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Micro Loans
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FAQs (provided by Kiva.org)For more information about microfinance, please go to the About Microfinance page.About Kiva
About Our Loans
About Our Partners
What kind of organization is Kiva? Kiva is a non-profit public benefit corporation registered in the state of California. Kiva applied for 501c3 status in December 2005 and is currently waiting on determination of our 501c3 status. Does Kiva accept donations? Yes! Kiva accepts donations online and offline. Tax-deductible donations are accepted by check only through the Village Enterprise Fund. To make a tax deductible donation please email Fiona Ramsey at contactus@kiva.org for details. How does Kiva make money? Kiva currently has financial support from a number of angel investors, including Silicon Valley donors, and corporate sponsors including Microsoft Research. However, self-sustainability is critical to Kiva, which plans to be fully self-sustainable by 2008. This will be achieved through the implementation of a number of income streams, which may include optional transaction charges to lenders and low debt capital fees to partners. Is Kiva a security? No. Kiva’s loans are personal agreements between lender and borrower. There is no note or security involved. Is Kiva a religious organization? No. Kiva is not a religious organization, although it is open to partnering with religious organizations. About Our Loans How do I loan to a business? It’s easy! From MATT.org: 1. Read the story of the entrepreneur in need of a loan in Mexico. 2. Click on the picture to access more information on their small business and our lending partner KIVA. 3. Lend as little as $25 and start helping an entrepreneur build his or her business in Mexico.
You can pay by credit card through PayPal’s web site, even if you don’t have a PayPal account. You will, however, need a PayPal account when you withdraw your funds as Kiva uses PayPal to handle all financial transactions. Will I get a receipt? Yes. We will email a receipt to the email address you gave us when you created your Kiva account. How do I keep track of my loans? Log in to your account at any time to see your account portfolio. What percentage of my loan goes to the entrepreneur? 100%. When I pay through PayPal, is PayPal taking a fee? No. Kiva is the first organization PayPal is supporting by providing free payment processing. What happens after I make the loan? You will receive emails throughout the loan updating you on the progress of the business, and letting you know each time a repayment is made. You may comment on the updates by going to the business page on the website and entering a comment below the journal entry. When the loan has been repaid in full, your account will be credited for your portion of the loan. You can then reloan these funds or withdraw them through PayPal. Will PayPal charge me to withdraw from my Kiva account? No. When you request to withdraw funds from your Kiva account, Kiva uses a PayPal function, which charges the sender, not the recipient. Assuming 100% repayment, you will receive 100% of your money returned to you. Is my loan tax-deductible? No – because it is a loan not a donation, and there is an expectation of repayment. Will I get my money back? Your loan is not guaranteed; therefore there is a chance that you will not get your money back. However, just as there are different levels of risk in stocks or mutual funds, there are also different levels in risk in funding a loan. Your Kiva loan is a low-risk loan. Microfinance loans worldwide are generating repayment rates of 97% (UNCDF: Basic Facts About Microfinance). To date, Kiva’s repayment rate is 100%. If you are still concerned about repayment, minimize your risk by diversifying—loan $25 to a number of businesses rather $100 (or more!) to one business. If my loan defaults, can I then claim it as a tax-deductible donation? No, because it was intended as a loan, not a donation. However you can claim it as a capital loss. Do I get interest on my loan? No. Kiva’s loans do not provide a financial return on investment. Does Kiva charge interest? No. Kiva does not charge interest to our partners. Do Kiva’s partners charge interest to the entrepreneurs? Yes. Self-sustainability is critical to creating long-term solutions to poverty and charging interest to entrepreneurs is necessary for microfinance institutions to achieve this. Our partners are free to charge interest, but Kiva will not partner with an organization that charges exorbitant interest rates. Kiva also requires partners to fully disclose their interest rates. Microfinance is an expensive business, which is essentially the reason small loans are not provided by large banks. While Kiva’s partners do not bear the cost of capital or the cost of default, they do bear transaction costs and currency risk. Charging interest to entrepreneurs enables our partners to bear these costs and achieve self-sustainability. Is there a “middle man”? Yes. The first are Matt.org and Kiva. When you loan through our web site, the funds are sent to Kiva via PayPal. From Kiva the funds are sent to the second middleman, our partner microfinance institution that will manage the loan including distributing funds and collecting repayments. When the partner receives the funds, they are then distributed to the entrepreneur. Repayments are made from the entrepreneur to the partner on a schedule determined by the partner. As each repayment is collected, the partner enters the repayment amount into our software over the Internet, notifying Kiva and the lenders that a repayment has been made. Kiva invoices partners quarterly for all repayments they have collected over the previous quarter. When the entire loan has been repaid in full, Kiva credits the lenders for their portion of the loan, and lenders can choose to re-loan or withdraw their credit. The middlemen are crucial to enabling this loan process to operate as efficiently