I often have difficulty finding real entrepreneurs (many of the loans are for things like education, fixing up their house, buying motorcycle/car, etc. that may well be very important but are not really related to entrepreneurship in most cases). That is fine, in this session I had 3 loans to entrepreneurs and 2 loans for solar energy solutions for people’s homes. Improved energy, cooking or water access are some things I am happy to lend to that are not entrepreneur related. Though usually the water loans are – to an entrepreneur that will sell clean water to a neighborhood and sometimes the solar energy ones are, though not in this case.

Kelly in Medellin, Columbia is starting a shoe business.

The write-ups on Kiva are often fairly well done; targeting those interested in making loans. Kelly’s:

I often screen the data on delinquencies and defaults for the partner bank in making loan decisions. It isn’t because I am worried about losing my loan (I just re-lend what I get paid back). But if I lend to organizations that are having more failures I increase their supply of money to make loans which don’t seem to be working out for borrowers as well as another lender). I want my money going to help people, not get people into a mess.

The stats for this lender are bad. But there is an explanation (for the bad delinquency rate, at least). The default rate is 3.99% which is also bad, but the way Kiva collects that isn’t great (they have called things defaulted that just had the borrower paying everything back but there was a currency exchange loss – which is a loss to the lender but not truly a default). I would hope Kiva fixed that, but I don’t know that they have.

I decided to give this entrepreneur a chance. I hope she is successful. It isn’t easy and I do worry about setting people up for a difficult time when they are not ready for the challenge of making the loan work for them. The loans I really like are ones like the one I made today on Kiva Zip for a entrepreneur in Kenya to have their Posho Mill fixed. They saw a market need for a more convenient mill (for her village) and bought one and has been running her business.

Hilda’s posho mill, Kenya

I am glad I am successful enough to help people out with loans. And also with donations through sites like Global Giving (which also does a good job of using the web to encourage investment by donors/lenders) and Trickle Up. It is wonderful to see people have success creating a business that can greatly improve their lives, which helping customers and sometimes creating jobs for others.

Related: Kiva Loans Give Entrepreneurs a Chance to Succeed – More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – Funding Entrepreneurs in Nicaragua, Ghana, Viet Nam, Togo and Tanzania

The 3rd entrepreneur loan is to a women in India to buy a press to make leaf plates. “As the business will grow, she can also employ a few women, creating employment.” Indian loans have special provisions (due to Indian government rules – which were put in place due to horrible practices, people killing themselves due to crushing debt and collection actions). This is another reminder that while, I like the opportunity these loans provide they are by no means perfect. For people really worried about this but that like the idea, look at Trickle Up; they do similar thing but with micro grants instead of micro loans. I have been giving to Trickle Up for much longer (since I was in college, actually).

I also like how Kiva includes a map showing the country of the borrower on the loan profile page. It is another good way to help people learn about the world while they are helping others.

It is a quirk that both are women. I am biased toward manufacturing loans and also to individual loans (over group loans). I think both of those (especially manufacturing) have many more men on Kiva. I am also a bit biased toward helping women with my loans but someone looking at the data might not think that (58% of my loans have been to men).

Top countries for my loans (I have lent to 60 of the 79 countries in which Kiva offers loans)

Cambodia – 7%
Kenya – 6.7%
Bolivia – 5.6%
Vietnam – 4.9%
Togo – 4.8%
Philippines – 4.4%
Nicaragua – 4.3%
El Salvador – 4.1%
Senegal 4%
Colombia 4%
USA is 2.5%

I have also noticed quite a few loans the last 6 months that are very near expiration with under 5% of the loan amount lent. If they don’t get 100% they loan is refunded via Kiva to the lenders. Most of the loans are actually already made but if Kiva doesn’t have lenders pick it up that means the partner bank has that loan on their books (tying up their capital so they can’t make as many loans). I think it is probably a good thing, in general. I would imagine a significant amount of cash is sitting on Kiva users balances (they get excited and lend but after awhile don’t come back and re-lend), but I could be wrong about that.

There is a Curious Cats group on Kiva that has now lent $25,075 in 664 loans.

In 2013, international migrants sent $413 billion home to families and friends — three times more than the total of global foreign aid (about $135 billion). This money, known as remittances, makes a significant difference in the lives of those receiving it and plays a major role in the economies of many countries.

India received $72 billion and Egypt $18 billion in 2013.

I liked an interesting point he made. These remittences often include business advice to those relatives in the home country.

This is a great talk if you are interested in economics and global development. It is very important to understand the issues we face in helping billions living in poverty. As he says regulation of small remittences must be reduced. Policies forced by countries like the USA have damaged poor people’s lives worldwide with extremely onerous regulation.

