When someone offers you an incentive of say $25 to lend on Kiva, you might think there was a scam. Why would anyone give you money to lend out and then potentially take it back when it was repaid? I’ve not read the small print, so this may not be possible, but it is interesting to know how much organisations are prepared to pay to get an extra customer.
Have you ever wondered why you can get £60+ cashback for switching your energy supplier? It costs a huge amount of money to get new customers – this is a big marketing cost. Expect therefore that on average it is costing the company a lot lot more to obtain new customers through other routes, like TV ads, newspaper ads, radio, email newsletters, leafletting campaigns, junk mail etc. Service or retail business who have no idea how much it costs to acquire new customers may well be throwing good money after bad when buying sdvertising space in the traditional way. The use of incentives on the other hand can be a very effective way of getting new customers, provided you construct the offering to avoid the sizeable cohort of ‘deal watchers’ who are not interested in anything but the incentive.
So now you know that there is no free lunch, but where does that leave the $25 one on Kiva. As far as I can see this is a really cute incentive and worth the ten minutes out of your busy lifestyle to get to grips with. The only warning? Kiva is slightly addictive – but in a positive way.
I should also say that I am not a financial adviser and this is not an investment in the sense that you get a financial return – you do not. But you will be helping to build human and social capital where it is needed, so think of it as a social investment. If you do invest, only invest small amounts and diversify your portfolio to manage the risks of default (default and delinquency are very very low compared to banks generally and say student loans in the UK) and exchange rate losses. Invest in small businesses you care about or know something about.