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my kiva loan has been repaid - what to do next?

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About this time last year I invested in a loan to an Azerbaijani minibus driver through kiva.org. Twelve months later, and the loan has been paid in full and it’s time for me to decide what I’m going to do with the cash. I could withdraw it and invest it in something with a monetary reward, or I could withdraw it and donate it all to charity. I’m going to do neither, I’m going to reinvest it through kiva.

I could invest for monetary reward

Although the entrepreneurs that kiva invests in do pay interest (which may or may not be at a high rate), this interest only covers the cost of running the schemes. One of the reasons that banks don’t lend out microloans is that the cost of the paperwork and collection is relatively fixed, so for a small loan, it eats up all the potential profits. Another reason, is that banks don’t commonly exist in some of the smaller villages as there is enough business there to make it worth their while. This means that the poorest people don’t have access to capital - in a modern capitalist world, they are at a distinct disadvantage.

The reward that I get through investing in kiva is better than money though. I know that I am making a difference, improving the world, and generally fulfilling my purpose for being. I’m not going to withdraw the money and put it into my ISA - which is my default solution for all my spare or windfall money.

I could donate to charity

I donate regularly to charity and am happy to continue to do so. The charities that I support are for causes that I believe are important, and I’m not opposed to increasing my donations. On the other hand, investing with kiva means that my money can be used again, and again, and again. The minibus driver has used the money, and now someone else can use it. And hopefully, in a years time, another person can use it, and so on.

Not everything can be solved through capitalist loans. Not every problem has a business as it’s solution. I’m going to continue to donate money to Oxfam to support their work in overseas development, but I’m also going to support some individuals in their quest to get out of the poverty trap by reinvesting my money in another loan through kiva.

I won’t, I’ll make a microcredit loan

Actually, reinvesting with kiva is pretty easy. It’s more effort to get the money out than it is to invest in a new loan. I’m quite pleased with the results, it’s nice to be able to help people out and treat them as competent and successful business people rather than deserving of sympathy.

If you’ve invested through kiva, what do you think of it? Are you opposed to microcredit for any reason? Let me know your views in the comments.

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20 comments for “my kiva loan has been repaid - what to do next?”

  1. I’ve loaned to two Iraqi cab drivers. Figured its the least I could do.
    Kiva’s great.

    Posted by guest | March 15, 2008, 1:14 am
  2. I looked into Kiva awhile back, it would appear that the nice tax people are going to be giving me some money soon so I think I’ll put some into Kiva. Thanks for the reminder.

    Posted by Looby | March 15, 2008, 4:20 pm
  3. I’m liking the idea of putting some money into Kiva so I can just keep using it again and again for different people.

    Posted by Mrs. Micah | March 15, 2008, 8:51 pm
  4. I donate to Kiva, it’s really easy and I just keep reinvesting the money when it gets repaid. Small amounts can make such a big difference in other countries.

    Posted by Louise | March 16, 2008, 3:42 am
  5. The only thing I worry about is the validity of the person; I haven’t invested in it, but am curious and always look for the good in people, but what are the odds of default on Kiva? Sounds like you’re 1 for 1 then, eh?

    Posted by hank | March 16, 2008, 5:40 pm
  6. I have been meaning to give Kiva a try sometime, if only for the sheer pleasure of helping someone else out.

    Posted by Zachary | March 17, 2008, 6:06 am
  7. I’m just wondering, how could I like this micro-loan principle as long as there is a man-in-the-middle who takes the interest, in other words is a “usurer”, instead of allowing the subject of the loan to use the full amount? I simply cannot understand. I know there must be a incentive, an “effort” for the borrower to not take a too big loan and to not pay it off back quickly. But that interest should go to the management company (kiva), or to CHARITY, not to the middle name from the “terrain”.

    Posted by Stefan | March 18, 2008, 10:53 pm
  8. @Stefan:
    Actually the costs of providing micro-credit loans are pretty high - each borrower needs to be processed and checked out, just like a regular loan, but the cost of doing so is out of all proportion to the loan amount given. One of the reasons that micro-borrowers can’t access a regular bank loan is that there’s no real profit to be made in lending such small amounts to them. The man in the middle takes the interest to cover the cost of providing the loan - they aren’t making a fortune from this.

    Posted by plonkee | March 18, 2008, 11:30 pm
  9. Kiva is great: Using Capitalism to Make the World Better. I have been lucky enough to be born in the USA and to travel. Given some small opportunities to others to help themselves is great.

    Posted by John Hunter | April 11, 2008, 12:08 am
  10. Last night loaned money to purchase piglets for a lady to raise to sell. I love the idea of helping someone out who is working hard for a better life.

    Posted by TB | April 24, 2008, 1:23 pm
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