New York Times on Kiva, GlobalGiving, Etc.

November 9, 2009

[Update: Matt Flannery, Co-Founder and CEO of Kiva.org, replied to the NYT article.]

Reporter Stephanie Strom wrote a story in today’s New York Times about my blogging of Kiva in October, and the issues it raised. She goes beyond my post in writing about GlobalGiving. Naturally, I think it’s a fascinating article.

The article also quotes Tim Ogden of Philanthropy Action:

The problem is that they [socially connected nonprofits] are no more connecting donors to people than the child sponsorship organizations of the past did.

That to me goes a bit too far, at least if it is read to apply only to Kiva (and in context, it may not). As I wrote in my original post:

Indeed, Kiva’s P2P connections are more solid than those of child sponsorship 15 years ago. The people in the pictures, we can assume, really do get microcredit. Following in the Tribune’s footsteps, Nicholas Kristof tracked down one of his borrowers, a Kabul baker, with little difficulty.

I grant that when the Kiva model is carried beyond microfinance, the connection between giver and receiver may be no more direct than in the old days of child sponsorship, and that may be what Tim is saying. With child sponsorship, as I wrote, the Chicago Tribune found that many pictured children had not received promised services. Microfinance seems distinctive in building clearly defined and recorded relationships between the microfinance institution and each beneficiary. Even if my Kiva loan is not actually going to the woman pictured on kiva.org, I’m reasonably confident (I hope not naively) that that woman is getting credit.

Update: I’ve been surprised by the predominant negativity of the new wave of comments from the NYT article. The older comments vary more—some accuse me of condescension to think that users didn’t understand how Kiva really works, others expressed disillusionment, and others said “I didn’t know but love them anyway.” On reflection, I think the NYT headline, “Confusion on Where Money Lent via Kiva Goes,” is unfortunate because it makes it seem like Kiva is embezzling the money into bank accounts on the Cayman Islands. No one is seriously suggesting such wrongdoing.

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1. Tim Ogden Says:
   November 9th, 2009 at 11:26 am

   David,

   There were certainly some bad practices in the child sponsorship industry and a number of outright fraudulent organizations. But I think the major organizations, the majority of the time, were actually helping the children whose pictures were being distributed.

   Kiva, in turn, has suffered from fraud with at least 3 different partners so far. Presumably this means that the people pictured did not get loans.

   So the intent of my statement was not tarring Kiva with the negatives of child sponsorship but putting both well-run child sponsorship and Kiva on the same plane.

   That being said, I also agree that Kiva does a better job than many in making the connections as close as reasonably and prudently possible.

   And to bring it all back, it’s always useful to remind everyone of something that both you and I have said all along: The way Kiva operates in the background is the right way to operate and is most likely to benefit the people everyone is aiming to help.

2. Ryan Calkins Says:
   November 10th, 2009 at 12:58 pm

   I’m concerned that we have just unleashed the internet malcontents (who love to hate a good thing) over what, to my mind, is a relatively minor complaint. David, you are clearly sympathetic to Kiva and not interested in throwing the baby out with the bath water. For all the good that your initial criticism has done, I’m afraid that the New York Times article may turn this debate into a net negative.

   I’ve written a more thorough post at http://www.seattlemicrofinance.org
   Ryan

3. Amanda Zarle Says:
   November 11th, 2009 at 12:18 pm

   Despite the criticism, we are big fans of Kiva and modeled some of the development of our site around the great work they are doing.

   At SmallCanBeBig.org our goal is, however, to maintain the connection between the donor and receiver. We launched our site in January with the simple vision of making small donations have a big impact on families in need with a direct giving model.

   While so many families are struggling to make ends meet, our hope is to connect those with a little extra to families without enough. To date we have raised $75K and helped 79 families and 173 children avoid homelessness. Donations made to the site go immediately, and directly to pay for a families urgent expense. For more on our transparency… http://blog.smallcanbebig.org

4. milford Says:
   November 12th, 2009 at 3:12 pm

   David

   Perish the thought that I might sound like one of those internet malcontents lurking around, whoever they are, but I have to say that I think your blogging over Kiva was brilliant and urgently needed. However way you look at it and nuance things favorably, Kiva was essentially built upon a deception. So this cannot be good, no matter even if the intent was sound and genuine. The individuals concerned in Kiva are now media celebs and also have interesting high profile jobs, something that might not have been possible, I would venture, under a more truthful regime. They would have likely remained ordinary Joes like the rest of us. The end cannot justify the means. Otherwise this sets a horribly bad precedent—make any false claim or deception you like in order to get noticed and win business and funds, and when you get found out you can always politely and generously apologize, but from a position of strength and power. This is an ethical mess.

   I would agree too that the deception goes very wide indeed. One of the external academic reviewers brought in from the microfinance field to review my proposal for a critical book on microfinance with Zed Books, insisted that I simply must add in considerable material on Kiva because, the reviewer felt, it was a greatly admired innovation in directly connecting concerned individuals in developed countries with poor individuals seeking their help. I was finalising the manuscript and thinking how to write this last remaining section, as per the reviewers recommendation, but yet I felt distinctly uncomfortable about Kiva—not because of its claims regarding connections but for other reasons to do with what I see as the huge weakness of microcredit per se. And then your blog came out exposing things as quite the opposite to what the reviewer and I thought was the case! So if even senior academic researchers in the microfinance field like this reviewer were completely caught out, so must many other people.

   Some years ago in Croatia, a company was found to be selling “local mementos” of Croatia that were not made in Croatia, but in Taiwan. They were successfully prosecuted for deception, even though they pleaded that they had to deceive people in this way otherwise they would simply not have been able to get their business going. Quite. An interestingly wacky self-serving defence, but, as in the case of Kiva, completely wrong-headed and so rightly rejected.

   Milford

5. Jim Cashel Says:
   November 13th, 2009 at 12:48 pm

   David:

   I agree with what you, Matt Flannery and others say about Kiva. It does important work, entrepreneurs really get their loans, the model is efficient, and true person2person lending is not yet viable in this context.

   But I confess I still feel deceived. I thought hard when making my last loan on Kiva. I considered the region of interest to me, gender of the recipient, and type of business. I lobbied friends so she would get her full loan. I was delighted when enough people contributed and the loan was approved. I didn’t realize, however, that she had already been funded, and my efforts were really part of a ruse.

   I’ll likely continue making loans on Kiva, partly because the current scrutiny has shown it is indeed efficient. But the idea that donors should have known better, or that time-shifting disbursements is just a technicality, all miss the main point: lenders were motivated to provide funds based on a misrepresentation – and that’s a big deal.

   Jim Cashel

6. Scott Says:
   November 16th, 2009 at 11:13 pm

   It seems like a core issue is getting lost in all of the discussions about transparency: is how Kiva operates the best choice from a development perspective? You highlighted this well in the initial post: “what Kiva does behind the scenes is what it should do,” but “building [well-regulated institutions] is hard and is neither photogenic nor atomizable into P2P”. Are there healthy financial sectors that rest on the long-term support of small-scale cross-border individual donors (or zero-return investors)? I don’t know much about the history of child sponsorship funds, but maybe they would have had more long-term impact had they directed their funds to supporting locally-run hospitals or schools, rather than concentrating on “connecting donors to people.” Kiva channels their funds through the same institutions that have the potential for long-term development impact.

   (It’s also worth keeping in perspective that funds from Kiva are typically only a small portion of the total financing for any MFI, even though the volume of funds Kiva has mobilized worldwide is impressive. Institutional donors and investors far outweigh Kiva globally.)

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