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<< Back to complete list of topicsAbout our Field Partners
- What is a "Field Partner"?
- Why does Kiva.org use Field Partners?
- How does Kiva.org choose its Field Partners?
- What are the Field Partners' responsibilities?
- Do Kiva.org's Field Partners charge interest to the entrepreneurs?
- What are the interest rates that the Field Partners charge?
- Why are your field Partners' interest rates so high?
What is a "Field Partner"?
When we refer to our "Field Partners" we are referring to the microfinance institutions that we have partnered with to manage and administer the individual loans.
Why does Kiva.org use Field Partners?
Kiva.org's Field Partners are critical to our ability to provide loans efficiently. By partnering with microfinance institutions located on the ground, Kiva.org leverages critical knowledge of the local population and years of experience managing loans. Were Kiva.org to operate as a microfinance institution ourselves, we would enter the market decades behind many well-equipped organizations with documented success. Partnering allows us to divide and conquer -- Kiva.org collecting and distributing loan funds through the website and Field Partners managing the loans on the ground -- allowing us maximum efficiency at the lowest cost.
How does Kiva.org choose its Field Partners?
Kiva.org partners with established microfinance institutions with a social mission of lending to the poor. We conduct extensive Due Diligence on each Field Partner. For more information, please visit our Risk and Due Diligence center: www.kiva.org/about/risk/overview.
What are the Field Partners' responsibilities?
Our Field Partners are responsible for vetting loan applications to ensure that loans uploaded to the site have a high chance of being a successful business. The Field Partner uploads the loan details, including a photo of the entrepreneur and a description of the business, to Kiva.org's website for approval and live posting.
Once a loan has been funded our Field Partners are responsible for managing the loan on the ground, including distributing loan funds, collecting repayments and providing reasonable support to entrepreneurs to ensure the highest chance of business success. Field Partners are responsible for providing updates on the progress of the business through Kiva.org's software.
Finally, Field Partners are responsible for forwarding repayments to Kiva.org on a quarterly basis.
Once a loan has been funded our Field Partners are responsible for managing the loan on the ground, including distributing loan funds, collecting repayments and providing reasonable support to entrepreneurs to ensure the highest chance of business success. Field Partners are responsible for providing updates on the progress of the business through Kiva.org's software.
Finally, Field Partners are responsible for forwarding repayments to Kiva.org on a quarterly basis.
Do Kiva.org's Field Partners charge interest to the entrepreneurs?
Yes, self-sustainability is critical to creating long-term solutions to poverty, and charging interest to entrepreneurs is necessary for microfinance institutions to achieve this. Our Field Partners are free to charge interest, but Kiva.org will not partner with an organization that charges exorbitant interest rates. We also require Field Partners to fully disclose their interest rates. You can find more information about the interest rates that Kiva's field partners charge on our partner pages: www.kiva.org/about/partners .
Microfinance is an expensive business, which is essentially the reason small loans are not provided by large banks. While Kiva.org's Field Partners do not bear the cost of capital or the cost of default, they do bear transaction costs and currency risk. Charging interest to entrepreneurs enables our Field Partners to bear these costs and achieve self-sustainability.
Microfinance is an expensive business, which is essentially the reason small loans are not provided by large banks. While Kiva.org's Field Partners do not bear the cost of capital or the cost of default, they do bear transaction costs and currency risk. Charging interest to entrepreneurs enables our Field Partners to bear these costs and achieve self-sustainability.
What are the interest rates that the Field Partners charge?
You can find the average interest rates that our field partners charge on our partner pages: www.kiva.org/about/partners .
Why are your field Partners' interest rates so high?
The average interest rate that a Kiva field partner charges is about 21%, and Kiva.org only partners with microfinance institutions that have a social mission of lending to the poor. To obtain more information about how Kiva.org evaluates and selects its field partners, please see our Risk and Due Diligence center: www.kiva.org/about/risk/overview .
The nature of microcredit " small loans " is such that interest rates need to be high to return the cost of the loan. To quote (CGAP) (Consultative Group to Assist the Poor):
"There are three kinds of costs the MFI has to cover when it makes microloans. The first two, the cost of the money that it lends and the cost of loan defaults, are proportional to the amount lent. For instance, if the cost paid by the MFI for the money it lends is 10%, and it experiences defaults of 1% of the amount lent, then these two costs will total $11 for a loan of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers both these costs for either loan.
The third type of cost, transaction costs, is not proportional to the amount lent. The transaction cost of the $500 loan is not much different from the transaction cost of the $100 loan. Both loans require roughly the same amount of staff time for meeting with the borrower to appraise the loan, processing the loan disbursement and repayments, and follow-up monitoring. Suppose that the transaction cost is $25 per loan and that the loans are for one year. To break even on the $500 loan, the MFI would need to collect interest of $50 + 5 + $25 = $80, which represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest of $10 + 1 + $25 = $36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that when loan sizes get very small, transaction costs loom larger because these costs can't be cut below certain minimums." (CGAP)
The nature of microcredit " small loans " is such that interest rates need to be high to return the cost of the loan. To quote (CGAP) (Consultative Group to Assist the Poor):
"There are three kinds of costs the MFI has to cover when it makes microloans. The first two, the cost of the money that it lends and the cost of loan defaults, are proportional to the amount lent. For instance, if the cost paid by the MFI for the money it lends is 10%, and it experiences defaults of 1% of the amount lent, then these two costs will total $11 for a loan of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers both these costs for either loan.
The third type of cost, transaction costs, is not proportional to the amount lent. The transaction cost of the $500 loan is not much different from the transaction cost of the $100 loan. Both loans require roughly the same amount of staff time for meeting with the borrower to appraise the loan, processing the loan disbursement and repayments, and follow-up monitoring. Suppose that the transaction cost is $25 per loan and that the loans are for one year. To break even on the $500 loan, the MFI would need to collect interest of $50 + 5 + $25 = $80, which represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest of $10 + 1 + $25 = $36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that when loan sizes get very small, transaction costs loom larger because these costs can't be cut below certain minimums." (CGAP)
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