More Kiva Kibitzing

October 6, 2009

• Kiva Is Not Quite What It Seems is eliciting an extraordinary set of high-quality comments.
• On CGAP’s microfinance blog in April, Deborah Burand imagined the worst for the person-to-person microcredit industry Kiva has spawned. What if charlatans debase the market with Ponzi schemes? How should the good guys differentiate themselves?
• Tomorrow at CGD (where I work), Raj Desai and Homi Kharas will present their new paper comparing how government and individual donors give. They took their data on individual giving from Kiva and GlobalGiving. Actually, this paper doesn’t qualify as kibitzing. I’ll be the discussant.
• A colleague pointed out that the interest rate on Kiva loans is rather hard to find. It is never listed under “About the Loan” on individual loan pages. The closest you can come is to click the link for the Field Partner (the institution that actually makes the loan) and page down a ways. He made me wonder how many Kiva users realize that even though they earn 0% on their loans, borrowers are paying a typical 20–50%.
• On the DevFinance mailing list in June, Barbara Magnoni mused about the contrast between the simple pitch about microcredit and entrepreneurship and real-life complexities in how microborrowers use loans:
  

  Let’s consider how successful KIVA (I am not singling them out other but it illustrating a point here) has been in attracting average Americans to the sector while keeping a very simple message and not getting into the nuances.
  Would it have worked if Kiva stated on its home page:

  “Make a microfinance investment of $25 to a Maria in Guatemala. You won’t get a return on this investment, but an MFI will charge her 30% locally. She may have access to other loans also from other sources, though none of this is easily discernible as there is limited use of credit bureaus. So, it is possible that your loan may actually be going toward the purchase of a new television for her husband. Yes, often loans to women can be used for the benefit of their male family members, as it is easier for women to access a microfinance loan. We expect she will pay you back though. Women tend to pay well, even if it means forgoing other expenses. Ideally, of course, she will use her loan to invest in her business of selling cakes on the side of the road. She and some other 15 women do this daily. The margins are low, but it’s the only business that they have learned to manage. Luckily, her children help her after school, which boosts sales quite a bit. Assuming none of them have a roadside accident, it is a predictable income stream.

  Without this loan, María might not otherwise have sufficient working capital to make her cakes and compete with the other women on the road. She could go out of business altogether. Please lend to María, it’s a good thing.”

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Kathy Graham Says:
   November 10th, 2009 at 4:20 pm

   OMG…That’s it! I’m not buying Charmin any more as it’s not cushiony soft and forge about Lucky Charms as there’s no wee leprechaun and Mr. Clean,where is he when I’m mopping my kitchen floor?

   Marketing is one thing and Kiva does a decent job. Kiva keeps the site simple which I for one like. Anyone with any ounce of intelligence can navigate the site and figure out what’s what or if they’re still not sure they can contact Kiva directly for more clarification.

   Throughout the entire process Kiva is as transparent as they can be at any given moment. There are sites where you can buy a goat. Do people who buy goats really think that a goat is bought if the organization has more than enough goats? Or mango trees? Or chickens?

   I truly don’t understand all the angst about Kiva. They do a great job of telling folks who they are and what they do. It makes my head spin. Just because Kiva’s a nonprofit that doesn’t give those of us that loan the right to know in minute details every single decision or direction they take. Does it?

   As a shareholder in other huge for profit companies I don’t get the level of transparency that Kiva gives to her lenders. Kiva is awesome.

   This critique might indeed be good. The title though implies, infers, and/or states that Kiva is up to no good. They’re a good model with the odd hiccup as they’re new. I, for one, would prefer more articles on the positive aspect of Kiva or how lenders can learn more about Kiva rather than a floodlight shining in a never used corner of a never used room being occupied by one very lonely and not so bright teensy weensy spider who doesn’t even get to set up camp as a broom comes through on a regular basis and sweeps away the web.

   Then again, I’m biased. Kiva ROCKS!

2. David Says:
   November 19th, 2009 at 4:55 pm

   Kiva is not awesome; it is based on a lie told often. They say “read this story about a person, send us your money, and gets it”. That is not true. When something is not true, it is a lie. When money is involved and a lie, it is fraud. This is fraud.

3. Jenny Says:
   January 10th, 2010 at 12:15 pm

   I have been lending to Kiva for several years now, & encouraging others to do the same via my website and personally. It is deceitful to imply that lenders are funding loans to individuals when in fact they are not. I will not be lending anymore funds, it I wanted to just donate to a charity I would be doing that, Kiva sets itself up to appeal to people who want more than just writing a cheque. The ends do NOT justify the means, lying is lying, no matter wether it is outright or implied.

We value frank and constructive exchanges and encourage you to use your real name in your comments.