FANU Kiva Fund

What is Kiva?Kiva.org is a nonprofit group that acts as a conduit for people to make “micro-loans” to

entrepreneurs in depressed regions of the world. These micro-loans are typically quite small, of short duration, and can be funded by multiple creditors. The minimum amount one can lend is $25.

The way Kiva makes these loans available is through the use of partners in the locations in which Kiva operates. These partners take the form of schools, churches, local lending institutions and charitable organizations. 80% of these partners operate as nonprofits with the remaining 20% using the kiva funding to subsidize their lending at a lower rate than could otherwise be obtained.

The partners have the responsibility to seek out barrowers, perform due diligence, and then pass their cases on to Kiva.org. Kiva posts these cases; detailing the nature of the loan, the barrowers’ delinquency rate, and financial position. It is then up to the individual lenders on Kiva.org to decide whether or not the barrower is creditworthy. Once the loan has been fully funded by Kiva users, Kiva will wire the money to the local partners who then lend it to the barrower.

At this point it is the responsibility of the partners to collect repayment and wire the principal back to Kiva.org, who then returns the principal to the original lender. The only interest collected is that which the local partners collect to cover their overhead. All overhead for Kiva is covered by separate donations to the sight. All credit Kiva provides to partners is at 0% interest. The individual lenders using the sight also receive 0% interest.

It is important to note that Kiva maintains strict quality standards when selecting whom they partner with. This quality can be seen in the 98.79% repayment rate seen by Kiva.org users.

Mission:It is the mission of the Finance Association of Northwood University (FANU) Kiva fund to provide

low interest micro loans to small businessmen in developing nations in order to foster growth and the entrepreneurial spirit. Furthermore, we will strive to inspire an openness to freedom and capitalism by demonstrating, through generosity, the wealth and decency of a free enterprise society. We hope to achieve the dual goals of helping others to help themselves, while at the same time helping ourselves to fulfill the moral obligation of sharing the great wealth of our society. We aim to use this fund as a means of empowerment rather than a handout. In so doing we hope to avoid the evils of dependency and resentment that have plagued charities ad infinitum.

Charitable Goals: Promote free enterprise and entrepreneurship in developing nations by facilitating low interest

lending to small businesses. Build goodwill towards capitalism and the United States. Set up a philanthropic outlet for the wealth generated by the current leaders of a free enterprise

society. Help others to help themselves. Avoid the pitfalls of dependency and resentment that arise from charitable handouts.

FANU Goals: Gain experience in credit and risk analysis. Become familiar with international credit markets. Gain experience in selling (our fund to potential donors).

Strategic Goals: To preserve capital while maximizing loan turnover. Because any interest collected is retained by the local lending institutions, we collect no interest,

and therefore have no other metric for gauging our performance.

Rules: No loan will comprise greater than 10% of the total fund treasury. No loans will be issued in nations hostile to the United States. The fund will comply with all sanctions imposed by the congress of the United States. All loans must be approved by a majority vote of the governing body of the fund (FANU). No money will ever be withdrawn from the fund. Any amendment to the founding charter will be approved by 2/3 of the FANU student body. 100% of all donations will be used to make loans. All loans must be commercial in nature (no home loans, car loans, personal loans). All loans will be made to enterprises of lawful and ethical bearing. A quarterly audit will be conducted. It will include the beginning and ending balance, change in

balance, the running total of dollars lent since inception, and loan turnover for the quarter and since inception.

Should the fund be dissolved all money will be donated to Kiva.com.

Fundraising Plan:Fundraising will be conducted once every semester at a time to be determined by FANU

members. Donations will be solicited from individuals, charitable organizations, businesses and nonprofit groups, and Northwood University. It is our goal to raise at least $500 to start our fund.

All money collected will be used for lending. No donations will be used for overhead. A quarterly statement of the fund’s total lending to date will be sent to any donor who has made a contribution in excess of $100 (in the form of an email).

Lending Strategy:We will try to mitigate the above risks using a conservative approach, focusing on diversification

and thorough due diligence. By avoiding oversized positions and concentrated lending in any one area we hope to stretch our capital as far as possible.

The qualitative merit of debtors will also be examined when determining where to allocate our capital. We will look for businesses with a likely chance of success and a realistic time frame of repayment. We will try to focus our lending on enterprises looking to make capital investments that will generate immediate cash flows.

As the fund will be assumed to operate in perpetuity, we will measure our success by calculating the loan turnover of our fund in the form of a total amount loaned and recovered since inception, divided by capital raised since inception.

Potential Risks to Capital: Individual Default risk

o Due to the small size of most enterprises seeking funding, as well as the unsecured nature of the loans, there is a higher likelihood that the debtor may be unable to meet their obligation resulting in a permanent loss of capital.

o This risk may be mitigated through conservative sizing of individual loans. Currency risk

o The exchange rate of foreign currencies may change resulting in loss of capital.o There is no ability to hedge this risk through Kiva.com.

Political risko Foreign governments may be corrupt, unstable, or under external threat. o Diversification of lending across nations can minimize the impacts of this risk.

Economic risko General economic conditions may deteriorate resulting in broad defaults due to the

tenuous financial positions of many potential debtors.o There is no way of diversifying or hedging this risk.