I love Kiva. I think what they do is a great service, and I love how principled they are about never supplying their lenders with profits. Now, I don’t particularly agree with this method, because it does limit a large donor base, such as myself. I’ve lent a total of $25 on Kiva, and not because that was all I thought should be lent, but because there was no potential for profit there. Yes, I can deposit my money into this account, I can help someone out, and then get my money back, but while I’m doing that, that money is tied up. So I don’t lend, because I can help more people with the same amount of money by spending it in a way that will earn a return.
How can Kiva implement this, without becoming evil?
It’s really simple. The $25 I donated in the past was a gift from Kiva, so technically it wasn’t even my money. But what they did was associate that amount with my account, and then when it was paid back, they took that money back into their accounts. That tells me there are systems in place to differentiate between amounts of cash on specific payback. As a developer, this is important for the idea I have in mind.
The idea is to allow people to earn a profit percentage on what they lend. The lending agents are earning a profit based on the interest made–Kiva states on their website that ” Interest rates are set by the Field Partner, and that interest is used to cover the Field Partner’s operating costs” but this is the world of loans, and there will be more than expenses covered by that interest. The idea is to spread that profit up to the lenders at a small margin, somewhere around 1% — literally $0.01 for every $1 you lend. Kiva can charge their field agents 2%, and supply 1% to the lenders–which is still held in Kiva’s banks. This margin would come back into your account as “non-withdrawable” amounts. In other words, you could re-lend that amount, and create a compounding care effect, while still not being able to profit directly from the lending.
Basically the idea isn’t so much to put money into your pocket as it is to put your account in charge of more funding, so you are able to direct that funding towards goals and borrowers that you feel deserve / need it the most.
What this would do for Kiva, and the Micro-lenders
Using the data off of Kiva’s own website, I intend to prove this is the right thing to do.
First, I’ll be focusing on:
- Total Amount Lent through Kiva (A)
- Kiva Users who have Funded a Loan (U)
- Number of Loans made through Kiva (L)
It’s a simple formula:
This breaks down to the average amount a Kiva lender lent towards a Loan. Obviously this will be different in action, as averages are only average. But we’ll get an idea of what Kiva could consider as “missed interest” so far.
Basing these calculations off of lenders receiving just 1% interest on their loans, which at this time amounts to $48.82 per lender, per loan. So for the first loan, the interest is tiny: $0.49. For the next, because you have the previous interest, it’s a bit better at $0.98. Eventually going as high as $5.11 interest for a single loan by the 10th loan. This is the power of compounding interest. Through 10 loans (the average for a Kiva lender) you would earn around $27.67 in total interest.
Now that doesn’t sound like a lot, but let’s keep in mind that’s per lender. Of which there are 1,014,158 according to the stats. So, total interest, would be $2,806,477.84. How much could Kiva do with that? And that’s at 1% interest, if Kiva charged 2%, and kept 1% for their own, they would see the same in their bank accounts, and would be able to expand to new countries, find new worthy recipients, and could help so many more people.
What happens to the original deposit?
That’s the best part. Once you’ve gotten to the point where you’re in control of a relatively large sum of non-withdrawable funds, you could withdraw your original deposit, be able to access that money, while at the same time being able to help more people VIA Kiva. This is caring capitalism at it’s core, you’re not spending excess capital, you’re not seeing expenses, because you’re playing it smart. You begin with, say, $100 investment. You earn another $100, and withdraw the original $100. Now your capital investment is $0, and your risk is also $0.
This means you can help people without the worry that you’re going to lose money, more people will see donations this way, and Kiva will be able to help more people, and have a stronger sense of “community” than it does now.
On the flip side of that, you could simply keep your original stake in Kiva, lending it out with the rest of the money in your account, watching as the interest grows, and you are eventually able to help fund entire loans on your own! How many more people would be able to be helped if Kiva grew to this extent? You could spend your entire weekend searching out worthy recipients for the interest that you can’t withdraw, so you might as well lend!
Why not just deposit some money, and quit being so stingy?
I have this debate within myself that fights between my Buddhist belief that I shouldn’t be materialistic, that attachment to things and money will corrupt my soul, and the knowledge that I can do so much more good in the world with more money. It’s for this reason that I started Capitalist Cares, it’s why I became a Caring Capitalist. It’s the guiding principle behind all of my business decisions. So yes, it may appear as stingy to you, but to me it is simply the reconciliation of the two halves of my whole.
The social conscious yin to my capitalist yang.
If you have any other suggestions, or know of companies that are doing these types of things already, leave links in the comments below so we can spread the word, and help more people out!