Using Kiva to manufacture spend
Nov 17, 2012, 7:36 am
#16
Join Date: Aug 2009
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You are right, I do not have any factual basis for my assertions. Doesn't change the fact that my spidey-sense says no. Not that I am a super-hero either, and if it works for you more power to you. I just agree with the premise of the OP that's all. Clearly I am not the only one with concern about this despite the noble intention.
Nov 17, 2012, 7:47 am
#17
Join Date: Mar 2010
Location: mountains of western NC
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You are right, I do not have any factual basis for my assertions. Doesn't change the fact that my spidey-sense says no. Not that I am a super-hero either, and if it works for you more power to you. I just agree with the premise of the OP that's all. Clearly I am not the only one with concern about this despite the noble intention.
I have made $27K in Kiva loans over the past 2 1/2 years and will continue to do so.
Nov 17, 2012, 7:56 am
#18
Join Date: Mar 2010
Location: mountains of western NC
Programs: Life, Love and Laughter
Posts: 8,539
I've been aware that FTers are using Kiva to manufacture spend or generate points. I have nothing against Kiva personally, nor have I done my due diligence about this company.
However, I would warn all FTers that there is a risk in doing these kind of Kiva spends. Even if some of you have done your due diligence, and find that the company backing Kiva is financially sound and a legitimate operation there is always a possibility that Kiva can close down overnight. I strongly doubt that Kiva or its parent company has any credit rating, so Kiva loans are going to be akin to junk bonds. If a default happens for whatever reason, I would expect that all outstanding "loans" will be something that FTers will not get back, not without a costly and long drawn out litigation... assuming that Kiva is based in the US.
So, while I know many kind folks think that Kiva spends is a win-win scenario for all, I would exercise restraint. If you are churning $10k through Kiva, make sure you can cough up that $10k to pay your CC bills if the need arises.
However, I would warn all FTers that there is a risk in doing these kind of Kiva spends. Even if some of you have done your due diligence, and find that the company backing Kiva is financially sound and a legitimate operation there is always a possibility that Kiva can close down overnight. I strongly doubt that Kiva or its parent company has any credit rating, so Kiva loans are going to be akin to junk bonds. If a default happens for whatever reason, I would expect that all outstanding "loans" will be something that FTers will not get back, not without a costly and long drawn out litigation... assuming that Kiva is based in the US.
So, while I know many kind folks think that Kiva spends is a win-win scenario for all, I would exercise restraint. If you are churning $10k through Kiva, make sure you can cough up that $10k to pay your CC bills if the need arises.
The risks with Kiva loans are that an individual might default on a loan and that the micro-lending organization through which the loan comes might default. It is the micro-lending organizations that have credit ratings. Kiva provides that information with each loan and with each micro-lending organization.
Getting back to personal experience - I only wish that the investments I have made to companies here in the U.S. had the same repayment rate that Kiva loans have. If that were true, I would be much wealthier.
Nov 17, 2012, 8:06 am
#19
FlyerTalk Evangelist
Join Date: Aug 2011
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You are right, I do not have any factual basis for my assertions. Doesn't change the fact that my spidey-sense says no. Not that I am a super-hero either, and if it works for you more power to you. I just agree with the premise of the OP that's all. Clearly I am not the only one with concern about this despite the noble intention.
Nov 17, 2012, 8:44 am
#20
Join Date: Nov 2006
Location: RDU
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Posts: 103
I think it is a great cause so I don't mean any disrepect. I would just say to be careful - a ponzi scheme can also have great returns (or % paid back) to everyone for years until it finally breaks. Everyone gets comfortable that is legit due to the consistent returns until that happens. I would just limit one's contributions at any one time to be cautious.
Nov 17, 2012, 8:50 am
#21
Join Date: Mar 2010
Location: mountains of western NC
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I think it is a great cause so I don't mean any disrepect. I would just say to be careful - a ponzi scheme can also have great returns (or % paid back) to everyone for years until it finally breaks. Everyone gets comfortable that is legit due to the consistent returns until that happens. I would just limit one's contributions at any one time to be cautious.
It sure would be nice if folks who have concerns about Kiva would stick to the facts.
Nov 17, 2012, 10:01 am
#23
Join Date: Nov 2006
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I am not talking about making more than you put in, just getting something like 99% back of what you invest. That is still an expectation that people have, and Kiva has been able to meet that expectation so far.
Nov 17, 2012, 10:15 am
#24
Join Date: Jan 2005
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I expected to open this thread to find out that Paypal was closing down accounts used to fund Kiva. Or that Kiva was refusing to allow you to cycle funds in and out.
Makes me wonder if the OP isn't just trying to scare-monger for fear that one of the above will happen.
Makes me wonder if the OP isn't just trying to scare-monger for fear that one of the above will happen.
