Be a banker to the poor
hippiemom
Posts: 3,326
You, Too, Can Be a Banker to the Poor
The New York Times
By NICHOLAS D. KRISTOF
Published: March 27, 2007
For those readers who ask me what they can do to help fight poverty, one option is to sit down at your computer and become a microfinancier.
That’s what I did recently. From my laptop in New York, I lent $25 each to the owner of a TV repair shop in Afghanistan, a baker in Afghanistan, and a single mother running a clothing shop in the Dominican Republic. I did this through www.kiva.org, a Web site that provides information about entrepreneurs in poor countries — their photos, loan proposals and credit history — and allows people to make direct loans to them.
So on my arrival here in Afghanistan, I visited my new business partners to see how they were doing.
On a muddy street in Kabul, Abdul Satar, a bushy-bearded man of 64, was sitting in the window of his bakery selling loaves for 12 cents each. He was astonished when I introduced myself as his banker, but he allowed me to analyze his business plan by sampling his bread: It was delicious.
Mr. Abdul Satar had borrowed a total of $425 from a variety of lenders on Kiva.org, who besides me included Nathan in San Francisco, David in Rochester, N.Y., Sarah in Waltham, Mass., Nate in Fort Collins, Colo.; Cindy in Houston, and “Emily’s family” in Santa Barbara, Calif.
With the loan, Mr. Abdul Satar opened a second bakery nearby, with four employees, and he now benefits from economies of scale when he buys flour and firewood for his oven. “If you come back in 10 years, maybe I will have six more bakeries,” he said.
Mr. Abdul Satar said he didn’t know what the Internet was, and he had certainly never been online. But Kiva works with a local lender affiliated with Mercy Corps, and that group finds borrowers and vets them.
The local group, Ariana Financial Services, has only Afghan employees and is run by Storai Sadat, a dynamic young woman who was in her second year of medical school when the Taliban came to power and ended education for women. She ended up working for Mercy Corps and becoming a first-rate financier; some day she may take over Citigroup.
“Being a finance person is better than being a doctor,” Ms. Sadat said. “You can cure the whole family, not just one person. And it’s good medicine — you can see them get better day by day.”
Small loans to entrepreneurs are now widely recognized as an important tool against poverty. Muhammad Yunus won the Nobel Peace Prize last year for his pioneering work with microfinance in Bangladesh.
In poor countries, commercial money lenders routinely charge interest rates of several hundred percent per year. Thus people tend to borrow for health emergencies rather than to finance a new business. And partly because poor people tend to have no access to banks, they also often can’t save money securely.
Microfinance institutions typically focusing on lending to women, to give them more status and more opportunities. Ms. Sadat’s group does lend mostly to women, but it’s been difficult to connect some female borrowers with donors on Kiva — because many Afghans would be horrified at the thought of taking a woman’s photograph, let alone posting on the Internet.
My other partner in Kabul is Abdul Saboor, who runs a small TV repair business. He used the loan to open a second shop, employing two people, and to increase his inventory of spare parts. “I used to have to go to the market every day to buy parts,” he said, adding that it was a two-and-a-half-hour round trip. “Now I go once every two weeks.”
Web sites like Kiva are useful partly because they connect the donor directly to the beneficiary, without going through a bureaucratic and expensive layer of aid groups in between. Another terrific Web site in this area is www.globalgiving.com, which connects donors to would-be recipients. The main difference is that GlobalGiving is for donations, while Kiva is for loans.
A young American couple, Matthew and Jessica Flannery, founded Kiva after they worked in Africa and realized that a major impediment to economic development was the unavailability of credit at any reasonable cost.
“I believe the real solutions to poverty alleviation hinge on bringing capitalism and business to areas where there wasn’t business or where it wasn’t efficient,” Mr. Flannery said. He added: “This doesn’t have to be charity. You can partner with someone who’s halfway around the world.”
