Kiva has typically not been an investment option because they do not pay interest to lenders. They do charge interest but the money goes to cover their costs. According to an article in E-Commerce Times, Kiva plans on offering interest to lenders in the near future.
"Though Kiva members are donors, not lenders, borrowers are charged interest, which enables Kiva's local microfinance partners to cover their costs. Depending on the country, regulatory and economic situation, these can look quite high.
'The industry average is around 35 percent; our average is around 20 percent, but it really varies from organization to organization and country to country. In Mexico, there are tax considerations ... others [lending partners] include training services as well as the loan which increases the interest rates,' Ramsey explained.
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What's next for Kiva? One thing on the slate is expanding its services to include loans and offering Kiva members the option of lending and earning an interest rate return though with local microfinance partners providing the loan contracts -- something it hopes to do in the next year.
'Kiva is regulated only as a 501c3 tax-exempt nonprofit, and so we do not allow our lenders to receive interest. In the future, when we offer interest rates, we will be looking to be regulated as a person-to-person lending Web site, not a bank or a securities broker/dealer. This is similar to the regulatory treatment of Prosper.com, Zopa.com and Myc4.com,' Kiva cofounder Matt Flannery explained."
You can read the rest of the article, Taking Internet Finance to the Next Level, Part 2: A Case Study, at E-Commerce Times. We previously reported on Part 1 of the article as well.
