plonkee money an english-er's thoughts on personal finance

March 14, 2008

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

Filed under: giving — plonkee @ 7:00 pm

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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