Wednesday, July 27, 2011

Kiva Interest rate Question

A reader left a question in the Guest Book regarding the interest rates charged by the Kiva "Partners" who take the money from Kiva and do the actual lending and collecting on their behalf. Yes, the interest rates charges by these "partners" has bothered me. In comparison to interest rates charged in Canada and the USA, these rates seem high. On the other hand, compared to interest rates charged in developing and third world countries, these rates are very reasonable.

We know a Mexican who lives south of Mexico City who is very well off. He was telling me that even with his preferred interest rate he still pays almost 30% on his Visa card. This was when I was paying 6.5% on my card. Neither of of us ever lets the balance go unpaid after the due date but those are the rates we would each pay if we did.

The other consideration is that these people would probably find it impossible to get a loan from any other source. All the loans I have made have been paid off quickly, usually in three or four months in order to limit these interest payments. So yes, I am concerned but considering all of the above, I still feel Kiva is a worthwhile effort.

For an opinion from the field, read here.

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