I got word a few weeks ago that two of our loans have defaulted. The partner organization that Kiva uses in Ecuador—called MIFEX—went belly-up about a month ago and two of our recipients were working with them. (Kiva sent me a long email explaining what happened, and it’s a long story so for the purposes of this blog…let’s just leave it at ‘they went belly up’.)
Both of the recipients were making monthly payments before MIFEX closed its doors. So, while it’s a bummer that we did not get all the funds back, let’s hope that the money that was loaned to these two individuals did help them accomplish their goals and make a better life for themselves.
You can read their individual stories below, but first a bit on the recent defaults.
Three defaults in a row. Do we have a problem?
Here are the stats: the WPMF has made 29 loans thus far. Of those loans, 6 have been paid back in full, 20 are in active repayment, and 3 have defaulted. Our default rate is much higher than the average lender using KIVA, but I think we will see much success with our 20 active recipients.
Micro-lending carries a risk. Essentially, it is lending to people who absolutely cannot get financial help from any traditional source. The people we lend to don't have collateral; they live on the margins and barely get by each month. With this philosophy, I consider the loans we make via KIVA to be donations. Ideally, we will get that money back and be able to reinvest it in other entrepreneurs, but if not…we did what we could to help someone in need.
So, no, I don’t believe there’s a problem. In fact, I love checking the WPMF’s portfolio on the Kiva site to track the progress of our other recipients. There’s a lot to be excited about. To see what I mean, be sure to check back soon to read some great success stories. :)
