Is this the orphan crushing machine again
this post was submitted on 28 Jul 2024
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In case someone doesn't already know about it, the charity "Give Directly" tries to find the world's poorest people and gives them lump sums of money. Not as a loan. They recognize how hard it can be for people in that level of poverty to pay back money, and it also eliminates a lot of the issues that material based charities can inadvertently cause on local economies!
They're my number one favorite charity now, but I didn't know they existed till a few years ago so I'm trying to spread the word!
what's the interest rate?
This always bothered me about Kiva.org. My money provides the collateral to secure loans for people that would have difficulty getting a loan otherwise. All good so far. But then the loan company charges 20%+ of interest. Wtf? I have already collateralized the loan, why are they still charging that level of interest?
20-40% is still okay. Payday loans in those amounts are usually 200-400% (APR) in the US, or even twice that. In Haiti the official interest rate has been ~7-30%, now 17%. Real interest rate seems to be -14% at the moment because of inflation, historically it was ~7% to 0%.
So 20% is actually an amazing deal, especially if you consider that processing costs are much higher for micro loans, proportionally speaking.
Whoever is handing out these loans must barely be making a profit at all. I assume they are non-profit?
But I'm not sure how it works in detail, it might be a different picture with dollar loans.
It says "low interest" on their website: https://www.smallholderfarmersalliance.org/programs
They've had 100% repayment rate for over a decade. One of the quirks of the program is that women band together with other women to ensure the loan is paid back. The maximum loan term duration is 6 months.
NB: All of this information is from the alliance. I haven't seen anything from a third party to verify the claims.
All those subprime lenders had to go somewhere where there isn't as much regulation...
Is this not the same as https://www.bloomberg.com/graphics/2022-microfinance-banks-profit-off-developing-world/ ??
If we're talking about such low sums - why even have interest? Why not lend the money for free? There's C suite banking execs that blow that much money on their lunch supply of coke...
Debt fucks people up - I've personally known folk who've used debt "wisely" for business purposes only for it to crumble and they take their lives because they don't see a way out.
The micro-loans in Africa use very low interest rates as a way of encouraging responsibility for the loan, as well as a means of generating small amounts of capital which is used to fund future loans. In the programs I'm familiar with, all the money stays in the community instead of being siphoned out of it.
That's good to hear! - still feels weird to take profits from people worse off than you - but if it helps them and stays in the community it doesn't seem like that big a deal
Does that mean that Microsoft pay the interest and underwrite defaults? Or are they peddling debt? I hope it's the former.
At the amounts quoted it would be reasonable to just give them the money. It's also very effective.
We used to have to shill a micro loan "charity" back when I worked for the ole organic Walmart now owned by Bezos. My boss always gave me crap about not getting enough donations. I told them I was morally opposed to profiteering off the world's poorest people. No, raiderkev, this is different. No the fuck it's not. It's not a charity, it's a business, and we're asking people to fund banks that will charge these people interest and get them started on a debt spiral. Hard pass.