Micro Lending Information

[yourbeginnings]

I am interested in doing some micro lending has anyone participated in micro lending?

The two popular sites that I can locate is www.kiva.org and microplace.com (owned by ebay).

Any thought or knowledge you care to share is greatly appreciated.

[GOTO Fashion]

I recently read about prosper.com, which is a people-to-people lending site. This site is different in that it doesn't necessarily focus on developing nations or the impoverished. I haven't used this service before, but overall the article I read seemed positive. They seem to have some controls in place that help lenders recover in the event of a default, but overall the entire process seems inherently risky.

If you go this route, be sure to carefully specify the collateral (if any) that is being used to secure the loan, and take the necessary steps to secure that collateral (e.g., fill out and submit appropriate legal documents, such as a UCC Financing Statement, lien on real property, etc.). You may need to hire a lawyer to help you do this. After all, you wouldn't want to find out after the fact that there was a fatal error in this department.

[yourbeginnings]

GOTO, - Thanks for that information. I am going to checkout prosper.com. I did end up making a small $50 loan on Kiva.org as a test. Unfortunately there isn't any interested paid to me, it is more of a "good deed" to a lady in the Ukraine that runs a retail store. Hopefully, the $50 will be paid back. I will keep this post updated as I learn more about Kiva.org or any of the other sites I ended up using.

[GOTO Fashion]

Hmmm - $50 loaned without any interest and potentially without any payback at all? Sounds more like a charitable contribution... do you at least get to write off any bad debt at the end of the year on your tax return?

I'd like to hear what someone with accounting experience says about that...

[yourbeginnings]

GOTO - I check with the Kiva website about the charitable donation and this is their response.

"A Kiva loan is not considered a donation because it is possible you will receive your money back. Kiva cannot assure, however, that your loan will be repaid or that you will recover any of your principal."

Hopefully I will get paid back, however if I don't I am not worried about it. It is a feel good thing to help....I guess.

[GOTO Fashion]

I'd still ask your accountant/tax preparer if you don't get your money back - "bad debt" is sometimes deductible (but usually as a business expense).

I can understand the feel-good factor. The point I was making was that if I wanted to make a charitable donation, donate to a 501(c)(3) and get a receipt for it to be deducted at the end of the year.

[Linsey Knerl]

I did a few small $50 loans spread out through a portfolio. The risk was lower, as I picked a less risky portfolio, but I'll also get less back. I'll be interested to see how I do. I wouldn't recommend it to someone who can't afford to lose it. While I technically can't, we were going to invest it in stocks anyway, so this is sort of a way to switch it up. I'll let you know how it goes.

[redsoxmaniac]

Also check out http://www.lendingclub.com

and http://prosper.com

[rstlne]

I was a lender on Prosper for two years but I've started pulling my money out. Given the credit crunch and recession, even some A and AA rated borrowers may default on loans. I've been lucky so far in not having any borrowers skip out on a loan but one or two of them were late on payments.

If you lend on Kiva, do it for the feel-good factor because you're not getting compensated for giving up the time value of your money. I too would prefer to donate to a proper charity to get a tax deduction.

[yourbeginnings]

I signed up for the lending club. However received this email this morning:

Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

In the short-term the lending club is not going to be operating at a normal level. I am going to check out Prosper and update this post with my experience.