400 million people in India and 1.2 billion people worldwide do not have electric power at home. Mera Gao Power provides a wonderful market solution. Mera Gao Power can install solar power systems at a low cost that can be paid back in just 2 years by charging only 50 cents a month to users (for 7 hours of electricity a day). So they provide funding (through investors and grants) and recoup the investment quickly by providing a valuable service at a price users can afford.

Four solar panels are sufficient to power an entire village of 100 households with quality light and mobile charging. These panels are installed on the roofs of existing households, thus eliminating the need for land. Since power is generated during the day and used at night they use batteries to store the power.

By utilizing LED lights, MGP’s micro grid design is ultra energy efficient. This is the key to reducing power generation and storage equipment. Each household is provided with two or four LED lights.

Mera Gao Power received funding from USAID Development Innovation Ventures. The video presents their innovation for a village-level solar micro grid to electrify rural Uttar Pradesh for a White House meeting.

Related: Appropriate Technology: Solar Water Heaters in Poor Cairo Neighborhoods – Top Countries For Renewable Energy Capacity – Water Pump Merry-go-Round – Letting Children Learn, Hole in the Wall Computers – Homemade Windmills for Electricity – Water and Electricity for All

It would be great if this could give you portfolio annual rates of return (including factoring in cash additions and withdraws and keeping track of sales over time to show a true view of the portfolio). It does look like it will factor in stock purchases and sales which is very nice. You can import csv files with transaction history – another nice feature.

It also strikes me as a very smart move (as a Google stockholder that is nice to see) as advertising rates around investing are high. The more time Google can provide financial advertisers the more income they can make.

Related: Lazy Portfolios Seven-year Winning Streak – Google Posts Good Earning But Not Good Enough for Many (April 2010) – Dollar Cost Averaging – Curious Cat Investing Books

Douglas Osusu, Kisii, Kenya, in front of his posho mill (used for grinding maize into flour).

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.

Some of my favorite ways to help reduce extreme poverty are Trickle Up, Kiva and using Global Giving to find small organizations.

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

• 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

Add to those numbers by joining Kiva today or lending more money today. Let me know and we will add you to the Curious Cat Kivan page.

Related: Provide a Helping Hand Using Kiva – Funding Entrepreneurs in Nicaragua, Ghana, Viet Nam, Togo and Tanzania – Creating a World Without Poverty

This is great news. We need more charity. And we don’t need more trust fund babies. The Giving Pledge was established by Bill Gates and Warren Buffet to encourage this spirit.Charity should be a part of your personal finance plan if you are reading this (if you have access to a computer you are wealthier than most people alive today).

To many of the rich today act like they made their money by creating it by themselves. You can’t be a billionaire without getting it given to you by your parents or making your wealth from society. It is wonderful when people provide great solutions to society and become wealthy. It is ridicules to think those people’s wealth is not the result of the society others created. Using that wealth to make society better is right. Spoiling kids and grandkids with it is acceptable, to a certain level. After a couple million that is insulting, however.

Related: House Votes to Restore Partial Estate Tax Very Richest: Those with Over $7 Million – Rich Americans Sue to Keep Evidence of Their Tax Evasion From the Justice Department – Gates Foundation and Rotary Pledge $200 Million to Fight Polio

Better Jails by Andrew Leigh, economics professor, Australian National University

The idea of paying for outcomes is great. It makes sense for some pay to be based on keeping prisoners housed during their terms. But providing incentives for achievement in returning productive people back to free society is something we should try.

Related: Lean Management in Policing – Urban Planning – Rich Americans Sue to Keep Evidence of Their Tax Evasion From the Justice Department – Randomization in Sports – LA Jail Saves Time Processing Crime – Measuring and Managing Performance in Organizations
Quality Improvement and Government: Ten Hard Lessons From the Madison Experience by David C. Couper, Chief of Police, City of Madison, Wisconsin

Shock! Economist has really good idea

The changes in bond yields over the last 3 months months indicate a huge increase in investor confidence. The yield spread between corporate Baa 10 year bonds and 10 year treasury bonds increased 304 basis points from July 2008 to December 2008, indicating a huge swing in investor sentiment away from risk and to security (US government securities). From April 2009 to July 2009 the yield spread decreased by 213 basis points showing investors have moved away from government bonds and into Baa corporate bonds.