Web site of the speaker: Dilip Ratha

Related: International Development Fair: The Human Factor – Creating a World Without Poverty – Supporting Virtual Workers – Solar Power Market Solutions For Hundreds of Millions Without Electricity

I really really like your work and webcasts (example included below).

This seems to me to make it really difficult on people trying to use judgement. Calling people’s actions “extremely paternalistic” if they are not definitely so, I think impedes debate. And I think debate should be encouraged.

When making Kiva loans I do steer away from loans with rates above 40% (I also prefer loans that are geared toward a capital investment that will increase earning power going forward though this is hard – lots of loans are essentially for inventory that will be sold at a profit so a fine use of loans but not as powerful [in my opinion] and new capital investments – say a new tool, solar power that will be resold to users…).

Just like people anywhere, people taking Kiva loans are capable of getting themselves into trouble. Choosing to allocate my lender toward certain loans does not mean I am being paternalistic.

I am not being paternalistic if I chose not to invest in the stock of some company that vastly overpays executives and uses high leverage to do very well (in good times).

I do like the idea of direct cash to people in need. I give cash that way (and in fact did it a long time ago, 20 years, for several years – before any of this new hipster cachet :-). And I still do like it.

I also like to give to things that I think are good where I decide what the money will be spent to invest in (I like Global Giving). I have also been giving to Trickle Up for more than 20 years. They, to simplify, give micro grants (so not loans) to extremely poor to build businesses. I believe that there is great value in helping people gain long term economic success (even if that isn’t exactly the way they would use the funds if they had free reign). I don’t think that is paternalistic.

Declaring that if someone wants to borrow at an 80% interest rate that it is paternalistic to question that decision I think is unfair. To say the borrower knows best and if they think 80% is good that should be good enough is fine. I am not sure I agree (I think with rates that high it is possible wise, but the risks become greater and the borrower needs to be more aware of the risks), but I agree it is possible.

I like your later statement much more: “The reality of global poverty IS messy and complicated, and I do think there are times when kiva fails to acknowledge the complexity.” I think you understand the complexity and the reason why paying rates that seem very high may well be in the person’s best interest.

I think in this context “paternalistic” quickly gains connotations of racism (knowing better than those others…). It isn’t children we are talking about so being called paternalistic in relations to adults that are often of another ethnicity can easily push in that direction.

I also think it is sensible to object to payday loans in the USA. You could make the same argument that such an attitude is paternalistic (though I do see in your comments the explanation of the understanding of how limited the loan options are for many overseas – though that is how it can feel to many in the USA that use payday lenders).

Related: Researching the Effectiveness of Micro-credit – Kiva Loans Give Entrepreneurs a Chance to Succeed – More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – More Kiva Entrepreneur Loans: Kenya, El Salvador…

I think sites like oDesk provide a potentially great way for people to lead productive and rewarding lives. They allow people far from rich countries to tap into the market demand in rich counties. They also allow people to have flexible work arrangements (if someone wants a part time job or to work from home that is fine).

These benefits are also true in the USA and other rich countries (even geography – there are many parts of the USA without great job markets, especially many rural areas). The biggest problem with rich country residents succeeding on something like oDesk is they need quite a bit more money than people from other countries to get by (especially in the USA with health care being so messed up). There are a great deal of very successful technology people on oDesk (and even just freelancing in other ways), but it is still a small group that is capable and lucky enough to pull in large paychecks (it isn’t only technology but that is the majority of high paying jobs I think on oDesk).

But in poor countries with still easily 2 billion and probably much more there is a huge supply of good workers. There is a demand for work to be done. oDesk does a decent job of matching these two but that process could use a great deal of improvement.

I think if I became mega rich one of the projects I would have would be to create an organization to help facilitate those interested in internet based jobs in poor countries to make a living. It takes hard work. Very good communication is one big key to success (I have repeatedly had problems with capable people just not really able to do what was expected in communications). I think a support structure to help with that and with project management would be very good. Also to help with building skills.

If I were in a different place financially (and I were good at marketing which I am not) I would think about creating a company to do this profitably. The hard part for someone in a rich country to do this is that either they have to take very little (basically do it as charity) or they have to take so much cash off the top that I think it makes it hard to build the business.

But building successful organizations that can grow and provide good jobs to those without many opportunities but who are willing to work is something I value. I did since I was a kid living in Nigeria (for a year). I didn’t see this solution then but the idea of economic well being and good jobs and a strong economy being the key driver to better lives has always been my vision.

This contrast to many that see giving cash and good to those in need as good charity. I realize sometimes that is what is needed – especially in emergencies. But the real powerful change comes from strong economy providing people the opportunity to have a great job.

