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Kiva Partners with a Microfinance Institution
Kiva partners with existing microfinance institutions around the world (we call them Field Partners). These organizations that have expertise in microfinance and a mission to alleviate poverty facilitate Kiva loans on the ground. Our Field Partners know their local area and clients and do all the leg work required to get Kiva loans to the entrepreneurs posted on Kiva.org.
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Field Partners Disburse Loans and Upload Stories
Field Partners disburse loans as soon as they are needed. They can do this up to 30 days before the loan request is posted on Kiva's website or 30 days after (most choose to disburse funds before the loan request is posted). The Field Partner collects entrepreneur stories, pictures and loan details and uploads them to Kiva. Volunteer editors and translators review the loan requests and publish them to Kiva.org. Many Field Partners require mandatory savings as part of the loan cycle in order to ensure that borrowers represent a good lending risk and can build up cash reserves.
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Lenders Browse Profiles and Lend
Lenders browse loan requests and select which ones they'd like to fund. Lenders can fund as little as $25 and as much as the entire amount of the loan. To help streamline the loan transaction process, loan requests posted by the Field Partner are rounded up to the nearest $25 increment. Kiva aggregates funds from Kiva lenders and provides them to the Field Partner.
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Kiva Disburses Lenders' Funds to the Field Partner
The Field Partner uses the funds to replenish the loan they've already made to the entrepreneur. Kiva provides these funds on a schedule that accommodates the Field Partners' banking procedures.
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Entrepreneurs Repay Their Loans
The Field Partner collects repayments from Kiva entrepreneurs as well as any interest due and lets Kiva know if a repayment was not made as scheduled. Interest rates are set by the Field Partner, and that interest is used to cover the Field Partner's operating costs. Kiva doesn't charge interest to its Field Partners and does not provide interest to lenders. Kiva also gives Field Partners the option to cover currency losses. Learn more.
To minimize the expense and maximize the efficiency of money transfers, Kiva works on a net billing system. This means that, for any given month, we subtract the amount of Field Partner repayments from the amount of loans made by Kiva lenders. Kiva only asks our Field Partners to send payments for the difference and they have 30 days to send payment.
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Kiva Provides Repayments to Lenders
If there is already money in the Field Partner's account, or once their payment is received, Kiva uses these funds to credit the appropriate lenders with their loan repayments. Lenders can re-lend their funds to another entrepreneur, donate their funds to Kiva (to cover operational expenses), or withdraw their funds via PayPal.
Learn more about Microfinance »
What does "Currency Exchange Loss" mean?
When lending funds across national boundaries, an implicit risk exists with currencies changing relative to one another. The local currency in the Field Partner's country of operation may, for many reasons, lose some of its value relative to the USD, thus requiring the Field Partner to use more of its local currency to reimburse Kiva (Kiva’s working currency is the US dollar). The result may be that, while the borrower fully pays off her loan, the converted value of her repayment is less than the expected US dollar amount and so represents a loss to Kiva lenders.
As a means of encouraging responsible lending, Kiva offers Field Partners the option to protect themselves against severe currency fluctuations (a US dollar appreciation of over 20% relative to the Local Currency).
The Field Partner-specified Currency Exchange Loss to lenders can be one of three values:
“Covered”
The Field Partner has opted to cover any losses on the loan that are due to currency fluctuation. Lenders will not bear losses due to currency fluctuation.
This would happen in the case where the US dollar appreciates significantly relative to a local currency. When the borrower pays back the full loan amount in a local currency, that amount converted to US dollars would be less than the original amount lent by Kiva lenders. The Field Partner would then cover the loss, so that lenders would be repaid the full amount they originally lent.
“Possible”
The Field Partner has opted not to cover losses on the loan that are due to currency fluctuation. In this situation, lenders face additional risk because they will bear losses greater than 20%.
By bearing these losses, lenders are able to protect the Field Partner and its borrowers from catastrophic currency devaluations.
This would happen if the US dollar appreciates significantly relative to a local currency. When the borrower pays back the full loan amount in a local currency, that amount converted to US dollars would be less than the original amount lent by Kiva lenders. For any losses due to the US dollar appreciating exceeding 20%, the lender will bear that loss. For losses due to the US dollar appreciating up to 20%, the Field Partner will bear all losses.
"N/A"
This means that the loan is disbursed to the borrower in US dollars, so it is not subject to any foreign currency conversion.