Risk and Due Diligence
Field Partners are the critical on the ground link to entrepreneurs
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143 Current Field Partners in 57 countries |
Each entrepreneur requesting a loan through Kiva has successfully completed an application process conducted by a local microfinance institution (MFI). These MFIs have entered into a Partnership Agreement with Kiva to become one of our Field Partners, and there is actually no direct legal relationship between Kiva, or Kiva lenders, and the Kiva entrepreneur. The MFIs are responsible for the disbursement and collection of your loan. |
Field Partner Role #1: Screen entrepreneurs and post loan requests on Kiva | |
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Kiva Field Partners work in impoverished areas to screen and approve entrepreneurs who demonstrate a need for a loan and a reasonable likelihood of repayment. At the end of 2007, there were over 70 million borrowers served by more than 1,220 microfinance institutions and data suggests that the poor can be quite credit worthy (portfolio risk > 30 days of less than 6%1) if the Field Partner employs the proper screening methodology. One common methodology is to lend to entrepreneurs who belong to a borrowing group (e.g. a group of 5 women from the same village who know each other well). 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 entrepreneurs are also common, especially as the entrepreneur proves their credit-worthiness in a group setting. |
Field Partner Role #2: Disburse and collect your loan | |
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When you lend to an entrepreneur, 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 entrepreneur
or use the fudns to backfill a loan that has already been disbursed to an entrepreneur in order to expedite
the availability of capital. The Field Partner will then make collections based on a pre-determined repayment
schedule. Typically, loan officers will travel out to the entrepreneur's location (e.g. rural village) and collect a
repayment on a regular basis (weekly or monthly). Entrepreneurs are often able to pay the loan officer
the full amount due, on time, without any issues. On occasion, an entrepreneur may be late in payments.
You can view a Field Partner's delinquency rate or the percentage of Paying Back loans that are over one month
late in repayment. Once funds are collected, the Field Partner delivers funds under the net billing system
to Kiva and Kiva's software automatically distributes the repayments to each Kiva lender.
Repayment Collection and Currency RiskWhen 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). Additionally, if your home currency is not the US Dollar, another layer of currency risk is added because loans made through Kiva must be in US Dollars. Therefore, the initial conversion from your home currency to USD will add foreign exchange risk.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 20% relative to a local currency, Field Partners who opt for currency exchange loss protection will only be responsible for covering the first 20% of the local currency cost of appreciation while lenders will cover the remainder of the cost. This can help the Field Partner through difficult economic climates and may allow the Field Partner to continue funding local entrepreneurs. Note that currency risk is not present if your local currency is the US DOllar and loans are disbursed in US Dollars. |
Field Partner Role #3: Report impact and issues surrounding your loan | |
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In addition to loan screening and administration, Field Partners document the impact of your loan in the form of Journals. Journals provide insight into the entrepreneur's progress and challenges. It is a key point of connection between Kiva's lenders and their business partner across the world. |
1 The Microfinance Information Exchange (http://www.themix.org/sites/default/files/At%20a%20Glance%20-%20MFI%20Indicators_0.pdf). Based on data from 2007; where 2007 data was not available, data from 2006 was used. Data based on MFIs reporting to MIX Market or Microbanking Bulletin (MBB).
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