I find it disheartening that it is necessary to take out a loan to pay for vocational school after graduating from middle school (this is in Indonesia but the same thing happens all over in those countries that are not the most wealthy). Indonesia has been doing extremely well economically (which many people do not realize).
Kafita already graduated from junior high school and wants to go to vocational school.
So essentially she is paying for high school. I sure hope it is financially beneficial. This is the kind of investment in the economic development of a country that I wish governments could make. If not, I sure wish the super rich would give money to fund this kind of education instead of giving trust fund babies millions for conspicuous consumption.
It is disgusting how spoiled brats are such vapid people that they do what they do, while so many hundred of millions of kids lives could be changed with the most wasteful spending these trust fund babies that our politicians keep giving massive tax breaks to. Our politicians should be ashamed of themselves. And so should the spoiled brats.
I have donated more to Tricke Up than any other charity for about 20 years now. There is a great deal of hardship in the world. It can seem like what you do doesn’t make a big dent in the hardship. But effective help makes a huge difference to those involved.
My personality is to think systemically. To help put a band aid on the current visible issue just doesn’t excite me. Lots of people are most excited to help whoever happens to be in their view right now. I care much more about creating systems that will produce benefits over and over into the future. This view is very helpful for an investor.
Trickle Up invests in helping people create better lives for themselves. It provides some assistance and “teaches people to fish” rather than just giving them some fish to help them today.
The stories in this video show examples of the largest potential for entrepreneurship. While creating a few huge visible successes (like Google, Apple…) is exciting the benefits of hundreds of millions of people having small financial success (compared to others) but hugely personally transforming success is more important. Capitalism is visible in these successes. What people often think of as capitalism (Wall Street) has much more resonance with royalty based economic systems than free market (free of market dominating anti-competitive and anti-market behavior) capitalism.
There is a great deal focus recently on the “99%” (via occupy wall street and the like). The truth is these are mainly about the 5% or 10% (those rich, but not quite as rich as the richest 1% – and much further from the richest than they were a few decades ago). As I have written before, most of those in the USA (also Europe, Japan…) are rich (though this is changing, a greater percentage of the USA is not rich, looking globally, than maybe any point since the 1930s).
We get confused because many near us are even richer and think that means the rest of us are very poor. But those in the USA are often in the 5% or 10% – not the 30% or 60% or 90% they seem to think they are. $50,000 in annual income puts you in the top 1% globally. $25,000 puts you in the top 10%.
I agree with the desire to reduce the political and market corruption, as I have written for years.
For the 99% (or the 90% anyway), I really think the best things are government policies that reduce corruption and increase market forces. Letting actually capitalism work instead of political and corporate cronyism failing to let markets work as they should. Also giving education and the chance to build a better life for yourself are important. Thankfully many countries have been doing very well on this front: Singapore, Korea, Brazil, Ghana, China… That doesn’t mean there are not huge issues to still address for most of the 90%, there are.
Microfinance in general, and Kiva in particular, are one great way to help. Again it isn’t perfect. And those getting the loans are not given an easy life. They are given a chance to try and build there business to improve there economic condition. This isn’t a certain success. And I do worry that taking on too high an interest rate, or loan amount, can leave people worse off than before. But when looking at the system of microfinance I really like the opportunity it gives people, who haven’t been given many.
Those getting loans have to make smart personal finance and business decisions. If they do well they can greatly improve their financial situation. I made several more loans today, using money repaid by previous borrowers. I try to find loans where I am able to help fund a investment that will improve capacity (but that isn’t always possible) – a new machine that makes them more efficient for example. I also try to avoid loans where the interest rate is over 30% (which might seem very high, but rates below 20% are very rare given the economics of these loans – they are very costly to service). What Kiva does is provide the funds people like me lend as interest free loans to the partner banks. The idea is that this allows partner banks to provide more capital for loans (obviously) and at a lower rate because the bank isn’t having to pay interest on the funds.
My loans today went to: Mali, Honduras, Senegal, Ecuador, Togo, Philippines and in the photo above El Salvador. The Curious Cat Kivans group has now lent $12,925 in 320 loans. We now have 11 members, join up and help give people an opportunity to improve their economic condition.
