A few months ago, I gave away a few Kiva Gift Certificates — one via this blog, one via Twitter, and one via Facebook. I wanted to share with you where they went.

Tom at Prosper Lending Review used the first Kiva Certificate. He selected a loan for a restaurant owner in Kabul Afghanistan:

Ghalam Nabie is the son of Share Ahmad, and lives in Kabul, Afghanistan. Ghalam, 54, lives near the Afghan Hotel and is married with five children. He has a small restaurant in the city and has good experience in this field and would like to expand his business to support his family. He is requesting an individual loan of 50,000 Afghans ($1050) for a term of 18 months to enlarge his business and to buy a new desk and table and other necessary things for his shop in order to further his business with more success. Ghalam is very happy to be involved in this loan process and is especially grateful for the help of the AFSG and Kiva. He thanks all lenders around the world.

Erin Coyne, a friend from the Peace Corps and author of a book on Russian Slang that I have pre-ordered, picked up the certificate via Facebook. Erin loaned the money to:

Mr. Yous Ba Try, 35, is married and lives with his wife and a ten year-old child in a part of Phnom Penh, Cambodia. He is the head of the family and works as a sculptor designing and making Buddha statues and historical statues from cement and will then sell up for a profit. From his business activity he can moderately make $3 a day of income. Moreover, his wife, Lay Sarorn has a business at home washing motor-bikes and vehicles and makes $3 a day of income.

Yous Ba Try would like to ask for a loan from Kiva to purchase more cement to expand his business. Half of the loan will be used to fix a roof of the building where his wife has her business.

Daniele picked up the certificate linked to from Twitter. She posted in the comments:

I just redeemed your gift certificate, and immediately used it to fund a loan to the Grace group in Uganda, led by Dezilantah Pamba, for the purchase of sewing materials for their tailoring business. Thank you for helping spread the word!

Thank you for letting me know where the money went. It was fun to help spread the word about Kiva this way.

Want the next certificate?
Subscribe to the RSS and follow me on Twitter to find out when I will give away Kiva gift certificates again.

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• Kiva: Micro Foundations for Micro Loans?

There are two great ways that you can support peer to peer lending with a simple mouse click.

1) Vote for Kiva.org — the micro lending site for entrepreneurs in the developing world in the Crunchies which are a major web award. Vote at the 2008 crunchies website under the category of most likely to make the world a better place.

2) Vote for Uncrunch America at Change.org which is being sponsored by Lending Club. Uncrunch America is a newly formed NGO that has been submitted to help change America using the voting system on Change.org. It is based upon the idea that there is lots of money available but hoarded and lots of people in need of money. The top three ideas will be moved to a second round of voting for a runoff election. The the overall top 10 ideas for changing America will be presented to the new administration on Inauguration Day.

About Uncrunch America from Change.org:

Solving the credit crisis from the bottom up

The credit crunch currently crippling America’s economy is not due to a lack of available funds. It is caused by dysfunctioning credit markets and by the banks having adopted an overly conservative credit policy in the wake of the subprime meltdown. After very permissive lending practices for many years, the pendulum has now swung the other way.

But the money has not disappeared. The money is still there, with roughly $6 trillion currently sitting in deposits, CDs and savings accounts earning interest at 3% and not being lent out by the banks. This is enough money to get small businesses through the credit crisis, offer student loans to everyone who needs it and refinance half of all mortgages in America.

Our idea is simple: unlock these resources, enable the people who have the money to lend it directly to creditworthy people who need the money through a new (yet tested over the last couple of years) mechanism called social lending: people lending money to each other at fair interest rates. With this aim in mind, we have created Uncrunch America (www.uncrunch.org), to give us a chance to help each other out…

Read the rest of the pitch at Change.Org.

• Vote for Uncrunch America at Change.Org One More Time
• Rex Dixon: Social Media Director of Lending Club Blog
• Lending Club IRA – Reader Polls
• Zopa Open for P2P Lending in the USA
• Discussion with a Mortgage Fraudster: How to steal $600K

For Christmas I posted the free Kiva gift certificate. Tom from Prospser Lending Review redeemed it, but there are no loans open on Kiva right now for him to use the certificate.

From the scrolling banner on Kiva’s site about the impact that Kiva lenders have made this week:

$1,005,000.00 lent.
12,817 lenders made a loan.
17,329 gift certificates purchased.
15,002 new lenders joined.
2,874 entrepreneurs funded.
1 loan was made every 25 seconds.

AMAZING!

