Lending through Kiva online involves some risks

This page gives some examples of risks that exist when lending online through Kiva. This isn't meant to be an exhaustive list of risks, but we hope this page helps to explain these risks in easy to understand language. To review the terms that apply to your use of Kiva, please see our Terms of Use.

Borrower Risk

For information on Kiva’s historical repayment rate, please click here; please note, however, that past repayment performance does not guarantee future results. When you lend money on Kiva, 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.

In order to help reduce your risk exposure, you may wish to diversify your Kiva portfolio, thus reducing your exposure to any one borrower, Field Partner or country. For example, instead of placing $100 with one borrower, you may wish to place $25 with four borrowers in different countries through different Field Partners.

Each borrower is screened by a local Kiva Field Partner before being posted on Kiva's website. The Field Partner looks at a variety of factors (past loan history, village or group reputation, loan purpose, etc.) before deeming a borrower as credit-worthy. However, a number of factors can result in borrowers defaulting, such as:

  • Business issues (e.g. crop failure)
  • Health issues (e.g. malaria, HIV/AIDS)
  • Other issues (e.g. theft, paying for school fees, over indebtedness, reduced remittances, civil disturbances, etc.)

If a borrower defaults, Kiva Field Partners are expected to pursue collections according to their normal practices. In addition, Kiva asks and expects that all of our Field Partners adhere to the Client Protection Principles from the Smart Campaign.

* Learn more about the Field Partner's role in reviewing loan applications and administering your loan.

Field Partner Risk

When you lend to a borrower, Kiva delivers the funds to the local Field Partner (please refer to net billing system for more information). 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 borrower is able to repay, Kiva lenders could still lose principal due to Field Partner issues, for example:

  • Bankruptcy (e.g. the Field Partner may go out of business and be unable to collect your loan)
  • Fraud (e.g. staff members at the Field Partner may embezzle funds)
  • Operational difficulties (e.g. the Field Partner may have some cash-flow or other challenges that could prevent repayment)

To help you assess this risk, before working with a Field Partner, Kiva reviews each organization and performs either a full, basic, or experimental due diligence on the organization.

* Learn more about Kiva's role in rating and monitoring the risk of each Field Partner.

Country Risk

When lending internationally it is important to consider "macro-level" risks:
  • Economic (e.g. a large currency devaluation — or the institution of exchange controls by local governments — may reduce or render the Field Partner's local currency collections valueless for you)
  • Political (e.g. many loans posted on Kiva are disbursed in the developing world. Policies can change regarding funds repatriation or even the requirement that borrowers have to repay their loans)
  • Natural disasters such as a flood, tsunami or drought may greatly reduce the likelihood of loan repayment from certain countries or from specific regions in a country

Kiva currently targets a country limit of no more than 10% of total loans outstanding to help ensure a balanced portfolio. In certain instances, this limit is lifted on a temporary basis. Guaranty mechanisms may also be used in excess of this limit on a case by case basis.

In terms of currency risk, please determine if currency exchange loss is possible for a loan. Lenders bear the risk of loss if the US dollar appreciates by more than 10% against the local currency. Learn more about the Field Partner's role in dealing with severe currency devaluations.

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.

Note: foreign exchange risk is not present if your local currency is the US dollar and loans are disbursed in US dollars.

Kiva-Related Risks

There is a potential risk that Kiva, like any organization, may not continue its operations indefinitely. To better protect lenders’ funds in this circumstance and others, lenders’ funds are held by a separate Kiva entity in accounts for the benefit of Kiva lenders who have funds available in the Kiva system (e.g. funds deposited by a lender to make a loan or repayments made by Kiva borrowers to Kiva lenders). We believe that holding lenders’ funds separately from Kiva’s operational funds helps protect these funds from being subject to any claims of Kiva creditors (other than the Kiva lenders who have funds available in the Kiva system).

To learn more about Kiva’s role in the process, and related risks, please go to Kiva’s role.

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