Loan Sharking?[edit source]
Hello Dr. Pearce,
I am trying to choose a group to lend to for the Microfinance Project and came across a huge success story.
Fundación Paraguaya was cited in the Inter-American Development Bank's League of Champions as the sixth most profitable microfinance program in Latin America. In 2004, 2005 and 2006, the program also won Honorable Mention in the Financial Transparency competition run by the World Bank-sponsored Consultative Group on the Poor (CGAP).
I found the group through Villa La Amistad Group which has joined with the Committee of Entrepreneurial Women. I almost fired off 25 bones but decided to look into it in more detail. The currency exchange loss was covered (awesome!) and the Field Partner's delinquency rate and default rate were 0%!!!
I then found that the Portfolio Yield was 48%. This seemed outrageous to me and I wanted your input as to whether or not this was a reasonable number and I don't understand the mechanisms very well, or if this is borderline loan-sharking.
Any suggestions on whether I am out-to-lunch or not would be much appreciated.
The cost for MFIs[edit source]
This is as excellent point - the loan rates are enormous compared to what we are accustomed to in Canada. See thisinformational article published by a Kiva partner that starts to help clear up the seemingly high portfolio yield. You are likely to still have a visceral reaction to those kind of number (I have recently seen a portfolio yield as high as 60%) but wikipedia suggests Kiva's average portfolio yield (across Field Partners) of 35.2% is on par with other MFIs at 27.7%. We need to develop a more efficient way of providing capital to the BOP --Joshua 12:44, 24 March 2010 (UTC)