I also gave a certificate away on Facebook and my friend redeemed it for this loan:

Mr. Yous Ba Try, 35, is married and lives with his wife and a ten year-old child in a part of Phnom Penh, Cambodia. He is the head of the family and works as a sculptor designing and making Buddha statues and historical statues from cement and will then sell up for a profit. From his business activity he can … Read More moderately make $3 a day of income. Moreover, his wife, Lay Sarorn has a business at home washing motor-bikes and vehicles and makes $3 a day of income.

Yous Ba Try would like to ask for a loan from Kiva to purchase more cement to expand his business. Half of the loan will be used to fix a roof of the building where his wife has her business.

Congratulations Kiva on your great year. To date Kiva has facilitated over $54 million in micro loans to entrepreneurs in the developing world.

For more about Kiva’s outstanding year, see the Kiva year end review blog post.

Another Gift Certificate Give Away:
I’ll be giving away another gift certificate via Twiter. I am certain that Kiva will have more loans to fund shortly.

• Free Kiva Gift Certificate Experiment Results
• Free Kiva.org Gift Certificate – Merry Christmas!
• MySpace Founder Giving Kiva Gift Certificates for Christmas
• Kiva: Micro Foundations for Micro Loans?
• Second Peer to Peer Lending Carnival

Last year MySpace Founder Chris DeWolfe gave away Kiva.org gift certificates to his employees as a Christmas presents. I noticed Tim Ferris gave away a gift certificate via Twitter. I decided to do the same but with Kiva.org the micro lending site gift certificates.

I am giving away one certificate via my blog with this posting, one via facebook, and one via twitter. I’ll be giving away another certificate via twitter in the next few days so follow me on twitter. I added a $20 donation to Kiva on top of the gift certificates to cover the operations for the loans, so don’t feel obligated to add the service fees that they might ask you to donate when using this certificate for the loan.

From the Kiva website:

Kiva (www.kiva.org) [is] a non-profit that allows you to lend as little as $25 to a specific low-income entrepreneur in the developing world.

You choose who to lend to – whether a baker in Afghanistan, a goat herder in Uganda, a farmer in Peru, a restaurateur in Cambodia, or a … Read Moretailor in Iraq – and as they repay their loan, you get your money back. It’s a powerful and sustainable way to empower someone right now to lift themselves out of poverty.

Below is the certificate. All I ask is that you please post a comment linking to the loan that you used it on.

By the way, you will also need the email address <> to be able to use this certificate.

Merry Christmas!

This email confirms that you have purchased a $25.00 Kiva gift certificate. This gift certificate will become
a donation to Kiva if it is not redeemed by Dec 24, 2009. We’ll send you several reminders so that you won’t forget.

When you want to send the gift certificate to your friend, the recipient will need the following information:

———————————————

Amount: $25.00

Gift Code: 7667482456866

I still think that Kiva.org should allow you to make a donation with the expectation of never recieving any money back by creating microfoundations for micro loans.

Again, if you use this certificate please let everyone know by posting in the comments. Thanks!

• MySpace Founder Giving Kiva Gift Certificates for Christmas
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• Review My First Prosper Loans and Win a Book!

I have been fascinated with Kiva.org for sometime but have not jumped into lending on the concept yet. Part of my hesitancy is that I feel awkward about earning a return on these micro-loans for international development. I do not see them fitting with my goal of trying to offer a higher return, but as a former Peace Corps volunteer I am excited about the concept of micro-finance and would like to participate.

Therefore, I am sending the following note to Kiva.org:

I think it would be great if I could make a tax deductible donation to Kiva but a little differently than I have seen suggested on your donation page. In effect, I would like to see you offer micro-foundations. Foundations offer immediate tax deduction, but require the use of the money for charitable purposes. Vanguard offers such a service for those who can donate $25,000 or more. I would like to see you bring the foundation to the average American in the same way you are bringing micro loans to the poor.

I would like to make a donation and then use my donation to select particular loans. I would like the option to state that any monies paid back either accrue in my account to allow me to lend on future loans or they go back to cover Kiva’s operating expenses. I would prefer to never have the option for any personal gain once the funds were donated.

Basically, I want to donate the money without any option of return, but I still want the fun of lending to individuals’ micro-loans. Additionally, I would like the immediate tax deductible donation that a micro-foundation could offer.

I think it would fit well with your goals and the goals of many people who lend through your site. The micro-foundation concept might also earn you some additional press coverage.

I’ll let you know what I hear from Kiva.

