Status update – August 9, 2018

Kiva and TLM have agreed to end their partnership after 9 years and more than $1.2m in loans raised. This partner has repaid its outstanding balance to Kiva in full, and these funds have been distributed to lenders. We thank TLM for the years of collaboration and wish them success in their future endeavors.

Status update – May 10, 2016

Kiva recently conducted on-site monitoring at TLM in order to re-assess the level of risk posed by this institution. This visit, as well as our analysis of TLM's financial performance led Kiva's analysts to conclude that the organization's risk rating should be reduced from 3 out of 5 stars to 1.5 stars. TLM has been informed of our analysts’ findings, and their corresponding drop in rating.

Partner description: 

TLM is a Christian Microfinance business that seeks to improve the quality of life of poor communities in the province of Nusa Tenggara Timur (NTT) in Indonesia. Tanaoba Lais Manekat Foundation (TLM) was established by the Evangelical Protestant Church of Timor (Gereja Masehi Injili Timor – GMIT) in January 1995 as a non-government organization. It was created to support local communities through the provision of business creation and related services within the province of Nusa Tenggara Timur (NTT), also known as Eastern Indonesia. This province has the least favorable social and economic statistics of all the 33 Indonesian provinces.

Status update — April 27, 2011

Tanaoba Lais Manekat Foundation (TLM) has sent Kiva full payment on two recently defaulted cattle loans.

Last month, Kiva stated that "if the [defaulted] funds are repaid by the borrower at a later point, we will change the loan status from "Defaulted" to "Paid Back," and repay any remitted funds to the applicable Kiva lenders."  Due to the hard work and flexibility of TLM's cattle loan program, these previously defaulted funds have now been recovered. Now that this payment has been processed and distributed to Kiva lenders, TLM's default rate as expressed on the Kiva website has fallen back down to 0%. 

Kiva respects and values the work that TLM has been doing to help the poor in West Timor. We are proud to be connected to such an organization that strives to gives its clients access to high quality financial services that include valuable risk sharing policies like those on their cattle loan product.

We will keep this page updated with further updates as information becomes available.

Status update — March 21, 2011

Tanaoba Lais Manekat Foundation (TLM) has $15,505 in loans on Kiva currently in arrears out of a total outstanding portfolio of $52,125. As a result, its delinquency rate as expressed on the Kiva website is currently 29.74%. As of mid-March, 2011, there were 12 loans that were delinquent, each of which was a group loan with one or more repayments past due.

TLM borrowers have had access to a progressive loan product called the "Cattle Fattening Program". This program is aimed at rural clients, and enables borrowers to purchase lean and premature livestock at cheap prices in the market. The clients keep the cattle and use the loan money to feed and provide veterinary care. They then sell their livestock when the animals are indeed larger and healthier. In August of 2010, Kiva published an update that TLM's delinquency rate had been above historical norms, and that much of the cause was due to a significant drop in cattle prices impacting loans funded for the Cattle Fattening Program.

Kiva's Field Support Specialist for the Asia region reached out the MFI for further updates. TLM has shared that a major cause of the decrease in cattle price is a significant increase in the amount of cattle imported into Indonesia, both legally and illegally. TLM has further indicated that the low prices of these imported cattle has put significant downward pressure on the price of local cattle, resulting in strong pressure from the local cattle industry to reduce the quota on cattle imports. The local cattle industry is requesting the amount of the imported cattle quota be equal to the national demand for cattle, after local supply has been exhausted. The cattle used for TLM’s Cattle Fattening Program is local cattle.

There has been ongoing uncertainty around how this situation will be resolved. The Indonesian Agriculture Minister has signaled that the government will reduce the cattle import quota, although the Ministry has not announced the specific approach that they will adopt. At the same time, there have been reports that the government plans to increase the cattle import quota. There have also been attempts by certain parties to legalize the importation of the illegal cattle. The result has been a considerable amount of uncertainty over the future of cattle prices.

Despite this uncertainty, local demand for cattle has continued to grow. Strong economic growth in Indonesia in 2010 has led to predictions that local demand for cattle will grow by 6.5% as it did in the previous year. Indonesia is predominantly Muslim, and so prices are expected to increase in June, 2011 as Ramadan approaches.

The strong local demand for cattle combined with the upcoming Ramadan has given hope to the cattle industry that cattle prices will recover, particularly if the national government is successful in reducing the cattle import quota. (NOTE: Information relating to descriptions of cattle importation policies, cattle demand and related data provided by TLM.)