From April to July 10 year corporate Aaa yields have stayed essentially unchanged (5.39% to 5.41% in July). Baa yields plunged from 8.39% to 7.09%. And 10 year government bond yields increased from 2.93% to 3.56%. federal funds rate remains under .25%.

Investors are now willing to take risk on corporate defaults for a much lower premium (over government bond yields) than just a few months ago. This is a sign the credit crisis has eased quite dramatically, even though it is not yet over.

Data from the federal reserve: corporate Aaa – corporate Baa – ten year treasury – fed funds

Related: Continued Large Spreads Between Corporate and Government Bond Yields (April 2009) – Chart Shows Wild Swings in Bond Yields (Jan 2009) – investing and economic charts

The current stocks, in order of return:

The portfolio is beating the S&P 500 by 5.2% annually (which is actually quite good. Also it is a bit confused due to to Tesco not being included. View the current marketocracy Sleep Well portfolio page.

Related: 12 Stocks for 10 Years Update – June 2008 – posts on stocks – investing books

At this point I am most positive on Google, Toyota and Templeton Dragon Fund (I am also fairly confident in Tesco, I would like more evidence they will stick to their lean management commitments). I am still not positive on Dell. I have not replaced it yet but probably will remove it in 2009 (I updated the chart above to show I would not buy it today).

Since the March 2009 update PetroChina (total return was 11% now is 77%) Google (was 49% now 105%) and Templeton Emerging Market Fund (was -25% now 28% have performed the best).

I have made a few changes since the initial setup: adding Tesco, Templeton Emerging Market Fund and Danaher and selling First Data (after it split into two companies). I also owned Yahoo for a period: bought after the First Data sale and then sold to purchase Danaher.

In order to comply with the marketocracy diversification rules and deal with not being able to buy Tesco (in marketocracy) I own fairly small amounts of several other stocks in the portfolio (that are included in the marketocracy return): Target (TGT), Car Max (KMX), British Petroleum(BP), United Technologies (UTX), Euronet Services (EEFT) and ATP Oill and Gas (ATPG).

* Tesco had a purchase price of $22.55 on Dec 11th 2006 and has paid approximately 40 cents a year in dividends. The current price is $18.20. The -14% return is just an estimate.

Kiva is one of my favorite charities, as I have mentioned several times. They provide a platform that connects those with funds to lend to entrepreneurs. This week they added the ability to lend money to entrepreneurs in the USA. And they also added short webcasts to some of the entrepreneur profiles.

One of my goals for this blog is to increase the number of readers participating in Kiva – see current Curious Cat Kivans. I have also created a curious cat lending team on Kiva. If you lend through Kiva, add a comment with a link to your Kiva page and I will add you to our list of Curious Cat Kivans.

Related: My 100th Entrepreneur Loan Through Kiva – Using Capitalism to Make a Better World

I made my 100th contribution to a micro-loan through Kiva last week. Participating with Kiva is a great antidote to reading about the unethical “leaders” taking huge sums to run their companies into the ground (or even just taking obscene sums to maintain their company). The opportunity to give real capitalists an chance at a better life is wonderful.

Kiva allows you to lend money to entrepreneur (in increments of $25). The most you get back is the amount you loaned, and if the entrepreneur, does not pay back the loan then you take a loss. This is something you do if you believe if giving people an opportunity to make a better life for themselves through hard work and intelligent economic choices.

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.