Technorati Tags: kiva, international development, micro loans, charity, loans, money

• Free Kiva.org Gift Certificate – Merry Christmas!
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• Vote For P2P Lending: Crunchies and Change.Org
• Zopa Open for P2P Lending in the USA

Glenn Chapman wrote an article about P2P lending which can be found at Yahoo.com News. Included in the article were Prosper.com, Virgin Money, Kiva, and Zopa. Below are a few excerpts from Glenn Chapman’s article and my comments. Glenn Chapman begins the rehashed material article with a great feel-good tag line:

The Internet is directly connecting investors and borrowers, letting them take banks out of the lending equation and put their money where their hearts and dreams are.

Never mind the details that Zopa is actually adding a layer of bureaucracy between the bank of the people involved rather than removing it in its US based model:

Zopa feels US investors are steering clear of risk so, in contrast to its London-based service, the firm guarantees lenders will get their money back. Lenders at Zopa put their money into the equivalent of certificates of deposit, selecting borrowers they want to direct funds to and picking interest rates from pre-set ranges. Zopa banks on its borrower-screening savvy to minimize losses.

On to the Prosper.com information listed in the article because this was my reason for posting about Glenn Chapman’s article in the first place…

If a Prosper borrower fails to pay back a loan the default is reported to credit agencies and eventually sold to collection agencies. The default rate on Prosper loans is a meager three percent.

There are several items related to Prosper.com that people complain about 1) censorship (see my article on Prosper editing Wikipedia and the comments at the WSJ) 2) poor collections (link to one of Prosper’s Top Lenders Collections Issues) and 3) the default rate is higher than expected and advertised.

Prosper claims the default rate is 3% which is only technically true by the Prosper.com definition of a default and includes all loans — even very recent ones. The 3% default figure does not take into account that the average three-year loan is only less than one year old. Prosper statistics on Lending Stats can easily prove this. Take a look at the below graph generated from LendingStats.com:

Prosper’s statistics are technically correct per their definition — less than 3% of Prosper loans have been put in the status of “defaulted.” However, for a Prosper loan to go into default, it must be more than 4 months late and only once per quarter are all loans which are more than four months late are classified as defaulted.

Considering that the average age of a loan listed currently at Prosper is only 284 days (approximately 9.5 months) and that it takes four or more months to be considered in default, there are many more loans that are going to default in the near future. See this prosper statistics page which shows default rates on loans originated in the first several months of the site to be in excess of 20%. That is right, the default rate is probably going to actually be more than 20% after three years. A default rate of 1 in 5 loans is horrible. Banks would be out of business, but Prosper does not share in the risk only the people lending.

How Many Prosper Loans are Late?

A better question for Glenn Chapman to ask might be “How many loans are late?” The answer would be 13.16 percent even over the short period of less than a year!

• Defaulted – 2.69% – The figure Chris Larsen quotes in the article.
• Four + Months Late – 4.31%
• Three Months Late – 1.53%
• Two Months Late – 1.5%
• One Month Late – 1.74%
• Less than one month late – 1.39%

Even if you just count the loans that are three or more months late, the default rate is much higher than 3%. Ask any banker how many unsecured loans more than three months late he expects to recover. Not many. Update: Fred89 posted a more thorough analysis of the Prosper default rates on Prospers.org forum. (You must register to see the posting.)

If you need more information and analysis of why Prosper loans defaulted at such a high rate, see LC’s analysis of the state of affairs at Prosper. However, item number four, the groups, has been corrected by Prosper since that time. That is enough of criticizing Glenn Chapman for the five minutes of research that he could have done on any number of Propser statistics websites, forums or blogs.

Kiva’s model is philanthropic, letting investors of modest means back entrepreneurs in the developing world with interest-free loans… “Not all of us can afford to open a school in South Africa like Bill Gates can but they can afford to lend someone 25 dollars,” Ramsey said.

I cannot argue with those statements, but it might be important to note the major difference between most P2P loans with Kiva and other sites — No ROI. Kiva is completely philanthropic and the best you can hope for is the return of your initial investment with no interest. While Zopa is only slightly (and as much as a lender wants to be) philanthropic. A return on your investment is possible at Zopa, but is much lower than the other sites (and with less risk) since lenders invest in credit union backed CDs.

Virgin Money is sticking with the CircleLending model of managing loans between family members.

Those statements on Virgin Money seem to be consistent with what has been reported in the past including in a recent article at the Boston Globe on P2P lending and my understanding. Because Virgin Money just lends between friends and family, there is not a great deal of information on the topic posted on the web other than generalized statements such as those included in the article.

Overall, it seems to be a standard article on P2P lending. I wish that more journalists would push beyond the marketing statements made by P2P lending companies, especially in the case of Prosper, where statistics are easily available at multiple web sites.

