P2P-Banking.com

Kiva has now enacted changes in how currency risks are accounted for. The model was first proposed in March.
Now MFIs can choose “currency risk protection” for their new loans. If this option is selected lenders will have to cover any losses that arise from a devaluation of the local currency exceeding 20% (for the part that is over the 20%).

On listed loans at Kiva there will be a new information status on the “about the Loan” Section under “Currency Exchange Loss”. The status will either be:

• “Covered”: Meaning the MFI covers any losses (like it has been in the past)
• “Possible”: The MFI has opted for the new rule - the lender covers currency losses above 20%

I browsed some new loan listings today - most are still offered under the “covered” rule, one example of a loan under the new “possible” rule is this Tajikistan loan. (more…)

Matt Flannery has written a great article recapitulating the story of Kiva. “Kiva at four” centers on the developments in the past two years. Flannery shares his vision what Kiva might develop to.

I won’t even try to extract the highlights as the whole article is a fascinating read.

Tomorrow Kiva will announce that it will start to fund loans to borrowers in the United States. Kiva, which so far lets anyone support loans to small entrepreneurs in developing countries, is reacting to lender suggestions who wanted to use Kiva to help borrowers in need in the US.

In the US Kiva will partner with Accion USA and Opportunity Fund to select eligible borrowers. Initially the small business owners borrowing will be from the areas of Atlanta, Boston, Miami, New York and San Francisco. (more…)

The Kiva API allows anyone to develop applications that use the data from Kiva loans. Below are screenshots from two Kiva loan apps.

Kiva loans by country of borrower - source Kivadata.org (more…)

I am blogging this live while listening to the Kiva conference call. Kiva plans a loan matching program, where lenders and institutions can opt to automatically match loans made by other lenders.

Some statements/explanations from the conference call:

• Today 6 or 7 people out of 100 that visit the Kiva website actually make a loan (conversion rate)
• Lenders can select to match any loan, or select loans by criteria
• Lenders can opt to match immediately or only if they have periods of inactivity
• Minimum account balance allows to reserve some money in the account (only balance over this minimum is used for matching)
• Donations to the Kiva organisation are mandatory(!) when using the matching feature

Kiva says the new feature allows to automate the lending process and hopes that it inspires others to lend more.

The matching program will probably be launched in summer 2009.

On terms of automation there are similarities to the autobid feature MYC4 has.

See the following presentation for more details on the plans.

In today’s conference call, Kiva explained plans to reduce currency risks for the local MFIs by having lenders absorb losses, if currency depreciation is higher then a threshold x% (with x% yet to be defined).

Currently currency risk for loans issued in local currency is fully taken by local MFIs of Kiva. In future MFIs can select for new loans, if they want to keep it that way, or if a new stop-loss rule shall apply.

The details are explained in this presentation:

Slide 14 shows how many of the loans would be affected, if the stop loss rule would have applied in 2008/ in the last 5 years.

One question in the Q&A of the conference call was, why currency risk came up just now after years of operation of Kiva and the answer was that the problem is now more pressing with the recent appreciation of the US dollar.

Another question was, if a possible solution would be that Kiva just would supply the hard currency as collateral to a local bank in the country which would then issue the loan in local currency. The answer was that this would be impractical, because in case the local currency appreciates then the bank would demand a raise in the collateral, which could not be handled as neither Kiva has the funds nor could the lenders on the loans affected be expected to make an additional payment for this.

It will be interesting to see, if some MFIs stick to the current mode and upload loans with no currency risk sharing to the platform.

On MYC4 lenders take currency risk in full but earn interest.

A Fistful Of Dollars: The Story of a Kiva.org Loan from Kieran Ball.

The video was made by Kiva fellow (volunteer) Kieran Ball, who worked for Kiva in Cambodia. It explains the transfer of the money for a Kiva loan from a lender in London to a borrower in Cambodia.

This is a great example how many people can be reached over the internet with a well made video in a short time. Online since only 8 days the video has been watched over 32,000 times and was embedded in many websites (at least 50).

Just a short heads up: Kiva plans a developer program allowing 3rd party applications to use data from the Kiva (lender) pages.

We’ve been working hard over the past few months to create a developer program at Kiva. This will be a place online where software engineers can get creative with Kiva and build applications that use Kiva in new ways. Perhaps someone will build a spiffy new tool to help you make a loan on your iPhone, or a text messaging service that notifies you when loans from your favorite country are available. A Facebook application that helps you keep up with new journals from your loans and share them with friends would be handy too.

In this post Netbanker questions, if MyC4 and Kiva are offering p2p lending. He argues they are “not really peer-to-peer”.

Let’s have a look, if these microfinance models can fit under the definition of peer to peer lending. One aspect of p2p lending is, that the lender can select individual borrowers, which he wants to lend money to. Kiva and MyC4 offer this choice. A p2p lending platform usually allows search parameters to narrow the search for matching borrowers (e.g. by credit grade). Both have this function allowing to search by country, gender, industry and more.

A possible argument against classifying MyC4 and Kiva as p2p lending companies is the fact that they use local microfinance institutions as intermediaries acting between lender and borrower and charging fees. That is true, but several other p2p lending services (e.g. Prosper, Lending Club and Smava) use banks as intermediaries (for legal reasons).

So where exactly is the divide seperating MyC4 and Kiva from other p2p lending services. They differ especially on the factor that:

1. Borrowers can not sign up themselves (so one side is really offline); borrowers are selected and screened by the MFIs
2. Business model
3. Lenders receive no interest at Kiva
4. Lenders and borrowers do not reside in the same country.

I still think that MyC4 and Kiva can be defined as p2p lending services. With Microplace the case is different, because no individual borrowers can be identified; therefore Microplace could be excluded form p2p lending (Microplace states that it is not a p2p lending site).

(Photo credit: Stig Nygaard)

Kiva announced a new policy regarding inactive accounts:

So, later this month, we’ll be rolling out a new policy where credit that has been inactive for 12 months will turn into a donation to Kiva. This way, the funds will be put to use helping Kiva fulfill our philanthropic mission, and affected lenders will receive something of value - a tax receipt for a charitable donation.

Kiva says most lenders will not be affected, because lenders with active loans or those who logged in or received a repayment within the last 12 months are not inactive.

Update Dec, 13th: Long discussion by lenders about the proposed change here.