In the meantime, TLM has worked to find ways to help the twelve delinquent group loans sell off their cattle, including the following:

- TLM is shipping their borrower's cattle to Kalimantan (i.e. the island of Borneo) to get a better price. However, bad weather in late 2010 and early 2011 has meant that ships are unable to reach the village. TLM plans to start shipping again in February, 2011.

- The cattle are being trucked out from the village, to get a better price. However, the bad weather has resulted in difficulties in reaching the village where the cattle are held. The road to the village is in bad condition, and the truck is unable to reach the cattle. As a result, only two cattle from Kiva loans were sold in January.

In the meantime, three of the twelve delinquent group loans have had cattle die. As these are all from group loans, the mutual guarantee governing the group applies, and thus the other group members are generally required to cover this loss with their own profit. However, TLM has determined that if the full amount of the mutual guarantee is applied, in some cases the other group members would not receive any profit. As a result, TLM is planning to apply only half of the mutual guarantee and to disburse new cattle loans to these members by including a loan for the other half of the mutual guarantee. Kiva's Regional Director for Asia is scheduled to be onsite in Indonesia in the next month, and will update lenders if the new loans are going to be reposted to Kiva.

Kiva's policy is to default loans if we deem that either collection of the loan funds through our customary procedures (for example, without legal intervention) is unlikely, or if six months since the last repayment have passed, subject to case by case differences. Because of the factors described above, two of the delinquent loans have met these conditions. As a result, TLM has defaulted the loans and will post a journal about them. If the funds are repaid by the borrower at a later point, we will change the loan status from "Defaulted" to "Paid Back," and repay any remitted funds to the applicable Kiva lenders.

We will keep this page updated with further updates as information becomes available.

Status update — August 13, 2010

TLM's delinquency rate has been above historical norms recently. An initial investigation has revealed that much of the cause is due to a recent and significant drop in cattle prices.

TLM borrowers have had access to to a progressive loan product called the "Cattle Fattening Program". This program is aimed at rural clients, and enables borrowers to purchase lean and premature livestock at cheap prices in the market. The clients keep the cattle and use the loan money to feed and provide veterinary care. They then sell their livestock when the animals are indeed larger and healthier.

Recently, cattle prices have dropped materially. Cattle loans — like agricultural and agricultural input loans — carry more inherent risk than other microfinance products since farmers and herders are at the mercy of market prices and usually do not have bargaining power over the sale of their goods. In addition, borrowers typically only earn returns and make back any cash when they sell the crops or livestock at the end of an agricultural cycle.

As a result, microfinance institutions, including TLM with Kiva borrowers, often allow borrowers with agricultural and cattle loans to make one single loan payment at the end of the agricultural cycle when they have the harvest or cattle sale funds available. Given the recent drop in cattle prices though, TLM has decided to allow their Cattle Fattening Program clients flexibility in the timing of the sale of their livestock. This will allow participating clients to hold onto their cattle past the end of the term of their loan, until prices rise above the abnormally low levels.

Kiva supports TLM’s decision to allow its borrowers flexibility during this difficult time. Such flexibility during the last cattle price difficulty in earlier years resulted in favorable repayment rates. In general, flexibility during abnormal periods often increases overall loan repayment rates.

Institutionally, TLM maintains adequate equity reserves which should provide sufficient solvency in the event of losses on the cattle loan portfolio. Kiva feels that institutional risk due to the recent price fluctuations is mitigated by these reserves.

A Note on TLM's Portfolio Yield

We care deeply about the cost that Kiva borrowers pay for their loans, which is why fair pricing is a core part of our initial due diligence process for Lending Partners. With Kiva's 0% capital, many of our Lending Partners are also able to add additional value to their loans by reducing interest rates, offering non-financial services or creating new loan products.

For partners with reported portfolio yields or average APRs higher than 50%, Kiva takes steps to check that the high rates are justified by the impact of the loans. Kiva also verifies that the partner is not generating unreasonable profits or paying inflated salaries, and that the partner’s elevated operating costs are justified by its operating environment and/or the design of its loan products.

We seek to support loans that don’t impose an unjustifiable cost burden on hard-working borrowers. We nevertheless recognize that in order to reach vulnerable and excluded people with high-impact products and services, some of our partners incur high costs that necessitate charging higher-than-average costs to borrowers in order to allow for sustainability and scale.

Factors that drive up the costs that this partner organization charges its borrowers include:

• They provide very small loans. This leads to higher operating costs, since providing each individual loan presents a minimum per-unit cost.
• They provide more than just cash to many of their borrowers, including costly wraparound services such as healthcare, financial or business training, agricultural extension services, insurance or access to education.
• They operate in a region known to be at risk of natural disaster, which increases the cost of doing business.