Why Kiva Works

August 12, 2006 at 5:15 pm Leave a comment

So despite some bad news from my loanee, Kiva has for the most part worked. My bet on a Camabodian glass maker has turned out OK so far. But what’s nice about Kiva is that I get the money back or well… kiva does more accurately. Hence, the seller in Cambodia returns my money and I can invest it somewhere else. What does this mean? It means that Kiva grows by scale, but also that one 25 dollar investment can be used multiple times. As the network grows so does the capital, but barring some unfortunate accidents where people default on their loans, it means that the money you invest is generally coming back as new people in turn put more money in. Hence, it’s more effecient than a traditional NGO becuase it’s more penny conscious and provides a means of tracking improvements as the loan is returned. It’s an interesting concept and one that should be applied to more markets than just microfinance. It might take 20 years to return on an investment in solar or alternative energy, but as the returns come in they could be in turn invested in more projects. What’s perhaps needed is rate swapping where someone who has been successfull can hedge part of their loan on another person’s riskier proposition. While there is no interest, this would mean a first time loaner could offset their potential losses while a recurring loaner could have their fingers in multiple enterprises. Of course, even putting in a little interest would be better, as it would maximize the returns and also create a larger poll of money to invest in future projects while also making rate swaps more practical. I’d still like to see a website where people can pool money towards common goals, prizes, and other achievements to allow a broader span of grants and money for the sciences, poverty, etc. On another note, I have an idea involving the chicago climate exchange and state hand outs for alternative power I’ll post about in a little.

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Entry filed under: my life through software.

links for 2006-08-12 my brain augusr 13th 2006

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