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Monday, December 10, 2012

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Steve Rhode

Kiva is a great tool to help. I think I've now made over 360+ loans through them to help people around the world. And while I'm a huge supporter of them, the one point that was missed in the piece was the interest rates the local microlenders charge the people that get the loan.

Risk creates high interest rates but those that are participating as Kiva lenders should at least be aware that the rates charged the end user can be very steep. For those of us that help to fund Kiva loans, I don't think any of us expect to receive any interest, and that's totally fine with me.

The interest rates can get very steep and the irony is that while we speak out about high interest rate lending in the U.S. sometimes the microlenders overseas are the only source of funds for those that need access to capital to assist their small business.

If anyone wants to join the personal finance team I created at Kiva to help others, visit http://www.kiva.org/invitedto/personal_finance_bloggers/by/steve9997 Our little team has made 273 loans to help people.

I don't share any of this information to discourage people from participating, just to fully inform you.

Milaap Micro Lending

Kiva is undoubtedly the leader of Micro loan platforms through worldwide. However, Kiva had recently launched micro-lending in India which was very different than what they offer for other countries. Unfortunately, it offered a very poor consumer lending experience. Here are a few of the issues:

1. All loans are for 3 years (minimum) — even though loan term is only typically for 6-12 months
2. Loan capital is auto re-loaned to whomever the MFI wants to lend to during remainder of the period
3. No details provided on loan repayments until the end of 3 years
lender takes currency downside risk (but not upside!)

So, we hope that Kiva quickly fixes their product as there is huge demand for micro-lending in India.

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