I made several more Kiva loans to entrepreneur in Kenya, Lebanon, Nicaragua, Kenya, Honduras and Armenia (brining my total loans to 251). It really is great to see real people using capitalism to improve their lives. And being able to help by lending some money is wonderful. When looking for loans I give preference to loans that improve productivity and increasing capacity of the entrepreneur. If they use the proceeds of the loan to increase their capacity to produce they can pay off the loan and find themselves much better off.
A nice example of this is the loan to Douglas Osusu (pictured). He has requested this loan of 80,000 KES to purchase a dairy cow and a posho mill. This loan also has a portfolio yield (Kiva’s equivalent of an annual percentage rate) of 19%. 19% is very loan for loans on Kiva (remember there are significant costs to servicing micro-loans) – I like the rate to be under 30% but sometimes accept rates up to 40% (or even higher occasionally). I also give great preference to low rates, as the lower the rate the better for the entrepreneur. The 3rd factor I consider is the history of the field partner bank (default rate, delinquency rate and currency exchange loss rate). In this case the field partner is new and carries risk because of that. Still in this case I really like the loan and I like that this lender is charging low rates so I want to take the risk and see how they can do. The amount I lend is based on the combination of these factors – I lend more when I have several reasons to really like the loan.
Join other readers by making loans and joining the Curious Cats Lending Team: 8 members, 213 loans totaling $8,775. Comment with the link to your Kiva page and I will add a link on Curious Cat Kivans.
My current default rate is 1.39% and the delinquency rate is 8.49% (see chart of USA general delinquency rates). The delinquency rate is exaggerated due to technical details (some difficulties in reporting in various countries and such things). Agricultural loans often become delinquent on Kiva but still are paid in full (in my experience). While the defaulted loan rate is 1.39% if you look at the percent of dollars lost I have a rate of 1.2% (this is nearly all due to a bank that failed over a year ago to which I had 2 loans where I lost $87.50 of $100 – there are also 2 other losses for under $5). I add to my total loan amount a couple times a year but also I get to keep relending as money is paid back.
Related: 100th Entrepreneur Loan – More Kiva Entrepreneur Loans: Kenya, El Salvador (June 2010) – Kiva Opens to USA Entrepreneur Loans – MicroFinance Currency Risk – Kiva Fellows Blog: Nepalese Entrepreneur Success
Some fast facts on the Kiva micro-lending site:
- 58 months old
- $153,090,650 raised
- 99% repayment rate
- 395,427 entrepreneurs funded
- 742,717 Kiva lenders
- 201 countries
- Curious Cats Lending Team: – 8 members, 193 loans totaling $7,950
You have a pervading sense of shame and failure because you cannot provide for your children. Your poverty traps you and you lose hope of ever escaping from a life of hard work for which, at the end, you will have nothing to show beyond bare survival.
The number of people currently living in such conditions is 1.4 billion. This is bad, but not as bad as things were in 1981, when there were 1.9 billion people living in extreme poverty. That was about 4 in every 10 people in the world, whereas now fewer than 1 in 4 are extremely poor.
UNICEF, the United Nations International Children’s Emergency Fund, estimates that about 24,000 children die every day from preventable, poverty-related causes.
Personal finance is not just about living within a budget and making sensible steps to make safe financial decisions (safe investment portfolio, proper insurance, adequate savings, emergency fund) it is also about using your finances appropriately for you. I believe strongly in helping those that have not been as lucky to have the opportunities I have economically.
Some of my favorite ways to help reduce extreme poverty are Trickle Up, Kiva and using Global Giving to find small organizations (like the Anupshahar’s Girls School, Build Women’s Fair Trade Businesses, Profit for Poor Farmers, and Vegetable Gardens for India). I encourage you to join me: let me know if you contribute to Kiva and I will add your Kiva page to our list of Curious Cat Kivans. Also join the Curious Cats Kiva Lending Team (I am happy to say we have made over $7,500 in loans so far).
If you like that webcast you will like The Girl Effect.
Related: Creating a World Without Poverty – Financial Thanksgiving – 100th Micro Finance Entrepreneur Loan (I am not over 200) – 2006 Nobel Peace Prize to Founder of Micro-finance Bank – High School Team Project to Provide Clean Water
I made 6 more loans to entrepreneurs through Kiva today, including the 2 mentioned below. I have now made 227 loans through Kiva.
Christopher Kibubi Wahinya (in photo), Nairobi, Kenya, buys old computers, which he repairs and sells to the local people. He has been in this kind of business for the last four years and he says that the business is profitable. He is using his loan of Kes 50,000 to purchase old computers, repair them and sell to the local people. He plans to grow his business by moving to the ground floor of a busy building where he will stock all computer accessories and later own a computer showroom.
