I’ve written a bit about the benefits of donating to charity before, both in terms of tax benefits and in terms of how it makes you feel. Of course, there are many sorts of charity that don’t have a tax benefit, such as handing a few dollars to the homeless person you pass every day or dropping your change into a bell ringer’s pail during the holidays.
Something else that falls into that category is making a loan through Kiva. Kiva is a micro-lending site, allowing lenders to lend directly to entrepreneurs in developing countries. Lenders browse the site to find a person they want to lend to and how much of the loan they want to fund (usually $25-$50). Most of the loans have terms of six to twelve months, during which time the borrower pays back the money in small increments and makes short journal entries to discuss their progress.
At the end of the loan term, Kiva deposits the loan amount back into the lender’s account. The majority of borrowers repay their entire loans, but there is a risk that they will not be able to repay the full amount. The lender can then choose to re-loan the money or withdraw it back into their bank account.
There is no interest earned on these loans. Additionally, because it is a loan and not a donation, it is not tax deductible. But should that matter?
I made my first Kiva loan earlier this month and am eagerly awaiting reports on the progress that the woman makes on her business. It really brings home the idea of how much we can do for someone else with something so small. What was I going to do with the money? Given my budget lately, probably spend it on groceries. What is she going to do with the money? Build her animal sales business. And then she will repay it (hopefully!) and I can lend it to someone else to help them achieve their goals.
From everything I’ve read, people are delighted with their experiences as lenders with Kiva, and I’m excited to be a part of that group.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
Megan –
I’ve been loaning through Kiva for – wow, feels good – 3 years now. I started out with I think about $50 bucks and somehow, that’s gone up to almost 3-4 times as much without realizing it or even feeling a pinch (we’ve since become single-income).
I just have two experiences I really think stand out for me. One is the day I saw a $25 limit for people to lend. The note said that they’d had so many people willing to be lenders that they were imposing a limit so more people could lend. That warmed my heart – that people were lending so much!!!!
And the second was my own reaction, one that I confess to being proud of. Out of the loans I made, 2 defaulted. I got partial payment back to the extent they paid back, proportional to my amount. But what saddened me was how the borrower was coping. I mean – it was seriously a drop in the bucket to me. I think, combined, I lost less than 20 bucks. But to them – they lost so much more. They lost some credit rating, and more importantly – the chance to make their dream into something they wanted.
I love loaning through Kiva. It’s so small for me …. and so huge for someone else. I firmly believe that you never loan, you give. You give it and if it comes back, good for you, but you’ve loaned it not expecting it to come back. I only look forward to the loan being repaid because I can then re-loan and it means the person got their dream …. I have yet to take the money repaid and push it back into my checking account. It’s gone back to Kiva.
It feels good ….. that’s all i can say
I’m the same way. I loan and then re-loan, and it’s a great feeling. Over a few years, an easy donation of $25 can help a number of people. It’s a great feeling.