and as cheaply as it does. By dividing and conquering—Matt listing entrepreneurs, Kiva collecting and distributing loan funds through the website, and partners managing the loans on the ground—we leverage the skills we each have to provide loans at much cheaper rates than alternative sources of debt capital. How does the money get to the entrepreneur? Loan funds received by Kiva are forwarded, by check or international wire, to the respective partner on a monthly basis. The partner then distributes the funds to the entrepreneur. Some of our partners have working capital which they forward to an entrepreneur when they see the business has been fully funded online, before the payment arrives from Kiva. This allows the business to start operating sooner. How can I be sure of the integrity of the entrepreneur? Kiva does not send loan funds directly to the entrepreneurs. Each loan is managed by a microfinance institution who we partner with and who administers the loan funds. Before an entrepreneur appears on our website they have first been vetted by our partner for loan application approval. Each of our partners uses their own application procedure, which Kiva has reviewed and approved. This ensures that your loan funds are actually going to genuine entrepreneurs who will use the loan for the purpose they specified. How are the entrepreneurs chosen? Our partners choose the entrepreneurs whose business loans are posted on MATT’s and Kiva’s web sites. Each partner uses their own application vetting process, reviewed by Kiva to confirm that the organization has the ability to handle funds responsibly. Each business loan is reviewed by Kiva before going live to the site to ensure appropriate content. For more detail on how an individual partner approves business loans for funding, please contact the partner directly. How often are new businesses posted? We accept new businesses from each partner on a partner-by-partner basis, taking into consideration the partner’s repayment performance and quality of content provided. We currently accept new businesses from a number of partners on a weekly basis, and are working towards providing greater variety of businesses for funding. When my business makes a repayment, can I re-loan or withdraw the funds immediately? No. You will not be credited for your loan funds until the entire loan has been paid back in full, at which time you may re-loan or withdraw your funds. About Our Partners What is a "partner"? When we refer to our "partners" we are referring to the microfinance institutions that we have partnered with to manage and administer the individual loans. Why do we use partners? Kiva’s partners are critical to our ability to provide loans efficiently. By partnering with microfinance institutions located on the ground, Kiva leverages critical knowledge of the local population and years of experience managing loans. Were Kiva to operate as a microfinance institution ourselves, we would enter the market decades behind many well-equipped organizations with documented success. Partnering allows us to divide and conquer – Kiva collecting and distributing loan funds through the web site and partners managing the loans on the ground – allowing us maximum efficiency at the lowest cost. How do we choose partners? Kiva evaluates each potential partner on an individual basis, while adhering to our minimum requirements which include providing government registration papers for the organization, conducting extensive reference checks and checking the organization against the US Terrorist Agency list. Kiva prefers to partner with organizations that have a long history of lending to the poor, a strong reputation and who serve a socially beneficial mission which Kiva supports. However, Kiva does occasionally partner with exceptional organizations that do not have a long track record to evaluate when we have strong reason to believe the organization will be successful with Kiva’s support. Please visit our Partner pages to learn more about each of our partners. We strive to provide lenders with a variety of partners to support and encourage transparency to enable lenders to make educated lending choices. What are the partners’ responsibilities? Our partners are responsible for vetting loan applications to ensure that loans uploaded to the site have a high chance of being a successful business. The partner uploads the loan details, including a photo of the entrepreneur and a description of the business, to Kiva’s web site for approval and live posting. Approved entrepreneurs are posted live on MATT.org simultaneously. Once a loan has been funded our partners are responsible for managing the loan on the ground, including distributing loan funds, collecting repayments and providing reasonable support to entrepreneurs to ensure the highest chance of business success. Partners are responsible for providing updates on the progress of the business through Kiva’s software. Finally, partners are responsible for forwarding repayments to Kiva on a quarterly basis. Do our partners charge interest to the entrepreneurs? Yes. Self-sustainability is critical to creating long-term solutions to poverty, and charging interest to entrepreneurs is necessary for microfinance institutions to achieve this. Our partners are free to charge interest, but Kiva will not partner with an organization that charges exorbitant interest rates. Kiva also requires partners to fully disclose their interest rates. Microfinance is an expensive business, which is essentially the reason small loans are not provided by large banks. While Kiva’s partners do not bear the cost of capital or the cost of default, they do bear transaction costs and currency risk. Charging interest to entrepreneurs enables our partners to bear these costs and achieve self-sustainability. What are the interest rates the partners charge? We are currently collecting our partner interest rate data, and will make this information available as soon as possible on the individual Partners pages. |
