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.

Balance Humbleness and Credit

What is more sought after? Praise from someone who seems to praise you at every turn or praise from someone who seems to always be at odds with you?

My wife often praises me for many things, and it isn’t a bad thing, but sometimes it just feels like I would have done it anyway, so I don’t need praise. However, I would rather her continue to offer praise then to cut it all short because I don’t think I deserve it, as in quite a few situations I feel loved because of her words of affirmation. I have to admit that I sometimes am seeking praise from her, but not too often.

On the other hand I have a coworker that often greets my ideas with scoffs or sarcasm. The usual story goes that I would be seeking praise from him because it would be more awesome than anything, but that isn’t true. That is why his praise earlier today caught me off guard. It makes me think of how I regard people, I know that they are probably deep and complex, but really they are just a caricature drawn from my interactions with them or stories I have heard.

In my mind my coworker gained a bit more dimensionality, becoming less of a stereotype that I may have assigned subconsciously, and more of a person. But this whole delving into my mind about assessing characteristics isn’t the whole idea of this post, it is also to look at reactions to praise.

I have a hard time reacting to praise. I grew up and had things easy, school was a breeze, memorizing piano pieces the night before (really wrankled my teacher’s nerves), but also good feedback from family. Praise often came in the form of a ribbon or paper award, all I had to do was accept it and not blush too much.

The ease for which things came to me did not help in the transition to college. With a whole different paradigm I floundered and praise was hard to come by, especially hanging out with kids that were often as smart or smarter than me.

Then after college I had two totally different worlds. My job, where everyone was so smart that I hardly ever was recognized to the people I met who would praise me for things that I thought were general knowledge. And now I was hungry for praise.

Hunger for praise has another name, pride, and it can lead to some odd behaviors. I was overly competitive with fencing and other sports, getting very upset when I couldn’t perform as well as I thought I should. After years of working for the company I thought I deserved to be recognized, but maybe I was lucky that I got to work there at all. Perspectives change greatly.

Jessie confronted me about the fencing. I had to take a breather for months after fencing every week just to calm down enough to realize that I was pushing my stress level up and making mistakes that were hurting both my form and my body. Going into a bout with a mindset of having fun and learning greatly reduced that stress and allowed me to enjoy fencing quite a bit more, as well as be able to use my right hand without too much soreness from a death-grip on the foil.

Back to today, getting praised at work felt weird, especially from an unexpected person. However, self-deprecation won’t really do any good in that instance. Humbleness, sure, but abasing yourself to the point where the person is never going to say anything to you again, much less praise you? It wasn’t that bad, I mostly stuck with saying that it was what I was trained to do. I didn’t go into further detail and left him to draw his own conclusions. Mainly there is credit and yes I am passing credit to my training, but I was there administering it.

It is a tough balance, sure I still want credit for doing good things so that I can advance my career, but I don’t need praise just for praise’s sake, any more. I certainly don’t want to take other’s credit, or attack them in order to advance myself.

If I act too humble then I am proud that I am humble, and if I wheedle praise out of every passerby then I am most certainly proud. Neither of those things will help me grow and understand how I need to interact with other people.

Continue to do good and be humble, credit where credit is due, and don’t over do it.