The Odd Case of Charity Lending

I would ask what hole you are living in if you don’t know what micro-lending is, except you may see, soon, that I would like to join you. Basically micro-lending is set up like a charity where you give money to someone, but you know who it is, what they are trying to do, and you expect them to pay you back. This is so you can lend again, and again.

Let’s take Kiva for example: It has funders, like me, who put in $25 per person to fund an enterprise (farmer, banker, mechanic, store owner, etc.) Kiva takes this money and forward it to in-field institution, Field Partner, who is responsible for distribution and collection. The debtor pays this loan back and you get a portion back until the entire loan is paid. If you have multiple “investments” in your “portfolio” then you may get the $25 to relend sooner and be able to add to your portfolio.

This is great for a few reasons: you are getting capital investment to parts of the world that want to make things better and you have a tenuous but real connection to people around the world. But there are a few issues:

Kiva derives its funding from donations by the funding users. Essentially this makes it a charity, merely a way to funnel capital to other parts of the world. But this means that Kiva is always asking for donations, and if you aren’t adding money then you will at some point not have enough to make an investment.

Oh yeah, you won’t have enough money because you aren’t receiving any of the interest from these investments. It’s a charity, not true investment. Add to this that the fact a borrower can default, and then you lose the rest of the un-repaid amount. What happens to the loan? What does the Field Partner do, just leave it be? If there aren’t some strings attached, then every borrower would figure out the amount of a grant they need, get a loan and then default. Of course they can’t apply again, but a few thousand free dollars in a third-world country could certainly get you quite far, whether or not you are setting up a business for success.

So there must be something more that Field Partners can do to enforce a loan. But if we can consider the remaining amount as lost to us, the lenders, where does it go? I don’t like either implication.

And lastly by making people in debt to us, we are essentially spreading America’s idea of how to get ahead. Which is great in some regards, but really it’s just become how to get money for the things we “need” to buy, speaking as someone with a mortgage. We are in debt to many people, and as Americans are not as good about paying it off as the rest of the world. But let’s spread that idea to other people, so maybe we don’t feel as alone.

One thing that I have been wrestling with as a Christian is that we aren’t supposed to make money from usury, which is more specifically lending at unreasonable rates. So definitely not credit card lender… But what is an unreasonable rate? Of course we are not making an unreasonable rate from the transaction, but some of the Field Partners may be charging going rates in those countries, which by current American standards could be considered highway robbery. But back to who to lend to.

It really depends on the situation. With friends and family, unless you have a codified contract, in most cases you should only be ‘lending’ about as much as you would be willing to give away. And never co-sign. The idea here is that unless you are actually going to be a part of a business venture, you should expect it never to come back. Of course you don’t have to tell them.

Another case is absolute poverty, or extenuating circumstances. Lending money to a region that has no money isn’t going to help, how is the borrower going to pay back the loan if nobody else can pay them? War zones too, if someone can turn around and pay you back tomorrow you might very well get caught up in something very bad.

Now here comes the hard part, lending money can actually spur growth with the right business and in the right area. That is the idea of many of these micro-lending entities. The problem is how do you jump through hoops of actually lending money abroad without all the tax implications? You make it a charity. Good, but also not good. There is no way, as explained above that this will ever work out for you, the lender, other than just to feel good.

So I am becoming more convinced that we should be looking at traditional investing, idea investing like Kickstarter, and true charity rather than attempting to blend charity and debt. I would urge you to stay away from debt in general, but in some cases it can be useful to bootstrap ideas, or buy mundane possessions.

I would like to see something similar to Kiva except that we are actually investing and receiving returns, not just enough to lend to the next one, but enough to slowly grow the impact that we can have. Of course there are many regulatory issues with this, but it may be worth it, spreading a *slightly* better idea from the US.

Some links:
Kiva is not Quite What It Seems
The Joy of Pretending...
Wikipedia: Microfinance - 5/5/2017

And I might be a few years behind the curve. Hopefully not with my stories.

Contrasting Old and New

What’s the best thing about living on the mainland after seven years of living on Hawaii? Flights aren’t working out in my favor as far as schedule and cost, nor is it cheap to send furniture from my parents’. In Hawaii? Suck it up, the only way you are getting off this island is to fly or get really good at sailing. Also freight is going to cost you 1400 bucks to ship an end table… okay maybe not that much. Mainland? Okay, we will drive 3200 miles round trip for about 500 bucks, be able to take all the luggage we want, and then turn around and bring home the furniture. The bad news? We are looking at doing that in December and January. Oh seasons.

Whatever plans we have though, I think both of can be pretty flexible and be able to go before any large storms are going to occur. Then we won’t need to be as regimented to catch flights. And if we really need to we can go south. Add a few hours or more, but still make it in our own time. Also, if the weather is bad on the days we have plane tickets, the changing of plans or waiting would be frustrating to say the least.

What car are we going to drive there and pick up furniture with? Ah, but we have a direct line on a Subaru Forester, buying it Saturday. It might be the car’s first real trip period, but we are really excited to get it.

Furniture, but not really -

Due to office remodeling I also got cabinets with a countertop,  going to install that in the garage for a workbench. Might be modifications throughout the years to make it more useful, but I think it will be quite a bit easier than trying to build my own with basically no tools currently.

Short observations on work

One of the best things about working for a startup is the fact that there is huge right of way for creativity, in order for an idea to be really crazy it has to be at least one more level of crazy than normal. To put it into perspective, we have 30+ interns working for us this summer, about half the company. That is nuts in my mind, but the amount of work they are doing is actually amazing, in fact swamping our normal processes. But speaking of processes, still a large amount of room for growth or massive change.

Compared to the Joint Astronomy Centre the Center for Open Science is a massively younger, more flexible place. This is both a blessing, but it also means that we aren’t playing with 120 ton telescopes that can look at a gas cloud being eating by a black hole in the middle of our galaxy, trade-offs.

Probably my biggest issue is that there is so much going on that it is hard to keep track of who is working on similar or potentially conflicting things. I have to say that one of my merges of code essentially wiped out an entire commit by an intern, not because they did anything wrong, but because I started using schema validation rather than writing out a dataset line by line. Also there have been a couple cases where interns figure out that an issue already has a PR that just isn’t merged yet, after they code a solution. Even with all of that and the semi-chaotic nature of interactions I have to say I enjoy it nine out ten or fifteen days which is a bit better than some spans of time at the JAC.

And I have certainly learned a huge amount. That is not all that different from the JAC, but the pace is much faster, and the tools are so much newer in general at COS that sometimes you have to fix them and send in a PR to a stand alone tool. But that leads to other things: Open source! Oh man, so glad to still be working for science and for the greater good. I am not sure if I could work for a “business” company, even if I’ve dreamed of starting my own sometimes.

Anyway, on to solving the world’s problems by facilitating a better website for scientists to do better, more transparent work.