Nov 17, 2012, 10:31 am
#25
Join Date: Jan 2005
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I think it would be better for the OP to do some due diligence on Kiva operations and microfinance before sounding the alarm about how it works. Yes, you can use credit cards to make payments for loans and its not a bad way to help others, and still accrue miles. Costs for cc use are absorbed by PayPal in a unique relationship with Kiva.
While its a good way to earn miles, it is not an investment. The loans an individual makes are interest free and intended to help an entrepreneur in developing nations. Traditional local microfinance has been around for ages, and its growth can be attributed to Muhammad Yunus who founded the Grameen bank in 1976 that helped people (primarily women and rural poor) in Bangledesh. 30 yrs later he won a Nobel Peace Prize for his efforts.
Kiva was founded 7 years ago with the goal of using crowdsourcing/funding via the internet to enable microfinance loans. They are not 'owned' by anyone and operate independently. They are not a financial organization, but rather a 501(3)(c) charity . They do however work with microfinance groups in over 60 countries and do perform due diligence on operations to ensure the organizations are credible. As onthego15 has noted, their default rates are 1%. In truth, in the last few yrs, that rate is probably <0.5%.
How it works?
You make a loan to Kiva to help support a microfinance organizations loan to a lender who is featured. The borrower has received the funds and your $25 increment loan is used to support the MF. This loan is repaid over time (dependent on the loan size, type of loan...) and this appears in your account, usually on or after the 15th of each month. Unless you put all your funds into one MF and they happen to default on everything, you are unlikely to lose all your funds.
Kiva itself has a top rating at Charity Navigator indicative of their mandate. Their operations include individuals from all aspects of business, including finance team which is responsible for maintaining the high quality of loans. Kiva provides stats for their field partner operations, as well as social ratings to identify which vulnerable groups the FP works with or specializes in.
While I will not say they are perfect, Kiva has continued to excel in providing funds to people around the world to help their businesses and lives. They are not without controversy, but with each misstep, they have strived to improve themselves in order to repeat past errors.
Personal experience
I have been lending on Kiva for 1.5 yrs and in that time, I have had 2 default and 3 currency exchange losses in Southern Sudan. All told, the amount was about one full loan - $25. Do I want to lose $25? No. But there is risk in everything, and this is such a minor risk, its acceptable when I average it out over 1200 loans.
I hope this information helps. There is a lot of info on Kiva and I recommend you explore their website and others that have information, or where you can post specific questions on Kiva. I think its important to get information and exchange dialog, but not useful if you make statements without your own due diligence.
While its a good way to earn miles, it is not an investment. The loans an individual makes are interest free and intended to help an entrepreneur in developing nations. Traditional local microfinance has been around for ages, and its growth can be attributed to Muhammad Yunus who founded the Grameen bank in 1976 that helped people (primarily women and rural poor) in Bangledesh. 30 yrs later he won a Nobel Peace Prize for his efforts.
Kiva was founded 7 years ago with the goal of using crowdsourcing/funding via the internet to enable microfinance loans. They are not 'owned' by anyone and operate independently. They are not a financial organization, but rather a 501(3)(c) charity . They do however work with microfinance groups in over 60 countries and do perform due diligence on operations to ensure the organizations are credible. As onthego15 has noted, their default rates are 1%. In truth, in the last few yrs, that rate is probably <0.5%.
How it works?
You make a loan to Kiva to help support a microfinance organizations loan to a lender who is featured. The borrower has received the funds and your $25 increment loan is used to support the MF. This loan is repaid over time (dependent on the loan size, type of loan...) and this appears in your account, usually on or after the 15th of each month. Unless you put all your funds into one MF and they happen to default on everything, you are unlikely to lose all your funds.
Kiva itself has a top rating at Charity Navigator indicative of their mandate. Their operations include individuals from all aspects of business, including finance team which is responsible for maintaining the high quality of loans. Kiva provides stats for their field partner operations, as well as social ratings to identify which vulnerable groups the FP works with or specializes in.
While I will not say they are perfect, Kiva has continued to excel in providing funds to people around the world to help their businesses and lives. They are not without controversy, but with each misstep, they have strived to improve themselves in order to repeat past errors.
Personal experience
I have been lending on Kiva for 1.5 yrs and in that time, I have had 2 default and 3 currency exchange losses in Southern Sudan. All told, the amount was about one full loan - $25. Do I want to lose $25? No. But there is risk in everything, and this is such a minor risk, its acceptable when I average it out over 1200 loans.
I hope this information helps. There is a lot of info on Kiva and I recommend you explore their website and others that have information, or where you can post specific questions on Kiva. I think its important to get information and exchange dialog, but not useful if you make statements without your own due diligence.
I've been aware that FTers are using Kiva to manufacture spend or generate points. I have nothing against Kiva personally, nor have I done my due diligence about this company.
