Freeing up some credit

Not long ago Kiva announced some changes to the way that money is paid back to lenders. Previously you had to wait until an entire loan was paid back before you could access your $25 cash. Now, as someone paid off a portion of their loan, your share would be credited to your account straight away.  

This meant that credit became freed up – people poured their money back into the system, topping up their credit to make up $25, or in the case of mm who has MANY loans in action due to a little poetry challenge he laid down earlier this year, he could plough a significant amount of cash back in. Expect when he went to do it a few weeks back there were hardly any people that needing funding. The system was so liquid, everyone had gotten their cash!  You had to get in fast to make a loan – it was like a crazy on-line auction!

The parallels between our current situation and our liquidity crisis, and the liquidity bounty that Kiva is enjoying right now is interesting. The reason our financial systems get into so much trouble occasionally is that our monetary systems get so huge and inter-connected and tangled – no one really understands the scale of it or how much entanglement there is between different systems –  when one part of it collapses the domino effect through the system means the results are terrible.  Community banking began to get quite popular in the late 80s, and I wonder if it will re-emerge again as people want to become a) insulated from a system that you cannot conceptualise the scale of, and b) get a bit more control again over your financial situation.

"Community Bank" by Patrick Cates


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