Interest rates
As of November 2018, a total of 1,530,180 loans had been funded on Kiva.[42] The following table shows these loans sorted according to interest rate.
Some people, including microfinance pioneer Muhammad Yunus, argue that the interest rates of many microcredit institutions are unreasonably high. In his 2007 book he argues that microfinance institutions that charge more than 15% above their long-term operating costs should face penalties.[43]
According to its website, Kiva quotes interest rates as the "self reported average rate charged by the Field Partner to the entrepreneur."[44] Kiva does not publish the interest rates charged for the individual loans funded through its website. However, it does publish the average "Portfolio Yield" of each of its field partners, as a way for prospective lenders to estimate the cost to the borrower of the loans they consider funding. The "Portfolio Yield" measures the average income earned from the field partner's outstanding loan portfolio.[45] Some observers have pointed out that the "Portfolio Yield" measure is unreliable, and does not directly reflect the actual price that borrowers are paying for the loans.[46]
Kiva defends the interest rates of its field partners, however, saying its field partners provide much better rates than local alternatives, but must charge what they do because "the costs of making a micro-loan in the developing world are higher versus larger loans in the West."[44] Kiva itself does not keep any of the interest collected, but operates instead exclusively on donations.[47]
For example, in 2009, micro-loans from Kiva partners in Guatemala averaged 23.16% for the equivalent of US$430 lent on average, comparable to the commercial BanRural rate of 24.5% for a loan of US$635.[48] (For reference, the inflation rate for Guatemala typically varies between 5 and 10% and was just 0.62% in 2009).[49]
Kiva launched a more direct peer-to-peer microlending platform, called Kiva Zip, in 2012. Kiva Zip transferred funds directly to borrowers without outsourcing disbursements and repayment collection to field partners. Instead, the program partnered with local institutions in the United States and Kenya called Trustees, who vetted loan applicants and provided mentorship.[50] Kiva Zip borrowers did not pay any interest or fees and the repayment rate was 89.4%.[51] As of March 13, 2017, the Kiva Zip subdomain redirects to the Kiva homepage, and the program appears to be discontinued.[52]
Interest rates by field partner
As of November 2018, there are a total of 332 field partners listed on the Kiva website and their status is as follows: 173 Active, 41 Inactive, 14 Paused, and 104 Experimental. In addition, 178 former field partners are listed as Closed.[53]
The following table shows the "portfolio yield" of a sampling of field partners. "Portfolio yield" figures are calculated by dividing all interest and fees paid by borrowers to the field partner by the average loan portfolio of the field partner that given year. The figure provides a more accurate insight into the costs of borrowing because it includes fees associated with borrowing.
Interest rates by field partner
As of November 2018, there are a total of 332 field partners listed on the Kiva website and their status is as follows: 173 Active, 41 Inactive, 14 Paused, and 104 Experimental. In addition, 178 former field partners are listed as Closed.[53]
The following table shows the "portfolio yield" of a sampling of field partners. "Portfolio yield" figures are calculated by dividing all interest and fees paid by borrowers to the field partner by the average loan portfolio of the field partner that given year. The figure provides a more accurate insight into the costs of borrowing because it includes fees associated with borrowing.
Pre-disbursement of funds
When Kiva began, borrowers had to wait until their loans were funded on the Kiva website to receive the funds. Since then, the system has changed, so that loans are disbursed to borrowers before their stories are posted to Kiva's website.[54][55] Disbursing loans sooner has a positive impact on the borrowers, who no longer need to wait weeks to receive their funding and can thus take advantage of time-sensitive business opportunities. This is disclosed on Kiva's site; each loan proposal states whether funds were pre-disbursed. Thus, lenders' loan funds are likely to go to borrowers other than those chosen by the lenders.[54] However, since the pay-back behaviour of the specific borrower chosen by the lender does influence whether or not the lender gets their funds back (except when an MFI has chosen to cover for borrower defaults), there is at least some connection between the lender and the specific borrower. Whether lenders' preferences are used for lender preference trend analysis by any field partners or Kiva is not stated. Kiva's response has been to keep pre-disbursing but be clearer about the process.[56]
