Frequent Miler on the Air - Doing good and earning points with Kiva microloans | Coffee Break Ep33 | 11-12-24

Episode Date: November 12, 2024

Kiva is a clearing house for microlenders to help them find funding for microloans. You don't earn interest on these loans, but this can be an interesting way to accumulate spend on reward cards without fees... (00:37) - Kiva is like a clearinghouse for microlenders to help them find funding Read more about Kiva loans here: https://frequentmiler.com/why-i-love-kiva-for-earning-rewards-and-doing-good/ (01:32) - You choose which loans to fund and how much to fund. (You do not earn interest. At best: 100% of money back.) But you can pay with credit card with no fee! (03:33) - How much $ can you float? (And how long can you float?) (04:22) - No guarantee of pay back (05:00) - Avg default rate: 1.82% (mine: 1.73%) (06:03) - Tool to make it easier to find safe loans: KivaLens Read about KivaLens here: http://www.kivalens.org/ And read about updates to KivaLens here: https://frequentmiler.com/kivalens-resurfaces-better-than-before/ (06:40) - KivaLens gives you an ability to filter loan types (07:48) - KivaLens also gives you an ability to sort Visit https://frequentmiler.com/subscribe to get updated on in-depth points and miles content like this, and don’t forget to like and follow us on social media. Music Credit – Beach Walk by Unicorn Heads

Here we go. This is not your typical frequent miler on the air episode. This is a standalone segment we're calling Coffee Break. Each Coffee Break segment will cover a single topic related to miles and points. And each Coffee Break is limited to 20 minutes or your money back. Enjoy. Today's coffee break. Doing good and earning points with Kiva microloans.

That sounds interesting. Tell me more. Yeah. Kiva is a service I've been using for a long time now, and I figured it's time to tell our podcast audience all about it. In general, Kiva is a clearinghouse for micro lenders to help them find funding for micro loans. So basically all around the world, there are lots of different micro lenders who lend to people usually who are pretty needy that just need a little bit of money to, you know, get supplies for their business. Or sometimes it's even just things like they need some money so they can afford travel to be able to go to school. You know, there's all kinds of things,

reasons micro loaners are out there, micro lending. And Kiva is sort of the Craigslist of micro-lending, if you will. And what Kiva does is it lets you choose which loans you want to fund and how much to fund each one. You don't earn interest on these loans. At best, if all goes well, you earn 100% of your money back, but this is not a profit-making opportunity here. However, you can pay for these loans with a credit card and there's no fee whatsoever. Ooh, I like the sounds of that because if there's no fee, that means essentially you're earning rewards at, I'm going to say no cost, but I guess really if you talk about time cost of money and all that, we'll call it low cost. So yeah, without a fee, so you'd be using that to earn points and miles on your existing

cards, hit big spend bonuses, earn new welcome bonuses if you need to meet a certain amount of minimum spend and you need to get it done now. This could be a way to get that done quickly in a hurry, I suppose. But you called this like the Craigslist of microlending. And Craigslist is a little shady. So I'm wondering, what's the catch here? What do I need to worry about if this is the Craigslist of microlending? Yeah, maybe that wasn't a good phrase i i think kiva itself is very reputable and they do a lot to sort of audit the micro lenders to try to make sure that their quality ones will only uh on board and keep micro lenders that are um you know from their point of

view actually doing good and and keeping their promises and everything. So it's not exactly Craigslist, but there's probably some risks. Not exactly Craigslist. And one more thing I want to say about paying the credit card fee is that Kiva doesn't eat that fee. PayPal graciously eats the fee for them. So that's a nice thing too. The money is still going to the micro lenders without them having to worry about that fee. Anyway, there are things you need to worry about. So some cautions. You need to be able to float the money that you loan for quite a while. So don't think that if you loan, let's say $1,000, don't think that you're going to days, $1,000 over six months would earn something.

So you're not getting that if you don't have it in your bank account, but you're getting the advantage of doing some good in the world, hopefully. Yeah. So as far as costs go, yes, there's the cost of money. You're not going to earn interest for all that time that your money is locked up. There's actual loss. Some loans don't pay back or usually what happens is they don't pay back fully if someone defaults. And also if you're hoping that loans will be like charitable donations on your taxes, that's not the case. These are loans, not charitable gifts. So those are some costs. But in addition to the cost, there's the caution. I was saying like, how long can you float that money? There's no guarantee of payback. Usually they pay back, but there's no guarantee. The Kiva reports average default rate of Kiva lenders at 1.82%. My current default rate is 1.73%.

And that goes back many, many years. And so I don't know. I would not necessarily say that my experience is likely to be people's experience going forward because Kiva changed a lot in many different ways since they started up and since I've been loaning through Kiva way back when. So those are just some data points. I think the 1.82% is probably a safer data point to start with since that's what Kiva reports as their average. So I guess if you're having an average default rate of 1.82%, and if we call that losing 1.82%, then this isn't exactly free spend. It's spend that's going to cost you a

little bit of something because of all of those things that Greg just mentioned, some loss, obviously no interest on the money you got in the bank. So all right, so it's not totally free spend, but on the flip side, it's pretty easy spend, right? It's really easy spend. In fact, there's a tool that makes it even easier to spend. It's called Kiva Lens, which is Kiva, K-I-V-A, L-E-N-S. So there's no E at the end or anything like that. And if you go to KivaLens.org, that's where you'll find this tool.

Little caution, you have to go to HTTP, not HTTPS, to find this tool. A little trick there. But what's cool about this tool is it lets you filter all the available Kiva loans by a number of things that you might be concerned with, such as what is the risk rating? Kiva rates all of the lenders with risk rating, so you can filter to just the ones that are the least risky. You can pick ones that there's no chance of currency exchange loss. You can pick ones where the dispersal days is very soon. I'm not going to get into what that means, but you want it to be a smaller number there. You can also filter to things like what's the delinquency rate and default rate of these micro lenders. So it's not of the particular borrower on the ground. It's these micro lenders because they have more data for the lenders than the individual borrowers.

And that's probably a more useful data point because it gives you an idea as to the type of risk that that lender takes on, right? Yeah, exactly. Exactly. And finally, you could do things like sort by the final repayment date or more complicated. Date half is paid back, then 75% then fully paid back. And by doing that, the reason you might want to do that is if your goal is to try to get paid back more quickly, then they have all these filters and things for doing that. So anyway, big picture is Kiva and Kiva Lens as sort of an add-on helps you. It makes it possible to make these loans with your credit card and earn rewards. Get most of that money back, not all of it

necessarily. And most importantly, do good. I wrote a lengthy post a couple of years ago about how much good I believe they do. There has been controversy in the micro lending world about these things. But if you read the details, I think you'll find that they are doing good. I think they're doing a lot of good. And so I feel good about supporting these loans, even if it's not always a winning proposition or even a break even. There you go. So you got a good opportunity to pick up spend at pretty low cost in your pajamas from home and also do some good in the world. So Kiva Loans, if you've not read about it, you should check the link in the

description because Greg has written quite a bit about Kiva Loans. And so we'll give you a link to be able to find more information.