Reviewing loan applications and posting loan requests on Kiva

Kiva Field Partners typically target impoverished or marginalized areas to review loan applications and approve borrowers who demonstrate a need for a loan and a reasonable likelihood of repayment. Each borrower requesting a loan through Kiva has been reviewed and approved by a local Field Partner.

The majority of borrowers on Kiva are vetted by microfinance institutions. There are a variety of lending methodologies that Kiva's MFI Field Partners use. One common methodology is to lend to borrowers who belong to a borrowing group (e.g. a group of 5 women from the same village who know each other well). In some cases, when groups are bound by a group guarantee, loans to one member of the group are contingent on the other group members repaying on time. Because each member's livelihood depends on other members' repayment, a form of peer monitoring and support develops which helps ensure high repayment rates. Loans directly to individual borrowers are also common, especially as the borrower proves his or her credit-worthiness in a group setting.

Some of the borrowers on Kiva are vetted by Field Partners whose core business is not microfinance. In this case, the loan review process varies considerably from partner to partner and can depend on the partner's experience with a borrower, a borrower's capacity to repay, or a borrower's future earnings. Information about the core business of that Field Partner and the loan products they fund on Kiva is contained on each Field Partner's profile page.

Once a loan is approved by the Field Partner, the Field Partner takes a picture of the borrower, provides a description of the loan use, and posts the profile information of that borrower to Kiva for funding.

Disbursing and collecting your loan

When you lend to a borrower, Kiva delivers the funds (see net billing system) to the local Field Partner. The Field Partner may choose to either disburse the funds to the borrower or use the funds to backfill a loan that has already been disbursed to a borrower in order to expedite the availability of capital. The Field Partner will then make collections on that loan. Typically, loan officers will travel out to the borrower’s location (e.g. rural village) and collect a repayment on a regular basis (weekly, monthly or otherwise).

Borrowers are often able to pay the loan officer the full amount due, on time, without any issues. On occasion, a borrower or Field Partner may be late in payments. You can view each Field Partner's delinquency rate. Once funds are collected and approved for distribution, the Field Partner delivers funds under the net billing system to Kiva and Kiva's software system automatically distributes the repayments to each Kiva lender.

Repayment Collection and Currency Risk

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 US dollar, thus requiring the Field Partner to use more of its local currency to reimburse Kiva (Kiva's working currency is the US dollar).

As a means of encouraging responsible lending, Kiva offers Field Partners the option to protect themselves against these currency fluctuations. In cases where the US dollar appreciates by more than 10% relative to a local currency, Field Partners who opt for currency exchange loss protection will only be responsible for covering the first 10% of the local currency’s cost of appreciation while lenders will cover the remainder of the cost. This can help the Field Partner continue funding local borrowers even through difficult economic climates.