#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.
#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.