My loans have been made to in 32 countries including: Ghana, Cambodia, Uganda, Viet Nam, Peru, Ukraine, Mongolia, Ecuador and Tajikistan. Kiva provides sector (but I think this data is a not that accurate – it depends on the Kiva partners that are not that accurate on identifying the sectors (it seems to me). A large number of the loans are in retail, clothing and food. I like making loans that will improve productivity (manufacturing, providing productivity enhancing services…) but can’t find as many of those as I would like (8% of my loans are in manufacturing, 11% agriculture, retail 18%, 23% food, 25% services (very questionable – these are normally really retail or food, it seems to me).

Some examples of the entrepreneurs I have lent to: welding workshop (Nicaragua), expanding generator services business with computer services (Cambodia), food production (Ghana), manufacturing nylon (Nigeria), internet cafe (Lebanon), electronics repair (Benin), new engine for mill (Togo), weaving (Indonesia) and a food market (Mexico).

Related: Financial Thanksgiving – MicroFinance Currency Risk – Creating a World Without Poverty – Provide a Helping Hand

21 of my loans have been paid back in full. 3 have defaulted. Those figure give a distorted picture though (I believe). There was a problem with a Kiva partner (they partner with micro-finance banks around the world) MIFEX, in Ecuador. Kiva discovered that MIFEX (i) improperly inflated the loan amounts it posted for entrepreneurs on the Kiva website and (ii) kept the excess amount of the posted loan to fund its own operational expenses. Kiva does not expect any further payments on these loans. I had 2, so I think those 2 give a fair impression. The 3rd default is from Kenya. That loan was to a business selling bicycle parts. In 2008, in Kenya, the prevailing political crisis deteriorated and businesses have either been destroyed or closed in fear of looters. Technically the loan did default, however, I was paid $71.50 out of $75 loan (so the defaulted amount was very small.

In addition, of the 72 active loans only 1 is delinquent. Granted some are new, and have not had a chance to go delinquent but many have been paid successfully for a year or more and over 10 are within 2 months of being paid off. For Kiva overall the default rate is a bit over 2%. I think a more interesting figure would be the % of capital that had defaulted. So if $10,000,000 had been loaned, then how much was paid back. So with the Kenya loan above 95.3% of the loan was repaid.

Rather than that loan being counted as a binary defaulted yes or no, counting it as a 4.7% default provides a more accurate picture to me. If I had 100 identical loans and everyone defaulted I would have 95.3% of my original capital. Or I could have a 10% default rate at that same (95.3%) payback level in which case I would have 99.5% of my original capital. Or I could have a 5% default rate with a 5% payback level (they paid back $5 of a $100 loan) and I would have 95.3% of my original capital. It seems to me when you have the same percentage of original capital remaining with default percentages of 100% and 5% that means the default figure is not providing as valuable an insight as it could. I believe the % of original capital returned for the whole portfolio would provide a better measure of default performance.

I fully expect more situations similar to MIFEX, in Ecuador, where defaults happen. Historically micro-credit default rates have been very low. But as they become increasing popular and especially as they grown incredibly fast (due to organizations like Kiva) it is natural to expect some unwise decisions will be made and problems will follow. I am perfectly happy to have a few problems that result in some of my loan capital being lost, while helping a great number of people.

The thing I really worry about is not losing the money I put into Kiva, but the loans not creating value to the entrepreneurs. Being successful with a small business is hard. As the micro-lenders grow it is natural that getting loans will be easier. For those that make good choice that is wonderful. But there will also be loans made to people that will make bad choice or suffer from macro-economic conditions that result in the loans becoming a hardship rather than a boon. To some extent that is fine, with opportunity for success comes a certain amount of risk.

What I am concerned about most is maximizing the success and minimizing the failure. I believe in a model where the borrowers have to deal with real economic consequences and are rewarded for making good choices and hard work. But I want them to have good chances for success which will rely on not just their hard work but good decisions by the micro-lending banks and the economic conditions in their country. It does no good to make loans to entrepreneurs that are not likely to have success. As I wrote in 2007, getting unethical investment banks involved would be a very bad idea.