However, I would warn all FTers that there is a risk in doing these kind of Kiva spends. Even if some of you have done your due diligence, and find that the company backing Kiva is financially sound and a legitimate operation there is always a possibility that Kiva can close down overnight. I strongly doubt that Kiva or its parent company has any credit rating, so Kiva loans are going to be akin to junk bonds. If a default happens for whatever reason, I would expect that all outstanding "loans" will be something that FTers will not get back, not without a costly and long drawn out litigation... assuming that Kiva is based in the US.
So, while I know many kind folks think that Kiva spends is a win-win scenario for all, I would exercise restraint. If you are churning $10k through Kiva, make sure you can cough up that $10k to pay your CC bills if the need arises.
However, I would warn all FTers that there is a risk in doing these kind of Kiva spends. Even if some of you have done your due diligence, and find that the company backing Kiva is financially sound and a legitimate operation there is always a possibility that Kiva can close down overnight. I strongly doubt that Kiva or its parent company has any credit rating, so Kiva loans are going to be akin to junk bonds. If a default happens for whatever reason, I would expect that all outstanding "loans" will be something that FTers will not get back, not without a costly and long drawn out litigation... assuming that Kiva is based in the US.
So, while I know many kind folks think that Kiva spends is a win-win scenario for all, I would exercise restraint. If you are churning $10k through Kiva, make sure you can cough up that $10k to pay your CC bills if the need arises.
Nov 17, 2012, 10:50 am
#26
Join Date: Jan 2009
Location: LAX
Posts: 670
+1. What is the point of this thread? The same warning can be given for every other miles-earning opportunity. No new information has been given about Kiva and no information has been given that tends to show Kiva is more likely to shut down than any other company. Bizarre.
Nov 17, 2012, 10:57 am
#27
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Join Date: May 2002
Location: YEG
Programs: HH Silver
Posts: 56,449
FWIW I recently decided after doing my research to become involved with Kiva as I liked it's "hand up" approach to helping people in the developing world instead of the more traditional "hand out" aid program model. I'd encourage all readers to spend the time to learn more about the organization and visit the Kiva thread in the Flyertalk Cares forum and if you feel inclined join the FT lending team.
Nov 17, 2012, 11:30 am
#28
Join Date: Mar 2010
Location: mountains of western NC
Programs: Life, Love and Laughter
Posts: 8,539
Indeed. Kiva's default rate has been dropping steadily in the past two years. I remember that it was over 1.2% when I started paying attention to it two years ago, and it is now at 1.00%.
Nov 17, 2012, 11:30 am
#29
FlyerTalk Evangelist
Join Date: Mar 2000
Location: Southern Alberta
Posts: 20,550
I have been involved in Kiva microlending for two years and have done due diligence on the organization.
Please consult the website...... www.kiva.org before believing some of the nonsense posted on this thread.
Please consult the website...... www.kiva.org before believing some of the nonsense posted on this thread.
Nov 17, 2012, 11:32 am
#30
Original Poster
Join Date: Nov 2009
Posts: 1,060
More food for thought... while Kiva has been around and paying for many years, with a low default rate, it does not mean that will always be the case. The fact that Kiva is a "well-behaved" company, is not sufficient to condition to think that they are as safe as your FDIC insured deposits.
From a legislative viewpoint, mainstream investment products like mutual funds are protected by laws that we have in place. That's why we don't have cases of mutual fund fraud popping out every week. The last major one was Madoff, and that was a Hedge Fund (less restrictive regulations on what they are allowed to invest in). Mutual funds are also supposed to keep records on what their client's money is invested in, there are audits, separation between the fund manager and the trustee, etc... basically safeguards are there. I'm not saying the system is foolproof, but it's a well thought out system to minimize fraud. Other financial products like your saving accounts and CDs are backed by FDIC which is backed by the US government.
So coming back to Kiva loans, what legislation applies? Who is regulating them? It's even a known fact that the loans you give out are not really loans at all. Google around and you'll find that what Kiva does is to loan out stuff first, take pictures of the poor people, use that to sell a story to get fresh money, which they loan out in the next "cycle". Are they being audited? Is there a separation of the people who manage this loan business and the trustee of the money?
From a legislative viewpoint, mainstream investment products like mutual funds are protected by laws that we have in place. That's why we don't have cases of mutual fund fraud popping out every week. The last major one was Madoff, and that was a Hedge Fund (less restrictive regulations on what they are allowed to invest in). Mutual funds are also supposed to keep records on what their client's money is invested in, there are audits, separation between the fund manager and the trustee, etc... basically safeguards are there. I'm not saying the system is foolproof, but it's a well thought out system to minimize fraud. Other financial products like your saving accounts and CDs are backed by FDIC which is backed by the US government.
So coming back to Kiva loans, what legislation applies? Who is regulating them? It's even a known fact that the loans you give out are not really loans at all. Google around and you'll find that what Kiva does is to loan out stuff first, take pictures of the poor people, use that to sell a story to get fresh money, which they loan out in the next "cycle". Are they being audited? Is there a separation of the people who manage this loan business and the trustee of the money?