Comparing Kiva loan recipients to subprime borrowers here in the U.S. is not a good analogy.
Kiva screens and follows-up with the borrowers, something which was noticeably absent in the mortgage loan market:
William D. Dallas, the founder and chief executive of Ownit, acknowledges loosening lending standards but says he did so reluctantly and under pressure from his investors, particularly Merrill Lynch, which wanted more loans to package into lucrative securities.
He recalls being asked to make more "stated income" loans, in which lenders do not verify the information provided by borrowers and brokers with tax returns, pay stubs or other documentation. The message, he said, was simple: You are leaving money on the table aEUR" do more of them.
Kiva screens and follows-up with the borrowers, something which was noticeably absent in the mortgage loan market:
William D. Dallas, the founder and chief executive of Ownit, acknowledges loosening lending standards but says he did so reluctantly and under pressure from his investors, particularly Merrill Lynch, which wanted more loans to package into lucrative securities.
He recalls being asked to make more "stated income" loans, in which lenders do not verify the information provided by borrowers and brokers with tax returns, pay stubs or other documentation. The message, he said, was simple: You are leaving money on the table aEUR" do more of them.
http://www.nytimes.com/2007/05/08/business/08lend.html
If Kiva ever turns into a similar free-for-all, then expect their default rate to rise, too.