My Kiva Microlending Experience

Around the world, there are countless people for whom a small loan of $50 to $1,000 can make a life-changing difference. In many cases, these loans allow them to grow their business exponentially or to complete their education. The problem in many developing countries is that poor people lack access to capital which would help them to improve their situation because it is not profitable for traditional banks to lend such small amounts. By the time the banks factor in the cost of screening, the cost of underwriting and paperwork, and the cost of sending collectors into villages and farms, they would simply lose money. This is where microfinance organizations like Kiva come in.

I first learned about Kiva just a few days ago and have been researching it with some intensity since then to make sure I understand the nuances of how it works. Essentially, you get to choose an individual from the website to loan to after reading their story and their goal. This allows you to support those efforts which are in line with your own priorities, whether they be business efforts, education, building projects, or something else. You get a little background profile on the borrower as well, such as whether they are married, how may kids they have, and what their past work experience is. All of this serves to make the process feel very personal and meaningful. You can even keep tabs on that status of their goals via updates as they work to repay the loan.

Also, as most loans are several hundred dollars or more, you can pool your resources with other lenders in order to fund the full amount. You have the option to join teams with similar goals and priorities as yourself, which can allow you to have more of an impact than you could on your own. For example, I joined the Kiva Christians team in order to band together with other others who share my faith. Regularly, people will post profiles of lending opportunities that the team may be interested in combining resources on, which adds a component of social and community involvement to the mix.

Kiva teams up with a large number of Field Partners, lenders who do the groundwork of screening requests, dispersing loans, keeping track of loans, and collecting payments. According to Kiva, about 80% of these Field Partners are non-profit organizations, and the 20% that are for-profit have a strong social mission. These Field Partners charge an interest rate to cover the cost of processing the loan.*

After doing my research, I talked with my wife and she was on board with making our first loan. She wanted to start out small since we were new to the whole thing, so we decided on $50. After looking around the site for awhile, we found the profile for Lawrence from Kenya. Lawrence is a father of two and is a small-scale farmer who was looking to buy a high-quality dairy cow. According to his profile, he has been farming for six years. The demand for milk is high in his village, which should allow him to easily repay his loan and make some profit as well. In addition to the dairy produced by the cow, Lawrence will benefit from the cow’s manure on his farm. Awesome!

The Field Partner providing this loan is also giving Lawrence training in saving money and in business. This helps to equip him with lifelong financial skills and to ensure he will get the maximum benefit from the money. All in all, Lawrence was looking to raise $350. With our contribution and eight others chipping in, we were able to fund his loan and get him the money he needed for his dairy cow. Now, we get to watch for the next year as Lawrence grows his farming business. When you are repaid over time, you can elect to have this money either returned to you or lent back out again. By electing to re-lend the money, you can multiply the effect by loaning the same money to a number of people.

Lawrence from Kenya

You can access your portfolio of loans in your dashboard at any time. This dashboard is really fun because you can see how much you’ve lent over time, all the people you have helped, the countries you have lent in, the teams you’ve contributed with, and more, all with slick graphs and charts. The geek in me really appreciate all of this.

 

I’ll be sure to keep you posted as I learn more about the site and as I use it more. Head on over to www.kiva.org to check it out and see what you think. Please leave a comment or question; I’d love to hear your thoughts!

My Kiva Dashboard and Portfolio
My Kiva Dashboard and Portfolio (updated 5/8/2015)

*One of the concerns some people have with Kiva is the high interest rates charged by the Field Partners in these loans. However, it is important to keep everything in perspective economically. While the average interest rate is a surprising 34%, you must remember that the inflation rate in developing countries is often enormous in comparison to those we’re used to here in the West today. Even here in the states just 30 years ago, it was not uncommon to see mortgages and car loans at interest rates of 18%+ because of inflation. Next, you should keep in mind that the small amounts of these loans makes it more expensive to process in proportion to the principle amount. When you add to all of this the fact that the Field Partners have to pay collectors to travel many miles just to collect small payments, you’ll see that most of the Field Partners are barely covering their costs. In fact, most of them have a negative profit rate.

 

Dollar Shave Club – Deal or Gimmick?

After seeing Dollar Shave Club’s hilarious YouTube commercial and periodic Facebook ads, I decided to give them a shot. I have a bad habit of waiting way too long to replace blades, leaving me with a patchy shave at best and an occasional nicked chin at worst. When I did replace my razor, I usually ended up replacing the whole thing, which would cost $7+ and only came with 2 cartridges.

If you haven’t heard of the Dollar Shave Club, their model is refreshingly simple: pay a few bucks a month to get a quality razor up front and replacement cartridges delivered to your mailbox every month.

Their plans start at $3 per month ($1 + $2 s/h) for the twin blade razor, $6 per month (s/h included) for their 4-blade model, and $9 (s/h included) for the “Executive” 5-blade version.

When I first signed up, I figured I would give the cheapest version a try and upgrade if they were too cheaply made. The first package came a few days after signing up and included a plastic razor and 5 replacement blades. At first, they seemed to work reasonably well, but after a couple of uses I found that I wasn’t getting a very close shave and even nicked myself once or twice.