Carlos Alberto Pereira Granados is 43 years old and resides in the town of Cojutepeque, El Salvador. He has a workshop where he repairs sewing machines and sells all types of related parts. His business is located at the municipal market. Carlos Alberto works Monday through Sunday repairing the machines of his customers. He is requesting a loan so that he can buy sewing machines wholesale as well as parts such as bobbins, belts, hooks, and other items so that he has everything required to perform his work and attract more customers.
Kiva is a great way to support entrepreneurs. I try to focus on loans I think will benefit the borrower and grow the economy (not always easy). One of the things I try to watch is the “portfolio yield” (which is similar to Annual Percentage Rate) – the lower the better. Some banking Kiva partners are charities or partially funded by charities and therefore can 1) fund some of the administrative expenses of the bank and 2) are focused on helping the customers not making a profit. I would rather have my money used where it most helps entrapranuers so the lower the rate the better.
I encourage you to join me: let me know if you contribute to Kiva and I will add your Kiva page to our list of Curious Cat Kivans. Also join the Curious Cats Kiva Lending Team (the team has now lent over $7,500).
I made several more loans using Kiva today to entrepreneurs in: Mongolia, Costa Rica, Kenya, Togo and Peru. One nice improvement they have made to the layout of the site is to show the “portfolio yield” (which is their form of APR – to provide an idea of the fees an entrepreneurs must pay).
Since I am making loans on Kiva to help others out one of the big factors for me is the cost to the entrepreneur. I just would much rather provide funding for loans where the entrepreneurs gets a reasonably low rate. I understand there are costs the lenders have to cover. I have no problem with that, but if my choice is helping an entrepreneurs get a loan at 20% or 40% I am going to take 40%. I figure the odds that the entrepreneurs benefits will be much greater with lower costs. I also prefer loans where I see how the loan will let them be more productive, for example by purchasing a machine to help improve productivity.
I wish Kiva would let me selected lenders I like and then have the results shown only for those lenders (as one option).
I really like micro-credit as a tool to improve the lives of those willing to put in the effort to build a successful business. I do worry however, that the actual success is less than what is hoped. The idea is so appealing but objective results are not as obvious (for one thing the results, do not seem to be available). I want to find research that indicates what will make micro-credit most effective at improving the economic well being of people. Small change by Drake Bennett
They created their controlled experiment by altering the algorithm the bank used to evaluate creditworthiness so that some borderline applicants were randomly denied loans while other otherwise identical applicants had loans approved.
Working with a microcredit bank in India that was looking to expand in the city of Hyderabad, the researchers did find some small positive effects. Borrowers who already had a business did see some increase in profit. Households without businesses that the researchers judged more predisposed to start one were found to cut back on spending, suggesting they were saving to augment their loan for a capital business expense like a pushcart or a sewing machine.
Overall the article suggests that the data is hard to get. The time of the studies may be too short to see improvement. And the gains seen are small. I do believe we are in danger of creating problems with the rapid expansion of micro-credit. I can understand why, the situation is desperate for billions of people still. And we do not have many good methods for improving economic conditions for the world’s poor. I still strongly support micro-credit but I worry, especially if interest rates are high, that it may not help. We need to study what is working and adopt methods that will bring about improved results.
The behavior of banks is despicable enough when they are merely trying to trick educated, financially secure people out of their money. Banks charged $38.5 billion in fees last year according to the Financial Times. But that behavior, toward the poor, by banks (paying millions to hundreds of executives for, I guess, getting congress to send the companies billions) is immoral.
The Gates Foundation has decided to go into improving financial services for the poor. The are supporting micro-credit but also micro finance. Saving is key for poor people to get and stay out of poverty. Most already save money informally but want better, safer options. Setting aside money in a safe place will allow poor people to weather setbacks, build assets and financial security, and invest in opportunities for the next generation. Formal savings accounts also help them keep more of what they earn and easily access their money when they need it.
The poor need better banking options in poor countries. But the poor need better banking options in at least one rich country (the only one I know is the USA and banks in the USA provide lousy options for the poor). Credit Unions are much more likely to actually try and provide value to customers. Unfortunately banks in the USA seem to operate on the principle that customer are suckers that exist to pay for Porches for the children of bank executives.