The New York Times
By NICHOLAS D. KRISTOF
Published: March 27, 2007
For those readers who ask me what they can do to help fight poverty, one option is to sit down at your computer and become a microfinancier.
That’s what I did recently. From my laptop in New York, I lent $25 each to the owner of a TV repair shop in Afghanistan, a baker in Afghanistan, and a single mother running a clothing shop in the Dominican Republic. I did this through www.kiva.org, a Web site that provides information about entrepreneurs in poor countries — their photos, loan proposals and credit history — and allows people to make direct loans to them.
So on my arrival here in Afghanistan, I visited my new business partners to see how they were doing.
On a muddy street in Kabul, Abdul Satar, a bushy-bearded man of 64, was sitting in the window of his bakery selling loaves for 12 cents each. He was astonished when I introduced myself as his banker, but he allowed me to analyze his business plan by sampling his bread: It was delicious.
Mr. Abdul Satar had borrowed a total of $425 from a variety of lenders on Kiva.org, who besides me included Nathan in San Francisco, David in Rochester, N.Y., Sarah in Waltham, Mass., Nate in Fort Collins, Colo.; Cindy in Houston, and “Emily’s family” in Santa Barbara, Calif.
With the loan, Mr. Abdul Satar opened a second bakery nearby, with four employees, and he now benefits from economies of scale when he buys flour and firewood for his oven. “If you come back in 10 years, maybe I will have six more bakeries,” he said.
Mr. Abdul Satar said he didn’t know what the Internet was, and he had certainly never been online. But Kiva works with a local lender affiliated with Mercy Corps, and that group finds borrowers and vets them.
The local group, Ariana Financial Services, has only Afghan employees and is run by Storai Sadat, a dynamic young woman who was in her second year of medical school when the Taliban came to power and ended education for women. She ended up working for Mercy Corps and becoming a first-rate financier; some day she may take over Citigroup.
“Being a finance person is better than being a doctor,” Ms. Sadat said. “You can cure the whole family, not just one person. And it’s good medicine — you can see them get better day by day.”
Small loans to entrepreneurs are now widely recognized as an important tool against poverty. Muhammad Yunus won the Nobel Peace Prize last year for his pioneering work with microfinance in Bangladesh.
In poor countries, commercial money lenders routinely charge interest rates of several hundred percent per year. Thus people tend to borrow for health emergencies rather than to finance a new business. And partly because poor people tend to have no access to banks, they also often can’t save money securely.
Microfinance institutions typically focusing on lending to women, to give them more status and more opportunities. Ms. Sadat’s group does lend mostly to women, but it’s been difficult to connect some female borrowers with donors on Kiva — because many Afghans would be horrified at the thought of taking a woman’s photograph, let alone posting on the Internet.
My other partner in Kabul is Abdul Saboor, who runs a small TV repair business. He used the loan to open a second shop, employing two people, and to increase his inventory of spare parts. “I used to have to go to the market every day to buy parts,” he said, adding that it was a two-and-a-half-hour round trip. “Now I go once every two weeks.”
Web sites like Kiva are useful partly because they connect the donor directly to the beneficiary, without going through a bureaucratic and expensive layer of aid groups in between. Another terrific Web site in this area is www.globalgiving.com, which connects donors to would-be recipients. The main difference is that GlobalGiving is for donations, while Kiva is for loans.
A young American couple, Matthew and Jessica Flannery, founded Kiva after they worked in Africa and realized that a major impediment to economic development was the unavailability of credit at any reasonable cost.
“I believe the real solutions to poverty alleviation hinge on bringing capitalism and business to areas where there wasn’t business or where it wasn’t efficient,” Mr. Flannery said. He added: “This doesn’t have to be charity. You can partner with someone who’s halfway around the world.”
"Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." ~ MLK, 1963
Post edited by Unknown User on
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Comments
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that's cool as balls. I'm all over that sort of thing. Thanks HM.My Girlfriend said to me..."How many guitars do you need?" and I replied...."How many pairs of shoes do you need?" She got really quiet.0
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That's pretty cool. However, I find it odd that this article makes no mention of whether or not these people received any return on their investment. But whatever, it's their money.0
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That is great idea!0
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According to the FAQ on the Kiva site, there is no return on the investment. Your loans are also not guaranteed, although approximately 97% are repaid in full.farfromglorified wrote:That's pretty cool. However, I find it odd that this article makes no mention of whether or not these people received any return on their investment. But whatever, it's their money.
EDIT: I rushed through that section and misread it. 97% of microfinance loans worldwide are repaid in full. Currently, 100% of Kiva's loans have been repaid.
I'm definitely going to do this. Instead of a charitable contribution that I would otherwise make, I can put the same amount of money here and keep using it over and over again."Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." ~ MLK, 19630 -
hippiemom wrote:I'm definitely going to do this. Instead of a charitable contribution that I would otherwise make, I can put the same amount of money here and keep using it over and over again.
I was thinking that too... maybe just set aside a hundred bucks or so, and just keep re-investing it when it it repaid.
I also think that it's cool that Paypal is waiving any commission so that 100% goes to the borrower.My whole life
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln0 -
hippiemom wrote:According to the FAQ on the Kiva site, there is no return on the investment. Your loans are also not guaranteed, although approximately 97% are repaid in full.
No return on the investment??? Shit, I'm going to use this site to raise money myself
I'm definitely going to do this. Instead of a charitable contribution that I would otherwise make, I can put the same amount of money here and keep using it over and over again.
Yeah, it's definitely a cool thing. I'm going to do this too.0 -
Can I write off a loan?0
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Coolest thing I've seen in a long time. Thanks hippiemom.
Totally agree with this part..
“I believe the real solutions to poverty alleviation hinge on bringing capitalism and business to areas where there wasn’t business or where it wasn’t efficient,” Mr. Flannery said. He added: “This doesn’t have to be charity. You can partner with someone who’s halfway around the world."0 -
zstillings wrote:Can I write off a loan?
22 Is my loan tax-deductible?
No – because it is a loan not a donation, and there is an expectation of repayment.
23 Will I get my money back?
Your loan is not guaranteed, therefore there is a chance that you will not get your money back. However, just as there are different levels of risk in stocks or mutual funds, there are also different levels in risk in funding a loan.
Your Kiva.org loan is a low-risk loan. Microfinance loans worldwide are generating repayment rates of 97% (UNCDF: Basic Facts About Microfinance). To date, Kiva.org’s repayment rate is 100%.
If you are still concerned about repayment, minimize your risk by diversifying – loan $25 to a number of businesses rather $100 (or more!) to one business.
24 Do I need to report my loans to the IRS on my tax return?
No. As Kiva.org currently does not provide interest to lenders, there is no way to make a profit on your loan. You do not need to report to the IRS loans which cannot earn you a profit.
25 If my loan defaults, can I then claim it as a tax-deductible donation?
No, because it was intended as a loan, not a donation. However you can claim it as a capital loss."Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." ~ MLK, 19630 -
hippiemom wrote:22 Is my loan tax-deductible?
No – because it is a loan not a donation, and there is an expectation of repayment.
23 Will I get my money back?
Your loan is not guaranteed, therefore there is a chance that you will not get your money back. However, just as there are different levels of risk in stocks or mutual funds, there are also different levels in risk in funding a loan.
Your Kiva.org loan is a low-risk loan. Microfinance loans worldwide are generating repayment rates of 97% (UNCDF: Basic Facts About Microfinance). To date, Kiva.org’s repayment rate is 100%.
If you are still concerned about repayment, minimize your risk by diversifying – loan $25 to a number of businesses rather $100 (or more!) to one business.
24 Do I need to report my loans to the IRS on my tax return?
No. As Kiva.org currently does not provide interest to lenders, there is no way to make a profit on your loan. You do not need to report to the IRS loans which cannot earn you a profit.
