

It seems like a fairly shady deal. From what I've found in research, these microlending banks charge ricockulous interest rates on these loans and keep it all. A donor takes all the risk and they get all the profit. I know it's a charity thing, but why not just give directly to charity?

[Drolefille]

Originally Posted by Kevin

It seems like a fairly shady deal. From what I've found in research, these microlending banks charge ricockulous interest rates on these loans and keep it all. A donor takes all the risk and they get all the profit. I know it's a charity thing, but why not just give directly to charity?

There's value in 'teaching a man to fish' rather than 'giving a man a fish'

[Kevin]

Originally Posted by Drolefille

There's value in 'teaching a man to fish' rather than 'giving a man a fish'

So donate to the fishing school in Côte d'Ivoire rather than to some iffy bank that's charging as much as 80% interest (as one particular bank does in the Democratic Republic of Congo).

[MysticCat]

Originally Posted by Drolefille

There's value in 'teaching a man to fish' rather than 'giving a man a fish'

But there are many organizations that one can just give to that "teach a man to fish" rather than just giving handouts.

I'd actually not heard of Kiva or these other groups until this thread.

[Drolefille]

Originally Posted by Kevin

So donate to the fishing school in Côte d'Ivoire rather than to some iffy bank that's charging as much as 80% interest (as one particular bank does in the Democratic Republic of Congo).

Originally Posted by MysticCat

But there are many organizations that one can just give to that "teach a man to fish" rather than just giving handouts.

I'd actually not heard of Kiva or these other groups until this thread.

Very true, the premise of Kiva is that people are building credit as well as building income and a business for themselves. Kiva provides the backing for loans from partner banks in the local areas, the money you lend/donate is simply financing Kiva's backing.

Having that backing means the partner banks will make the loans where they might not have had the funding before nor the trust to loan $500 to someone for a sewing machine/equipment.

There are some high interest rates involved, and I've looked into it. It appears that because the loan is so small the 'fees' are a much bigger portion of the loan. Since the banks do have to administer the loans it makes sense for them to charge fees, but yeah. I'm not a 100% on it, but I don't think it's a scam or a ripoff for the recipients.

I believe that Kiva does not charge interest on the money it lends, but the local partners do.

In short, or long, Kiva addresses the issue and requires partners to disclose interest rates and fees. The user can make the choice about lending from there. Kiva believes it encourages accountability and responsibility, and 98%+ repayment rates they seem to be right.

[lovelyivy84]

Originally Posted by Kevin

It seems like a fairly shady deal. From what I've found in research, these microlending banks charge ricockulous interest rates on these loans and keep it all. A donor takes all the risk and they get all the profit. I know it's a charity thing, but why not just give directly to charity?

There are many microlending orgs that try really hard to prevent this I know of one or two (not Kiva) that actually form recipient communities and provide education in business and even healthcare to loan recipients and their kids. There are some truly great programs out there.