Tuesday, September 15, 2009

Why Kiva is the best bang for your buck


This simple chart says a lot about why Kiva is so great. $88 million is the total amount of money loaned, as of a couple of weeks ago. That $88 million is mostly from developed nations. For example, the nations with the most lending actions are the US (70%), Canada (9%), and the UK (3%). To calculate what that money is really worth to the people who receive it, I took the per-capita GDP of the lender's country and divided it by the per-capita GDP of the entrepreneur's country. I used the purchasing power parity GDP, so it's not just an exchange rate calculation but an attempt at taking the cost of living into account. The average ratio is 19.7, which when multiplied by $88 million results in the incredible amount of 1.75 billion dollars.

There are certainly many possible issues with this calculation. How accurate are the GDP numbers? I used the values from the CIA factbook, but the values from the International Monetary Fund and the World Bank aren't drastically different. And what does per-capita GDP PPP really mean, and is it accurate to say that one US dollar is worth almost 30 times
as much in Kenya? And there are also some possible issues with the calcuation of the average. Kiva understandably doesn't release how much money each person lends, so I have to weigh the average based on the number of loans made per country, not the actual amount of money loaned.

But even if all my numbers are way off there's still a lot of room to spare in that $1.75 billion to still be impressive.

This is the main reason why I lend money through Kiva instead of giving money to local charities. By some measures, Kiva is clearly the most efficient use of my money. If all else is equal, I'd rather give millions of dollars than thousands of dollars.

4 comments:

  1. Hi - I love this piece of thinking. How did you do it? You couldn't have calculated based on every loan to every country (or did you?) How did you account for all the individual GDPs and get an average ratio? thanks..

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  2. It wasn't that difficult, once all the data was loaded. My query includes every single lending action, about 3 million records excluding anonymous lending. If you're curious you can see and re-run the query I used. Look in the "other" drop-down: http://kivadata.org/query.php

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  3. What I would love to see is how much money is put out from Kiva compared to how much is put in. Since loans are repaid and that money is potentially relended, chances are that the amount that has been lent out over the years is quite a lot larger than the amount that has been paid in by the lenders :)

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  4. Hi, speaking of the most efficient loan -- from my perspective as a lender, I'm interested in getting as much of the money I loan to the actual borrower as possible. I understand that field partners need to be sustainable and therefore charge interest, etc. But I'd still like to choose the field partners which charge borrowers the lowest interest (all else, like region and market, being equal). Doing so should be an incentive to field partners to make their operations more efficient, and get more money in the hands of the borrowers.

    You have this data -- it's listed under Portfolio Yield on each partner page. But it's not in your SQL ERD, it's not in any search dropdown. I would love to be able to filter loans by this criteria. Could you at least add it to the SQL API? Maybe then I or someone could write an app... it might open up a whole new community of Kiva lenders, those who are suspicious of the high fees some microlenders charge...

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