

Kiva Now Allows You to Lend to US Small Businesses - swombat
http://www.readwriteweb.com/archives/kiva_now_allows_you_to_invest_in_us_small_business.php

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patio11
I have mixed feelings about this:

#1, I hope Kiva dots all the is and crosses all the ts more than Prosper did,
or they might also feel the wrath of financial regulators.

#2, While I love the idea of loaning to entrepreneurs to improve their
standings (and did it on Prosper), it is hella-risky and I don't see that 2%
delinquency rate being maintained. One thing I learned through hard experience
with Prosper: there is a reason banks are banks.

#3, That 2% delinquency rate is, how do I put this gently, creative
accounting. Kiva's lending partners routinely do things like rolling over
loans to avoid having to tarnish their near-perfect records -- the original
$100 loan isn't four years past due, it is a $500 loan now which is paying as
agreed (to the new, updated terms). They also use collection tactics that in
the US would be illegal (you know all those social pressure things, you'd
better repay the loan for your chicken or we'll tell your cousin you cost him
the loan for his cow? That has been done here before. Legislatures were not
neutral about the practice, which is why we have laws like the Fair Debt
Collection Practices Act, which prohibits 3rd party disclosure of the fact of
indebtedness, to say nothing of asking someone's cousin to be your enforcer.
The FDCPA might not apply directly to Kiva's partners, but similar laws exist
in all 50 states.)

The triple digit interest rates that some international Kiva parters charge,
to compensate for the we-can't-call-it-default-risk, also probably won't fly
that well here. Bad news: it isn't automatically profitable to give loans to
poor people at normal US credit card interest rates. As mentioned previously,
there is a reason banks are banks. Look at Prosper defaults on business loans
-- off the top of my head, in the lower credit grades they exceeded _forty
percent_.

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goodside
It's only slightly misleading to say Kiva lets you lend to small businesses,
but downright false for RWW to say it lets you invest in them. If you can't
get any return on the loan, it's simply not an investment.

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philwelch
It's not a zero interest loan, is it?

Lending is the most common form of investment, and it's comparatively safe.
Equity investment is what's risky and dangerous (unless you get into junk
bonds, or lending to bankrupt companies).

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apsec112
It's not a zero-interest loan, but the Kiva "field partner" pockets the
interest, so there's no possibility of return. From their website:

"Lending to the working poor through Kiva involves risk of principal loss.
Kiva does not guarantee repayment nor do we offer a financial return on your
loan. "

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robg
What are the regulatory obstacles to running a business that does offer a
small return? I have to assume there are some, no, or else you get loan
sharks.

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callmeed
That's what Prosper was doing but the SEC forced them to temporarily stop
lending and jump through more hoops.

[http://www.techcrunch.com/2008/11/26/sec-outlines-its-
reason...](http://www.techcrunch.com/2008/11/26/sec-outlines-its-reasoning-
for-shutting-down-p2p-lender-prosper/)

I'm not sure where they sit now, but when you browsed Prosper you could find
people requesting loans for business (not just personal items like cars).

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TrevorJ
I wonder how well the "think of it as a donation" model will work when it is
Americans lending to Americans? I don't have any poor expectations or
anything, it just feels a little different somehow because of our cultural
baggage. I'm curious to see how it goes over.

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netsp
Me too. There has to be some sort of psychological shift. Kiva has been a way
to help _the poor_ in the theoretical the _developing world,_ That place with
starving sad ad children that's plagued by everything & $1 a day can make such
a difference in a child's life.

When it's US-2-US, you are going to be associating this with something more
real. I have no idea if it'll be associated positively or negatively .

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siavosh
It will be interesting to see if the delinquency/default rate of domestic
loans is less than or greater than international micro-loans which are
reported to be at only about 2%

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Mistone
they should partner with YCom or setup a secondary market for folks that didn
fit the niche focus of Ycom, so young startups can get cash from a broad
community. maybe its a whole separate biz concept loosely modeled after YC and
Kiva.

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roblocop
I've been lending to Kiva for the past two years, and for me, it's been a
fulfilling experience. I think I definitely feel a connection to the people
I'm lending to through reading their stories and knowing what my loan is going
towards. Now that it's open to US small businesses, I thought I would be on
the bandwagon since there's a lot of need just on our front doorsteps.
However, the current opportunities listed on Kiva in the US are a little
uninspiring. I'm not sure whether it's purely psychological in the sense that
these people are closer to home (have the perception of already being more
fortunate), but I don't feel as though I'm helping someone overcome poverty by
paying for advertising for their business. Maybe it's just a different kind of
poverty manifested here at home.

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crsmith
One of Kiva's featured United States entrepreneurs is working down the street
from where I live. I dropped by and bought a sandwich because I was curious.

On one hand, it's interesting to personally meet the beneficiary of
microfinancing. On the other hand, it's interesting to think there are some
days that she makes more than me.

Here's the kiva link to her profile:
[http://www.kiva.org/app.php?page=businesses&action=about...](http://www.kiva.org/app.php?page=businesses&action=about&id=113783)

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dmix
Kiva ranks up there with Better Place as most inspiring types of companies to
create post-success.

World changing ideas.

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foppr
That's frickin sweet, I've been waiting for this. Boom!

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farticus-rex
it would be fun to autogenerate a thousand or so fake profiles and see if you
could earn six figures on this

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ryanwaggoner
Yes, _please_ spend your talent and energy destroying value and undercutting
any innovation that others create.

