The borrower’s side of the controversy: no time to wait!
23 November 2009 at 07:20 Julia Kastner 8 comments
A borrower making handicrafts while waiting for her loan.
By Julia Kastner, KF9 Mexico
Often while out interviewing borrowers for a new Kiva profile, the first question is “WILL THIS SLOW DOWN MY LOAN??”
Fortunately, my answer is “No, don’t worry! Kiva will repay your MFI, not make you wait!” This is only true, however, because of Kiva’s controversial policy of allowing its MFI partners, like my partner, Fundacion Realidad (FRAC) to make loans before receiving Kiva funding. So, why are borrowers so afraid of delays?
By the time FRAC’s loan officers can take a picture for Kiva, a group needs to have been officially formed and the loan contract needs to be finalized and signed. This can take weeks if the group hasn’t organized itself yet. Then FRAC requires a minimum of 10 days to process the paperwork, perform reference checks, etc. before disbursing the loan. Other MFIs and loan sharks will give same-day loans, but at much higher interest rates. Waiting for Kiva funding, though, could take over a month. Profiles have to be written, translated, and THEN wait for funding.
Why is timing so important to a borrower? Well, how would you feel if you had to wait a month every time you wanted to use your credit card?
Borrowers have all kinds of time pressures – bills to pay (for their business and/or their household), crops to plant in the right season, food to cook before market day, handicrafts to sell before the Day of the Dead or Christmas, and sometimes (unfortunately) other loans to pay off. They’ve applied for a microloan because they don’t have access to cash all the time, and the longer they wait, the more interest they’re going to have to pay someone. So they’re thrilled that Kiva isn’t going to slow them down!
Entry filed under: Fundación Realidad, KF9 (Kiva Fellows 9th Class), Mexico. Tags: controversy, Fundacion Realidad, KF9, Kiva, Kiva Fellows, Mexico.
1. American Loan Masters Inc | 24 November 2009 at 07:41
Thank you Ms Kastner for your effort to write about this topic, I feel that if you want to become a Kiva Lender, there is no pressure on you to become one, so why are there any restrictions; how, why, when, this and that. We all are here because Mr. Matt and his wife had a vision and they wanted to help make this world a better place to life and not to build a palace for themselves in Beverly Hills with other peoples money, come on give me a break. You said it right quote ” how would you feel if you had to wait a month to use your credit card”. People please understand, the borrowers we are helping live a life beyond our imagination. THERE SHOULD BE NO RESTRICTIONS AT ALL. Cut it short, PLEASE I humbly request this community to let this project THRIVE and let us help to make this world a better place to live for us all.
2. Julia Kastner | 24 November 2009 at 05:36
Thanks, everyone!
Marie-Jo, to answer your questions:
If a borrower appears on Kiva, by that point they’re fortunate enough to be sure to get their money and they don’t have to return it (except to pay off their loan, of course!). It’s the MFI that loses access to the Kiva funds if the loan isn’t fully funded in time, which may affect future lending. If the MFI doesn’t get their Kiva funds for a particular loan, they might think carefully about that borrower – what was wrong that it didn’t get funded? A bad story? An unclear picture? An unpopular loan use? The MFI might re-think who they pick to lend to in the future, and there might be another (probably similar) borrower out there who has to wait a little longer for THEIR loan, while the MFI figures out how to manage without the funds they were expecting from Kiva. The impact on the MFI is obviously especially severe if the borrower then defaults.
I hope that answers your questions – if not I’m happy to explain further!
-Julia
3. Gavin | 23 November 2009 at 23:47
Great post Julie! This is an important perspective to share. Nice job!
Kiva Love, G
4. coambse | 23 November 2009 at 22:25
Juile,
I like the post and the timing of the loans. These people are not waiting to buy a big screen tv with their loans, they are waiting for a loan so that they can make more money to support their family. If should be doing everything possible to make the process easier and faster, not slower and harder.
Great post, keep shedding light on the situation.
Ed
5. Mary Riedel | 23 November 2009 at 19:39
great post – love the part about money lenders offering same day funds! Really puts’ it into perspective.
thanks Julie
6. M-J Jones | 23 November 2009 at 17:22
Thanks, Julia, for your additional input in an aspect which actually never bothered me. Practice seemed to make sense for efficiency reasons.
But what happens when an entrepreneur does not get funded. Noticed that the lenders get their money back.
But what about the entrepreneur? Can he/she reapply? Within which period of time? Or does he/she get the loan through other funding channels? Or does he/she have to return the loand which by then might well have been spent?
Would be grateful for answers which I didn’t find on the site.
Wish you a fruitful continuation of your mission over there.
Marie-Jo
7. Jan & John, KivaFriends | 23 November 2009 at 15:10
Thanks, Julia. The more posts we have on this subject, the sooner the confusion will clear up. In this not-so-perfect world, we are happy to connect with people around the world the Kiva/MFI way. Whatever works best for the borrowers highest good… jan
8. Unilove | 23 November 2009 at 07:46
I think, for me, it was not clearly and plainly indicated on the Kiva website for new lenders. I better understand now, after a period of time, what the necessity is and why. It is no longer a problem for me, as the real goal is to help others, which is what the MFI’s do, whether I personally fund that individual or all of them indirectly… Good post, Julie…
Unilove aka Lisa
Kiva Fellows fan