Thursday, November 13, 2008

Kiva's New Repayment System - Questions Answered

As both Fiona and Roma have previously mentioned, we recently made the transition to a new partner administration system. The new system allows our partners greater flexibility in reporting and is aimed at increasing transparency, giving more accurate data, revising our billing process to better reflect realities on the ground, and adding some financial protection to Kiva by only giving our lenders repayments that Kiva has actually received.

What does this mean for your Kiva account?

Since we closed out one billing system and are opening up another, you shouldn’t expect to see any repayments into your Kiva account until the new billing system kicks in on November 15th. Some loans that were posted in the new system will need an extra month to catch up and won’t see any repayments until the next billing cycle begins – on December 15th.

How does Kiva’s new repayment system work?

Kiva’s repayment system is designed to accurately reflect the way that our Field Partners collect funds from the entrepreneurs that you’ve supported with loans.

When one of Kiva’s Field Partners uploads an entrepreneur’s loan request to Kiva, they set the anticipated repayment dates for the loan and the date that the loan is set to be disbursed to the entrepreneur. This repayment schedule can be monthly, quarterly, once at the end of the loan term, or whatever most accurately reflects the way that the entrepreneur will be making repayments.

Our Field Partners have until the end of the month that each anticipated repayment is collected to let Kiva know whether or not they actually collected the repayment. Once we have all of this information, we use it to generate a bill to charge our Field Partners for all of the repayments they collected that month.

To speed things up and to minimize the number of wire transfers being sent overseas, Kiva works on a net billing system. This means that, for any given month, we subtract the amount of repayments that a Field Partner owes to Kiva lenders from the amount that a Field Partner fundraises for entrepreneurs on Kiva.

If the balance is positive, that means that the Field Partner has raised more than they need to repay, and we use those funds to credit your lender account with the repayments due to you.

If the balance is negative, then the Field Partner has 30 days to send us a payment for the balance. As soon as we receive that payment, we use those funds to credit your lender account with the repayments due to you.

Once the repayment is made into your Kiva account, you can re-lend the funds, donate them to Kiva’s operating expenses, purchase a gift certificate or withdraw them into a PayPal account.

Why are all repayment due dates on the 15th of the month?

When one of Kiva’s Field Partners uploads a loan request to Kiva, they provide Kiva with a schedule of repayments that they anticipate the entrepreneur will make. At the end of every month, Kiva requires that our Field Partners indicate whether or not they’ve collected these repayments from the entrepreneur. They have a 15 day grace period after the end of the month to do so.

After this 15 day grace period, we bill our partners for all of the repayments that they indicate they’ve collected. Our Field Partners then have an additional 30 days to make a payment to Kiva so that we can deposit the repayments into your Kiva account. The repayment due date reflects the last day the Field Partner can pay before the repayment becomes delinquent.

For example, if a Field Partner posts a loan with the first repayment on January 10th, we ask them to indicate whether or not they’ve received this repayment by January 31st.

On Feburary 15th, at the end of the grace period, we generate a bill to the Field Partner for all of these repayments.

The Field Partner then has until March 15th to pay this bill before we mark the payment on Kiva as delinquent.

For more information, you can check our Help Center here and you can join in the lively discussion on KivaFriends.