I share Dr. Deming’s personal aim was to advance commerce, prosperity and peace.

Related: Commerce Takes More People Out of Poverty Than Aid – Investing in the Poorest of the Poor – I am a big fan of helping improve the economic lives of those in the world by harnessing appropriate technology and capitalism – A nonprofit in Queens taught people to write iPhone apps — and their incomes jumped from $15k to $72k

I realize some people see risk in what sites like oDesk make possible to create a market that means people can’t earn a decent living. I do actually see that risk and think it is real. I don’t think trying to block commerce because of this risk is an effective strategy. I do think many millions of people can be helped (and some will be hurt). I think we are better off trying to help those that want to work in such a way to do so.

I do worry that we may well not have decent work for people that are not interested in highly valuable skills and/or are not willing to work (just expect to be given the rich life many of those in places like the USA got to have the last 70 years without much effort). As long as we have corrupt politicians selling out the country to those giving them cash the richest 20% in the USA will have huge trust funds to live off, so they will be rich. Those that aren’t living off trust funds or inheriting huge windfalls will have risks to survive.

They are still economically super lucky to have been born in the USA so I don’t really feel very sorry for them. But yes, there are real risks to the easy riches that we have had (and even so many in the USA struggled even while we have the richest middle class the world has ever seen in the richest country the world ever saw). But it is going to be harder going forward (at least comparatively to the rest of the world contemporaneously) – compared to the struggles people had 100 years ago I am not at all sure it will be more difficult for the average kid born in 2010 than it was for the average kid born in 1910 (especially if average doesn’t mean white boy but everyone and both boys and girls).

Bono (who is fairly well known as the lead singer for U2): “Commerce — entrepreneurial capitalism — takes more people out of poverty than aid, of course, we know that.”

That is my belief and something I believe in strongly. Real capitalism will bring people out of poverty. That isn’t the same thing as any businesses will do that. Businesses that use monopolistic powers to extract benefits to themselves and suppress free markets may well do more damage than good. But we will continue to bring more people out of poverty through economic development and capitalism than through aid.

Related: Helping Capitalism Make the World Better – Kiva – Giving Entrepreneurs an Opportunity to Succeed – Dr. Deming’s personal aim was to advance commerce, prosperity and peace – Business 901 Podcast with Me: Deming’s Management Ideas Today – Monopolies and Oligopolies do not a Free Market Make

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 sure hope the vocational education is much better than much of what is available in the USA – which seeks just to exploit people. Vocational education can be extremely useful and valuable and worth taking out a loan for. But it is just so dangerous if someone is pushed into taking out a loan without the real prospect of a good income after the education is completed.

If anyone knows of charities providing grants or doing the vocational education directly please let me know. I would much rather donate than provide a loan in a case like this. I actually have no problem at all with it being a loan if the results of graduates shows the loan will reward hard work with a much better economic future. I just am very worried about people being taken advantage of in this situation. And I am perfectly happy to donate to a good vocational education program.

Maybe I am getting to be too soft. The luxury that those in the USA have taken for granted has not been available to billions that are living at the same time. We (in the USA) often have unrealistic ideas of how easy everyone else can expect to have it. Many very poor people around the world have to pay for even primary education.

I made new Kiva loans, today, to entrepreneurs in Indonesia, Cambodia, Senegal, El Salvador, Philippines and Togo.

Related: Investing in the Poorest of the Poor – Kiva Entrepreneur Loans: Kenya, Lebanon, Nicaragua, Kenya, Honduras and Armenia – You Can Help Reduce Extreme Poverty

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.

Related: Kiva Loans Give Entrepreneurs a Chance to Succeed – Micro-credit Research – Using Capitalism in Mali to Create Better Lives

Manuel De Jesus, miller and farmer in El Salvador, will use his loan to buy parts for this milling euipment.

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.

Related: More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – Using Capitalism in Mali to Create Better Lives – Funding Entrepreneurs in Nicaragua, Ghana, Viet Nam, Togo and Tanzania

There are many ways to help without writing a check. You can volunteer to help someone learn how to read or how to speak English. You can take on a little brother or sister and give them a positive role model. You can provide extra food from your garden to neighbors in need using Ampleharvest.org. You can volunteer at Hospice. Help build housing for those in need. Volunteer Match can help you find opportunities like these in your area.

12 ways of giving — without reaching into your wallet

Sometimes it is far more convenient to give money to support a worthy charity. But if your financial situation makes that difficult there are many other options. And truthfully volunteering your time is often more rewarding to those you help and those who are doing the helping.

Related: You Can Help Reduce Extreme Poverty – More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – Financial Thanksgiving

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