kiva.org - with a pro-gun group

[learn2shoot]

I have been lending money to folks in areas of the world less fortunate than mine through a website called kiva.org. This is micro loans (as little as $25). I have also started a group called "Gun Owners" right now I am the only person in this group - I would love to expand this group and let people all over the world see the benefit gun owners can have. If you are already lending through kiva please lend "through" this group if you are not please consider it.

Remember this is a loan that they pay back over time. - sometimes months other times years.

[Taggure]

[allingeneral]

Not sure what I think about this. Where does all of this money go, again? I see that the top donors are the Anti-religion group, the Obama group and the Gay Lesbian group. None of the three do I wish to be associated with in any way, shape or form.

[Taggure]

[OakRidgeStars]

Maybe I'll just send the NRA another $25. I have no idea where that goes either

[allingeneral]

Maybe I'll just send the NRA another $25. I have no idea where that goes either

So true. You could send VGOF another $25.00 and I'll spend it on hosting and advertising

[gunderwood]

The concept of micro loans is not necessarily bad, but the implementation is awful. Three primary faults I see are:

1. The interest rates are set by the field office.

Interest rates are set by the Field Partner, and that interest is used to cover the Field Partner's operating costs.

http://www.kiva.org/about/how

Notice that the flow diagram at the bottom of the page. The first step is? Funds are given to the loan requester. This means a couple of things.

A. The field office must be bank rolled and isn't working for free. The interest rates are set by them and often are really high...like 100% high.

B. While they are using your capital in the long run and getting it because "you want to help the poor people," they collect a huge interest amount which you never see. You assume the risk, they get most of the profits. In some cases, all of the profits.

2. This arrangement induces a moral hazard
The middle man is making all of the profits and is responsible for making the loan look good. This is just like the housing bubble here in the US and in fact some economist are warning that there is a mico-loan bubble too. The problem is that the field office is the one creating the package which you read. Their "justification" for why the loan is needed is often not accurate. Just like the derivatives market, you don't really know what it is you are buying...the middle man makes up a story and the better the story, the more money he makes.

The usual check on such behavior (the investors wanting to manage risk) has been removed. The housing bubble check was removed in a different way. The investors assumed correctly that the US government. This induced an obvious moral hazard, just like the micro loans. If someone else is assuming the risk, but you are making the profits, why worry?

3. This is an inefficient way to allocate capital as it is designed.
There certainly are people in the third world who could use a loan for business development, but under this system it becomes virtually impossible to distinguish valid loans from predatory ones. Money wasted filling the pockets of a fraud is money taken from elsewhere. That makes everyone else poorer. This is big business to the tune of billions.

The system is designed to prey on the your best intentions.

[newdovo]

Here's some more info:
http://en.wikipedia.org/wiki/Kiva_(organization)

Kiva's website says "Kiva connects people through lending to alleviate poverty." So we lend money to the local lender, or "field partner" for free, so they can lend it to others with interest. Looking at the interest rates charged by the field partners, if I gave money to this organization, I would consider myself a venture capitalist for loan sharks. You can't help people out of poverty by charging 80% interest.

No thanks.

[allingeneral]

newdovo and gunderwood - I'd say you two about summed it up.

[baz]

newdovo and gunderwood - I'd say you two about summed it up.

+1
wow what a great idea to scam people...

[Diomed]

Looking at the interest rates charged by the field partners, if I gave money to this organization, I would consider myself a venture capitalist for loan sharks.

Yeah, if I'm gonna bankroll loan sharks, I want a lot more return a lot faster than this thing.

[gunderwood]

Looking at the interest rates charged by the field partners, if I gave money to this organization, I would consider myself a venture capitalist for loan sharks.

Yeah, if I'm gonna bankroll loan sharks, I want a lot more return a lot faster than this thing.

Some of these schemes actually have no return for the investor. Only the field agent makes money.

This concept was started and pushed by a bunch of socialists. They removed the economic incentives which allow for a fair interest rate to be determined and those that provide for an efficient allocation of capital. They replaced them with a feel good institution and are shocked it failed. Notice that the founder of micro loans didn't win a Nobel Prize for economics, but rather a peace prize. Instead of helping the poor, they are acutally enslaving them economically like the rest of the world.

Just like gun control, it has become a tyranny of good intentions.


On the other hand, the banking industry wasn't serving this market because they couldn't figure out a way to control it. They need government to assist them and provide cheap capital. E.g. the financial reform bill doesn't acutally reform anything. All it does it codify the TARP/"to big to fail" mentality. This helps politicians avoid unpopular polticial choices. It becomes just part of the system to bailout these banks. It happens, no one notices, the politicians don't have to make hard decisions and the banks are given more of our money. Brillient.

Capitalism unfairly gets a black eye for this. What we have isn't Capitalism at all. It is a modern twist on Merchantilism. Industry uses the force of government to advance its own interests over the peoples and other competitors. That BP oil well in the gulf is a joint BP/federal government effort. BP was to get special access and protection from legal suits and the government gets profits it had to do no work for (usually around 16-17% of the oils fair market value)...just some regulation is all.

[learn2shoot]

nevermind then.. Didn't really see all the details, will look closer before I participate again.

[allingeneral]

nevermind then.. Didn't really see all the details, will look closer before I participate again.

Hey - it was a good thought. Just a bad implementation in my opinion.