Friday, July 17, 2009

Kiva Adds Currency Risk Protection

I recently read Banker to the Poor by Muhammad Yunus, and was surprised that one of the primary barriers to stability in the microfinance business is currency fluctuations between countries.

It makes sense that the countries most vulnerable and in need of microfinance are often the countries at the greatest risk for fluctuations.

That of course got me thinking about my own Kiva Account. Would my paltry $25 be there to re-loan when the loan was repaid?

It doesn’t surprise me to see that Kiva has already thought about that. In June, Kiva.org launched a currency risk protection tool to better protect Kiva Borrowers against fluctuations in their borrower’s native currency.

The tool works by limiting the foreign currency risk for field partners to a devaluation of 20%. Any amounts beyond that is shared by Kiva lenders, if the field partner organization has selected to use the currency protection tool.

Next time you fund a Kiva loan you can check on this by viewing “About the Loan.” In the section there is a label titled “Currency Risk” and there are three risk statuses.
1. Covered: If the field partner has not opted in to the risk sharing program.
2. Possible: if the field partner has opted in to risk sharing.
3. N/A: if the partner doesn’t need to take risk precautions as they disburse loans in US Dollars.

Jessica Ward is a freelance writer and blogger in the Seattle, WA area. She writes on family, money and business. You can learn more about her projects at www.jessicaward.me

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