25 If my loan defaults, can I then claim it as a tax-deductible donation?
No, because it was intended as a loan, not a donation. However you can claim it as a capital loss.
Thank you hippiemom.0 -
i saw this short while ago somewhere on TV.
it is a great idea and think i will give it a whirl... i just hope the afghan TV repair man isnt affiliated with al-queda so i wont be labeled a terrorist sympathizer, and the secret police kick in my door with the patriot act in hand 0 -
I posted this back in March, and have made several loans since then. The first two were repaid in full yesterday, so I thought this would be a good time to bump the post for those who may have missed it the first time around.
I've already lent out the repaid funds to new borrowers, so it just keeps on giving
"Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." ~ MLK, 19630 -
Oh I love this idea mom!
I'll have to organize myself and get on board! And good to hear from someone that has tried it. Thank you. NOPE!!!
*~You're IT Bert!~*
Hold on to the thread
The currents will shift0 -
Thanks. Didn't you (or someone else) post this a year or so ago? I was going to do it and forgot. This time I won't forget because I'm going to do it now. "I'd rather be with an animal." "Those that can be trusted can change their mind." "The in between is mine." "If I don't lose control, explore and not explode, a preternatural other plane with the power to maintain." "Yeh this is living." "Life is what you make it."0
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I'm gonna ammend this post to keep it short and keep the flames down.
1. I think it sucks that they only accept "loans" in the form of CREDIT CARDS.
It fucks the lender, by forcing them to MAKE INTEREST PAYMENTS on a loan, of which they receive NO INTEREST.
2. I think it is funny that YOU can not make any money, but the guy who is running this gets a salary. Infact, everyone on staff is getting paid, i imagine.
3. I think they would get a LOT more lenders if they would just charge even some token interest to these people. Say 3%
4. I think this system errodes the free market on some level.
If you think about it, for every person out there on this site getting a 100% subsidised NO INTEREST loan, there is another guy out there somewhere who didn't get on this site, who is trying his damnedest to get a loan like every other honest joe in this world, and HE IS NOW AT A SEVERE DISADVANTAGE because YOU gave the OTHER guy a FREE LOAN!
Just think about it.
Is THAT fair?
I dunno.
:(If I was to smile and I held out my hand
If I opened it now would you not understand?0 -
YOU ARE PAYING INTEREST ON A CREDIT CARD TO LEND SOMEONE ELSE MONEY FOR FREE. I for one am not doing that. I pay my bills in full every month. The non-profit is being funded by donations that are fully deductible. It is a non interest bearing loan to be sure but the upside is great. No interest to the banks at least on my part and a small investment (no interest on my money if it is repaid and still small if it isn't) to make a big difference in someone else's life.DriftingByTheStorm wrote:man i hate to say this, but i think this is crap.
Don't think i'm a cruel heartless bastard for this, but here goes:
1. Kiva is a non-profit corporation, yes.
However, that means the directors, namely the CEO, board, etc are making SALARY on this. They are being paid.
Yeah it's great what they are doing, they are giving money to poor people for free ... yeah ... it's free ... 100% subsidised, NO INTEREST.
2. YOU are getting screwed.
Yeah, you get your money back, but they are only taking CREDIT CARDS for payment ... why not take checks or cash, or wires, or EFTs or cashiers checks etc ...
YOU ARE PAYING INTEREST ON A CREDIT CARD TO LEND SOMEONE ELSE MONEY FOR FREE.
... honestly, great.
If that makes you happy ... if you feel better about yourself for giving away free money, great.
But i truly think it is a mild version of a scam.
I know i'm gonna take a lot of shit for this, because this board leans so far left, and we all have so much compassion etc ...
... i'm just saying that for those of us who believe that entrepreneurial effort should be rewarded, it is a bit of an insult to think that people are getting FREE money.
