Risk and Due Diligence
Lending to the poor online involves 3 levels of risk
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98.88% Repayment rate for $204,138,225 in ended loans |
Of the $204,138,225 of loans with completed loan terms, the repayment rate is 98.88%.
(Note that this repayment rate is not necessarily indicative of borrower repayment rates since many Kiva Field Partners chose to guarantee or cover individual borrower defaults).
However, past repayment performance does not guarantee future results. When you lend money, you may lose all or some of your principal. You should be aware of the different types of risk and find the right loan option for you, with respect to repayment risk and social return. |
Risk 1: Entrepreneur Risk
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Each entrepreneur is screened by a local Kiva Field Partner
(Microfinance Institution) before being posted on Kiva's website.
The Field Partner looks at a variety of factors (past loan
history, village or group reputation, feasibility of business
idea, etc) before deeming the entrepreneur as credit worthy.
However, a number of factors can result in entrepreneurs
defaulting:
* Learn more about the Field Partner's role in screening entrepreneurs and administering your loan. |
Risk 2: Field Partner Risk | |
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When you lend to an entrepreneur, Kiva delivers the funds to the
local Field Partner (please refer to net billing system).
While working with Field Partners increases the likelihood that your loan will be effectively
used and repaid, new institutional risks are introduced such that even if a Kiva Entrepreneur
is able to repay, Kiva Lenders could still lose principal due to, for example:
* Learn more about Kiva's role in rating, and monitoring the risk of each Field Partner. |
Risk 3: Country Risk | ||
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When lending internationally, it is important to consider "macro-level" risks:
Kiva currently targets a country limit of no more than 10% of total loans outstanding to help ensure a balanced portfolio. In certain instances, guaranty mechanisms may be used in excess of this limit on a case by case basis. * Learn more about the Field Partner's role in dealing with severe currency devaluations. |
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