I wasn’t terribly surprised by the results. I expected that two blades probably weren’t going to suffice in the first place, but I was still a little disappointed. However, I decided to upgrade to the $6 4-blade model.

When the new razor arrived earlier this month, I was pleasantly surprised by the high quality. It was made of a sleek metal that felt sturdy and manly. I felt the difference immediately with the first shave, much smoother than the previous. Honestly, I think this is one of the best razors I have ever used, ranking right up there with some of the more expensive Gillette models.

The $6 model comes with 4 replacement blades. Because my facial hair doesn’t grow very fast, I don’t need to replace my blade every week. As you can imagine, then, I was excited to see that DSC offers an every-other-month plan for guys like me. As long as I can make my blades last at least 2 weeks, this equates to $3 a month for a great razor and fresh blades in my mailbox every month without any effort required. At this point, I am about a week and a half into my first blade with the new model and it’s still going strong. I don’t think I’ll have any problems with the every-other-month plan.

Overall, I’ve been extremely happy with my Dollar Shave Club experience and I look forward to staying with them for a long time to come. If you found this short review helpful and would like to sign up, I would really appreciate it if you would use the referral link below. If you do, they’ll give me a few bucks for recommending them, and they’ll do the same for you if you spread the word.

http://shaved.by/by6AB

 

3 Great Tools to Track Your Net Worth – And Why You Should!

Have you ever filed taxes at the end of the year and, when looking at your income, wondered, “Where did all that money go?” Maybe you’ve been working a job for 5-10+ years and have little to show for it. Maybe you’re even in the hole, owing more than you own.

If this sounds familiar, or if you’re just having trouble sticking to your goals of saving a certain amount of money over time, you may find tracking your net worth to be a tremendous motivator.

Your net worth can be calculated using this simple formula: Assets – Liabilities = Net Worth. Assets are things you own that have a positive value, such as cash, your house, retirement investments, and so on. Liabilities are things that you owe, such as credit card debt, student loans, car loans, mortgage, etc..

Let’s look at a very basic example to make sure we’re clear. Assume John has $5,000 in cash, $10,000 in various investments, and his house is worth $150,000. That brings his assets to $165,000. Let’s say he has a mortgage of $120,000 on his house, owes $3,000 on his car, and has $15,000 in student loans.

To calculate John’s net worth, we plug the numbers into our formula:

$165,000 (Assets) – $138,000 (Liabilities) =  $27,000 (Net Worth)

Tracking your net worth over a period of time, such as months or years, gives you a look at the progress you’re making. Sometimes it’s tempting to lose focus on your goals if you have unexpected setbacks such as medical payments, car repairs, or just blow your budget for a bit. Taking a longer-term view of your situation helps provide the motivation you need to keep going.

There are a number of ways you can keep track of your net worth. First, you can use Mint.com. If you’re not familiar with Mint, it’s an excellent website for keeping track of your finances and budgeting. All you do is plug in your information for your different financial accounts such as your checking, savings, retirement accounts, auto/mortgage loans, credit cards, and the like. All of this information is sent with heavy encryption, so nobody can see your your passwords or private information. As a computer scientist by training, I feel comfortable knowing it’s all very secure. Once you’ve plugged in your accounts, Mint keeps track of them over time, so you can always look back and see your net worth over any period. One nice feature about Mint is that it even allows you to add your house and will track your home value using Zillow’s “Zestimate.”

Net Worth
An Example Net Worth Chart from Mint.com

 

Another website that I use almost exclusively for net worth tracking is called Personal Capital. It’s all a matter of preference, but I like the detailed graphs and ability to explore more on Personal Capital than Mint when it comes to net worth. Mint is much better at budgeting and tracking transactions, however, which is why I still use both.

Personal_Capital

I couldn’t find a good net worth graph example online, so I figured I’d just use our own and exclude the numbers. I only started using Personal Capital in March of this year, so I don’t have as large a range as I do in Mint, but I like the ability to see our story in the peaks and valleys of this net worth graph. I can quickly see how our income compared to our expenses each month based on the paycheck peaks, I can see the valley where we put a downpayment on my car (wish I’d paid cash for a less expensive car, but that’s for another time), where we paused our retirement investing for a short time, where we transferred retirement accounts, and so on. This is fun to look at in Mint as well since I have a longer timespan with them and can see where we were financially leading up to and going into marriage, as well as how far we’ve come since then. Every thousand dollar milestone gets me excited and solidifies the conviction that we’re doing the right things, which helps us stay on track. If I didn’t track our net worth, it would also be easier to make large purchases as long as we could “afford” them without realizing the impact they make to our bigger picture.

If you don’t like the idea of connecting outside websites to your financial accounts or if you prefer the flexibility of running your own numbers, you can also use an Excel spreadsheet to track your net worth. In fact, this is probably the best option which allows the most customization. However, as it will require a lot of manual input each month, it’s not the most convenient.

So there you have it: three great options for keeping track of your net worth and staying motivated. Hope this has been helpful!

If you have any questions about Net Worth, Mint, Personal Capital, or anything else, please let me know in the comments!