free market odds and ends


Just did my 24th loan through Kiva. I have been putting in $25 a month since September of 2009 and now things are starting to really roll. By my estimates, I have put in $450 into Kiva but have made $600 worth of loans. As people pay me back, I channel that money back into more loans. The last two months have been great, when I do my usual $25 contribution there is already over $25 in my account. Now I’m doing 2 loans a month even though I’m still putting in the same amount as I always have.So far there has been exactly 0 defaults. This is how things are supposed to work. People get infusions of capital making them more productive. They pay that money back and then that same money can go to someone else. Yes, they pay interest on the loan (not to me BTW, I only get back what I put in) but that assures that the money is being put to productive uses.

Most people see this as a great charity. I can’t help but notice that it looks like good old fashioned loans to improve capital and productivity. In other words, this looks exactly the way things would be absent market distortions. In an ideal world I would receive some of that interest instead of only getting the warm glow of helping someone out. That’s really the only thing separating what Kiva does from good old-fashioned capitalism.

One day I might need to withdraw the money I’ve put into Kiva. I have that option. I’m not getting any interest on putting my money aside, and I run the risk of not getting some of it back. Additionally, if I do want to withdraw the money, I might have to wait until it gets paid back to me before withdrawing. In general though, I feel good about what Im doing with this money and with a diversified enough portfolio I know that I can get most of it back eventually. Why aren’t more people doing this?

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