Originally Posted by
onthego15
Kiva works with micro-lending organizations which in turn loan money to individual (or group) borrowers. Kiva does not charge interest to these micro-lending organizations. But the micro-lending organizations do charge interest to the borrowers.
It's important to understand that the costs involved in running a micro-lending organization are
very high. For example many of the borrowers live in remote areas where communications, roads and other infrastructure are very poor. Doing due diligence on a third world borrower is a complex task. Also, most of the micro-lending organization provide many, many other services to help the borrowers in addition to providing capital.
Here are a couple articles which provide more explanation:
http://fellowsblog.kiva.org/fellowsb...misconceptions
http://www.kiva.org/help/interestRateComparison
Thanks very much for this! The first link doesn't fully address the problem that sometimes people take out loans out of desperation rather than being savvy calculators of cost and benefits, but it is still worthwhile. It would be great to have more granular data on this at it pertains to Kiva, but perhaps that's not possible.
The second link seems incomplete in that the link within it (on money lenders' rates) seems incomplete.
Still, both of the links you provide are well worth reading.