May 14, 2008

• kiva and stuff

  So, i was driving to work today, and had a brilliant idea (I know, it's a bit lame to call my own idea brilliant.  And I'm sure not everyone will think it's brilliant, and I tried to think of other words that felt right, but that's the only one that seemed to fit.  So since it's my blog, I'm ruling that I'm allowed to call it brilliant).  So background first, Kiva is an awesome organization, that helps facilitate microfinance loans.  They work with local microfinance partners in developing countries, that help distribute, coordinate, and otherwise oversee microfinance loans to local entrepreneurs (who, as you can read about in the wikipedia article, are unable to obtain credit in the way we have easy access to in the US, etc).  Here is a quick page about how Kiva works.

  So Kiva is awesome, they allow you with a few mouse clicks to make a difference in the life of someone struggling in a developing country, in a sustainable way.  You aren't "donating" money, but rather loaning it and will get it repaid (many of Kiva's partners have records of 0 delinquencies across all their loans, sometimes up to half million $ worth of loans).  That's not the news, as Kiva has even gotten a mention from former President Clinton, and has gotten a good amount of press and exposure.

  Ok, so second part of the background.  Those of us with pretty good credit, tend to get quite a bit of mailings of credit cards with "0% introductory rates for 12 months!" or sometimes even up to 18 months.  I've got one right now that I've put a lot of my purchases on and deferring payment til the introductory period is over.  That's not something I recommend to anyone except for those with very good financial discipline.  Credit cards can really get you in trouble, but if you have proper financial discipline, they are also great tools.

  So the "brilliant" part comes by combining these two things.  I could, say, get a credit card with a 15 month introductory period (I've got one offer from chase right here).  I expect I might a credit card with a limit somewhere in the $12000 or more.  Now the way to get money into the kiva system is through paypal, either through credit card or funds.  So I could charge somewhere up to 60-80% of the card, and have $10000 or so worth of funds to lend out through the microfinance loans.  That's a lot of funds to give these people access to.  It does entail taking on some risk for myself as well as a credit hit, but essentially that's what I'm "giving" in terms of help.  By taking on some risk and a slight credit hit, I'm able to be the intermediary risk holder and help a lot of people.  Imagine if 100 people did this, that'd be an extra $1 million in microfinance loans.  If 2000 people did this, that'd be $20 million more to help people in developing countries.  Ok, I know most of you are pretty good at math so I'll stop there.  But Kiva loans do get repaid, and when the introductory period winds down, you could withdraw the funds and pay off your credit card.  If you felt it had gone well, you could do it all over again with a new introductory rate credit card.

  Now, certainly this isn't without risk.  And you'd need to make the minimum monthly payment on your card in order to keep the introductory rate.  You would really need to be on top of your finances to do this, but if you are, this might be a powerful way to help a lot of people.  I'm going to do some more thinking to really analyze the risks and maybe do some digging to find out how feasible this really is, but fundamentally it seems sound to me.

  • 12:52 am
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