I dunno ... I can't get free money! Why should they?
Look, i'm not being ugly ... but this website is essentialy erroding free market economics on a small scale level ... AND it is screwing the donor with interest themselves!
WHO EVER HEARD OF PAYING INTEREST TO LOAN MONEY !!?!!
YIKES!
I dunno guys.
Collective lending, eco-investing, micro-lending -- these are all GREAT.
But you shouldn't be guilted in to handing over money AT YOUR OWN EXPENSE to help out some other guy.
Responsible hardworking people should do just that.
Be responsible and work hard ... AND that means subscribing to the system like everyone else. Borrowing money is a privelage, and you are supposed to PAY for that privelage ...
I dunno.
At the end of the day, do what you want.
I agree, it's a great IDEA ...
but in reality i think THIS instance of the idea sort of sucks.
If you could donate WITHOUT a CREDIT CARD, i would probably think MUCH differently, but i am no way in hell lending someone money and PAYING FOR IT!
:( :( :(
Besides,
they'd get a SHIT TON more money if they would just charge even some NOMINAL INTEREST.
Are the banking partners getting interest?
How is this non-profit being funded?
SOMEONE is making money somehow.
??? "I'd rather be with an animal." "Those that can be trusted can change their mind." "The in between is mine." "If I don't lose control, explore and not explode, a preternatural other plane with the power to maintain." "Yeh this is living." "Life is what you make it."0 -
wolfbear wrote:YOU ARE PAYING INTEREST ON A CREDIT CARD TO LEND SOMEONE ELSE MONEY FOR FREE. I for one am not doing that. I pay my bills in full every month. The non-profit is being funded by donations that are fully deductible. It is a non interest bearing loan to be sure but the upside is great. No interest to the banks at least on my part and a small investment (no interest on my money if it is repaid and still small if it isn't) to make a big difference in someone else's life.
Even if you are paying off your card in full, you are still losing the "Time Value" of your money.
I hear you, it's great to make a difference.
See #4 in my ammended post.
Lending to someone at 0% is fucking over someone else who is not privy to this subsidised way below market rate loan. You have just put someone else at an infinte disadvantage as far as operating costs. Literally, infinite. Person A has loan costs of ZERO dollars. Person B has loan costs of ANYTHING OVER ZERO.
:(
Who wins in the longrun? Maybe not a sure thing, but even if person B runs a more efficient business, they are still running against the odds, since Person A has an artificialy low operating cost for their loan.
:(If I was to smile and I held out my hand
If I opened it now would you not understand?0 -
I do understand your position of inequity, but I really can't do anything about that. I can't solve all the problems in the world - lol. What I can do is donate or loan whichever the case may be a few dollars to help make a difference. I think this is a great idea and hopefully it will spread so all who need it can use it.DriftingByTheStorm wrote:Even if you are paying off your card in full, you are still losing the "Time Value" of your money.
I hear you, it's great to make a difference.
See #4 in my ammended post.
Lending to someone at 0% is fucking over someone else who is not privy to this subsidised way below market rate loan. You have just put someone else at an infinte disadvantage as far as operating costs. Literally, infinite. Person A has loan costs of ZERO dollars. Person B has loan costs of ANYTHING OVER ZERO.
:(
Who wins in the longrun? Maybe not a sure thing, but even if person B runs a more efficient business, they are still running against the odds, since Person A has an artificialy low operating cost for their loan.
:( "I'd rather be with an animal." "Those that can be trusted can change their mind." "The in between is mine." "If I don't lose control, explore and not explode, a preternatural other plane with the power to maintain." "Yeh this is living." "Life is what you make it."0 -
wolfbear wrote:I do understand your position of inequity, but I really can't do anything about that. I can't solve all the problems in the world - lol. What I can do is donate or loan whichever the case may be a few dollars to help make a difference. I think this is a great idea and hopefully it will spread so all who need it can use it.