Yahoo article found via Prospers.org – Independent Prosper Lending Forum.

statistics, Prosper, P2P lending, credit, risk, journalism, Glenn Chapman

Technorati Tags: statistics, Prosper, P2P lending, credit, risk, journalism, Glenn Chapman

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MySpace Co-Founder and CEO, Chris DeWolfe, is giving Kiva.org gift certificates to his employees for Christmas so that they can provide microcredits (found via Fortune). You can gift Kiva gift certificates too by purchasing them on the Kiva website. That is a great idea to generate buzz and interest in Mircoloans and MicroCredit for international development. The Grameen Bank received the Nobel Peace Prize in 2006 for its microcredit program, so I expect the concept to continue to grow. It is the teach a man to fish concept (and give him a few bucks to buy a pole and lure) that makes microcredits long-term more sustainable than giving out a loaf of bread.

Another alternative development Christmas gift is OxFam which allows you to give farm animals to help reduce poverty. See the OxFam Catalog to order.

Continue below for Links about Kiva:

• Kivapedia
• Kiva on MySpace
• Kiva on Friendster
• Kiva on Squidoo
• Discussion board at Kiva Friends

poverty, kiva, microloans, microcredits, chris dewolfe, myspace, gift ideas, oxfam

Technorati Tags: poverty, kiva, microloans, microcredits, chris dewolfe, myspace, gift ideas, oxfam

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Wiseclerk mentioned the fighting over the Wikipedia article on Prosper. (The disagreement can be seen on the Wikipedia talk page. ) This reminded me of the wikipedia scanner. The wikipedia scanner checks Wikipedia edits versus the IP address of the editor and looks up the domain to find out possibly what company or governemnt agency made the change. Some interesting examples of Wikipedia Scanner usage include:

• BBC shows the CIA edited the page for the President of Iran
• Diebold axed a section of a page which included criticisms of its voting machines
• Someone in the Democratic Party HQ modified Rush Limbaugh’s page

So what did Wikipedia users with Prosper Marketplace IP addresses edit on the Prosper wikipedia page?

Since all the following edits came from Prosper Marketplace IP addresses, the implication is that someone from within Prosper’s offices made the following changes. Here is the link to the Prosper.com edits of all Wikipedia pages. The changes include a few of edits of self promotion such as adding Prosper.com to the Wikipedia page on loans, businesses in San Francisco, and Peer to Peer Lending. I don’t consider those edits much of an issue, but technically businesses are not supposed to use Wikipeida to promote themselves.

On the Prosper Wikipedia page itself, Prosper employees likely made several changes:

• Whitewashing: Someone turned the first paragraph into almost into marketing but they did leave a few criticisms to keep the changes from being too obvious.
• More whitewashing: Someone removed criticisms of the abuse of the group system and of licensing and rate caps. (Note that the removal of the group system criticism was about the time that the group system was removed due to the abuse so while no longer valid complete deletion of the criticism is still whitewashing.)
• Squashing Competition: Someone at Prosper.com removed a reference to Zopa. The removed note said Zopa was a similar website in the UK which is factual.
• The most obviously inappropriate edit — someone with a Prosper Marketplace IP address removed the entire criticism section.

By the way, someone at Prosper is also a huge fan P2PNoBank and RateLadder. They added links to those sites One, Two, Three, Four, and Five times. The first edit was actually made to Kiva’s web page! Why is someone at Prosper so fascinated with those websites?

Also, Prosper.com is not unique in making changes to their Wikipedia web page. Someone at Kiva removed negative information about their web servers crashing. I checked for Zopa edits and found none.

Of course, we’ll never know if any Prosper employees knew about the Wikipedia scanner and made other edits from home…

Disclaimer: I am relying on the Wikipeida Scanner to accurately reverse look up IP addresses of edits. If those lookups are incorrect, my data is also incorrect. I used only the IP addresss alloted to “Prosper Marketplace.” Additionally, there is now way of knowing if an employee made these edits on their own initiative and were not directed by Prosper Marketplace management. However, these Wikipeida edits taken together with removing the old forums and moderating the new forums may indicate pattern. Of course, they were dealing with rebellion in the forums, but it seems like they may be deleting criticisms rather than dealing with the root causes.

What do you think users from Prosper Marketplace IP addresses editing Wikipedia? Do you consider it abuse or vandalism? Or was Prosper making some minor corrections?

Wikipedia, Prosper, P2P Lending, internet, criticism

Technorati Tags: Wikipedia, Prosper, P2P Lending, internet, criticism

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