Borrowing Cost Comparison
Kiva uses a calculation called "portfolio yield" to express the average interest rate and fees that Kiva borrowers pay to the Kiva Field Partner administering their loan. Portfolio yield is defined as all interest and fees paid by entrepreneurs to the Field Partner divided by the average portfolio outstanding during any given year.
The Portfolio Yield is generally based on audited financial information and is a better indication of the cost of borrowing money from a Kiva Field Partner than the simple interest rates reported by our Field Partners because it:
- Includes any fees associated with loans and
- Is expressed in one-year increments (similar to the way an APR works)
Please note that Portfolio Yield does not yet include the concept of mandatory savings.
For more information about portfolio yield and interest rates, please visit the Kiva Help Center and click "Interest Rates/Portfolio Yield".
Profitability (Return on Assets):
Return on Assets is an indication of a microfinance institution's profitability. It can also be an indicator of the long-term sustainability of a microfinance institution, as organizations consistently operating at a loss (those that have a negative return on assets) may not be able to sustain their operations over time.
Average Loan Size (% of Per Capita Income):
The Field Partner's average loan size is expressed as a percentage of the country's gross national income per capita.
Loans that are smaller (that is, as a lower percentage of gross national income per capita) are generally made to more economically disadvantaged populations. However, these same loans are generally more costly for the microfinance institution to originate, disburse and collect.