When the US Government created the FHA and subsidized home loans to the "poor" in America, it drove up housing prices for the entire middle class.
:(
I'm just saying, i agree with lending a hand, but it would be prudent for these people to be charging interest ... (come on, WTF is interest on $100 anyhow? sheesh) ... hell, compound it anualy instead of continuosly if you feel so bad ... but charge some interest so you aren't destroying the free market system.
If this really does "catch on" it could truly have a cataclysmic effect on the local markets in which the loans are operating.
By randomly choosing certain businesses to dole out 0% interest loans to, you are unraveling the fabric of a system which is supposed to be issuing loans at varying rates based on some rating system of risk.
It is unhealthy for business as a whole in the long run.
If 5000 incompetent twits get free money and go on to put out-of-business 500 great minds who just happened not to get a free loan, then the entire country in which those 5000 twits operate suffer for it. You have just promoted the expansion of bad business, to the detriment of everyone who relies on that business. Your motives may be 100% genuine altruistic greatness, but it does not get around the fact that you sidestepped the checks-&-balances of the free market system.
It may not be that bad, but it certainly could be.
I probably wouldn't be ranting this hard if i wasn't knee deep in the middle of The Creature From Jekyll Island, which deals with this issue on a MUCH higher level. It is about The Federal Reserve, and how by government interference and the creation of this Reserve entity, America has destroyed the free market and promoted the growth of poorly run banks and directly disadvantaged smaller, better managed banks.
It is the same principal, and it STINKS!
Regardless of what the "intent" may be.
Sorry.
:(
PS - and i'm really glad you are "making a difference" some how.
I wish i could subscribe to this. I was all over it until i realized it was 0 interest. Not even for my own benefit, but as i described. I recognize the injustice of it. Makes me want to start my own site that DOES charge interest. Of course, it couldn't be non-profit for that reason, lol. But i bet it would get MORE lenders! If I was to smile and I held out my hand
If I opened it now would you not understand?0 -
Ok, agree with you again somewhat. But you're comparing government loans to private loans, not a far comparison. Private loans are free market where government ones are not. I will put my money on people not government any day.DriftingByTheStorm wrote:When the US Government created the FHA and subsidized home loans to the "poor" in America, it drove up housing prices for the entire middle class.
:(
I'm just saying, i agree with lending a hand, but it would be prudent for these people to be charging interest ... (come on, WTF is interest on $100 anyhow? sheesh) ... hell, compound it anualy instead of continuosly if you feel so bad ... but charge some interest so you aren't destroying the free market system.
If this really does "catch on" it could truly have a cataclysmic effect on the local markets in which the loans are operating.
By randomly choosing certain businesses to dole out 0% interest loans to, you are unraveling the fabric of a system which is supposed to be issuing loans at varying rates based on some rating system of risk.
It is unhealthy for business as a whole in the long run.
If 5000 incompetent twits get free money and go on to put out-of-business 500 great minds who just happened not to get a free loan, then the entire country in which those 5000 twits operate suffer for it. You have just promoted the expansion of bad business, to the detriment of everyone who relies on that business. Your motives may be 100% genuine altruistic greatness, but it does not get around the fact that you sidestepped the checks-&-balances of the free market system.
It may not be that bad, but it certainly could be.
I probably wouldn't be ranting this hard if i wasn't knee deep in the middle of The Creature From Jekyll Island, which deals with this issue on a MUCH higher level. It is about The Federal Reserve, and how by government interference and the creation of this Reserve entity, America has destroyed the free market and promoted the growth of poorly run banks and directly disadvantaged smaller, better managed banks.
It is the same principal, and it STINKS!
Regardless of what the "intent" may be.
Sorry.
:( "I'd rather be with an animal." "Those that can be trusted can change their mind." "The in between is mine." "If I don't lose control, explore and not explode, a preternatural other plane with the power to maintain." "Yeh this is living." "Life is what you make it."0
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