Kiva forgives loans due to severe financial crisis in Lebanon

Today, Kiva executed our largest writeoff to date. We forgave $2,001,388 in loans from our lending partner Al Majmoua in Lebanon, a country that has been facing an unprecedented economic and political crisis since 2019. We first partnered with Al Majmoua, a nonprofit microfinance institution, in 2007 and together have facilitated over $25M in loans thanks to the support of over 240,000 Kiva lenders.

I myself have had the pleasure of spending significant time with Al Majmoua over the years, including conducting full social performance evaluations, which allowed me to meet many different members of staff, as well as borrowers.

I have always considered Al Majmoua one of Kiva’s best partners: the organization was in a strong financial position and consistently made significant investments in maximizing impact. They have always shown a commitment to reaching the most underserved, including refugees who don’t have full legal or economic rights in Lebanon. Kiva has been one of many reputable international partners for Al Majmoua over the years and Al Majmoua has long been well regarded in the microfinance sector globally.

The crisis in Lebanon, which began in 2019, has been catastrophic on numerous levels. Following the collapse of the Lebanese government and exacerbated by the Covid-19 pandemic, Lebanon plunged into economic turmoil. The World Bank has called it one of the most severe economic and financial crises the world has seen since 1850, impacting the lives of millions across the country.

The massive explosion that rocked Beirut’s port in August of 2020 devastated the country further, killing and injuring thousands and leading to billions of dollars in damage. Basic services largely no longer exist in the country. Power outages are the norm. Medicine, gas, and other critical imported goods are often in short supply. Inflation across the country soared.

A currency crisis has been one of many consequences of these events, as the Lebanese Pound (LBP), which had been pegged to the US Dollar for 25 years, began to lose value against the dollar. This hit both Al Majmoua and their borrowers greatly, impacting the institution's ability to operate and their borrowers’ ability to repay their loans. The devaluation of the LBP grew worse and worse — it is now worth just one tenth of its previous value — and US Dollars became hard to come by. According to UN estimates, 80% of the population now lives in poverty.

Through all of these challenges, Al Majmoua has worked tirelessly to continue to serve their target population as best they can. Due to the currency crisis, the value of their borrowers’ loans, long stable against the US Dollar, dropped precipitously. Al Majmoua has been further hampered by capital controls which were put in place by Lebanese banks in 2019, preventing US Dollars from being sent out of the country. As such, even when Al Majmoua has attempted to repay the institution’s lenders, including the thousands of Kiva lenders who have supported the institution over the years, obtaining the US Dollars and the necessary permission to send those funds out of Lebanon has been impossible.

“We continue to be saddened by the disaster that we find ourselves in today and the effect it has had on our borrowers, organization, and Lebanon as a whole,” says Youssef Fawaz, Al Majmoua's Executive Director. “Kiva has long been one of our strongest partners and we are grateful to every single Kiva lender who has funded our borrowers.”

Over three years into the crisis, today Al Majmoua is doing all they can just to continue operating. Kiva has remained in constant contact with the organization throughout this period. It is clear to us that the ongoing challenges they face are through no fault of their own and are unlikely to change anytime soon. This reality is what led us to decide to forgive Al Majmoua’s debt to Kiva lenders.

“We are doing all we can to weather this storm so that we can continue to serve the communities who need our support,” says Youssef Fawaz, “and we greatly appreciate Kiva lenders’ understanding of the situation we find ourselves in.”

Every day, our lenders take on the risk that a borrower can’t repay his or her loan. This is part of what makes Kiva lenders’ capital so special, and so impact-friendly. While we never want to reach a situation where lender funds are lost, in this situation we firmly believe this is the right path forward during this crisis and in line with Kiva’s mission.