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December 10, 2009

Kudos for Kiva

Posted by David Roodman in Uncategorized Tags: ,

I just noticed that Kiva has revamped its individual loan pages. Here’s a screen shot of a loan page from March 2007 that I dug up (thank you nau.com), for a loan to Galib Asadov, a hairdresser in Azerbaijan:
Kiva old-style loan page

And here’s a new loan page. Notice the How Kiva Works link, the clarity about pre-disbursal, and the up-front display of interest rate and profitability information. “Portfolio Yield” is a bit confusing, though I think I understand the motivation for the term. But I consider this an even bigger stride forward than the one I commended Kiva for in October:
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December 7, 2009

They’re Talking about Me

Posted by David Roodman in Uncategorized Tags: ,

From an interview on devex.com with Kiva’s Chelsa Bocci:

I saw the “Finance Access Initiative” blog by Abby Gray coming to Kiva’s defense about David Roodman’s article. I thought that was a great example of social media in action. I was wondering initially, did you think that you wanted to do a social media campaign after Roodman’s article came out?

That wasn’t the top priority when David Roodman’s article came out. I mean, social media campaign can mean so many different things, and I want to better understand what you’re asking. There were a lot of goals that were set after that article came out, and, for the most part, we welcome this kind of publicity because it’s all about asking the right questions, and I think it gives Kiva an opportunity to answer some of those. It’s been a very positive thing for us. We’re using the social media channel a lot to bring more awareness to some of those articles, and some of the follow-up questions, and bloggers we’ve seen taking an interest in some of the things we have going on. We didn’t set up to do a formal campaign around that publicity, but we have definitely been using those channels to direct or educate our existing community on how we view the situation.
…
What did you learn from the Roodman experience?
Honest, honest answer is that we’re still learning. Every month is new time for us. Things change and grow so quickly.

The joke internally is that today is short term, tomorrow is medium term, and the next day is long term. But it’s really hard to plan because we’re growing so fast. Everyone around here would absolutely agree that they highly value what we do to grow our social media presence. Again, back to the challenge of tracking and metrics, that is where I’m tasked to get creative and really put some thought into it.

I think it’s been a wonderful experience, and we’re headed in the right direction. But, that being said, we have a lot of work to do.

[Sorry blogging has been light. I just came through eight days straight of rehearsals and performances.]

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November 28, 2009

The Challenge of Cheap, Charitable Capital for For-Profits

Posted by David Roodman in Uncategorized Tags:

Milford Bateman, “a confessed microfinance sceptic” made a serious and novel (to me) charge against Kiva on the devfinance mailing list, that Kiva’s cheap capital is padding the profits of any for-profit microfinance banks through which it lends. I tweeted his message, so I ought to share with you the reply I received from Kiva. First Milford:

If you go to Kiva’s website it is very bizarre to find that the default percentage is ZERO for every single current partner MFI but one (Zene za Zene from Bosnia which registers 0.13% default). Given we know that default rates do exist (it seems that Kiva has dropped several MFI partners as a result of high default rates – go to the bottom of their list of current partners to find ex-partners) and defaults are growing of late almost everywhere, how come current partner MFIs have an almost perfect record? Well, if you think about it, why would anyone want to risk interest free money by advertising a default rate over zero if they don’t have to? I mean, an MFI would be silly to risk losing interest free cash offered by Kiva. Even if it simply popped the cash into an interest bearing account, a partner MFI could benefit from the interest generated, present Kiva with a few photo’s of current clients every now and again to keep them happy, and then return 100% of the original cash amount to Kiva at the end of the year. Nice work if you can get it! How do we or Kiva know that some MFIs don’t simply do this? How do we know that MFI managers don’t simply use the juicy Kiva margin to inflate their own remuneration? After all, from a variety of websites it is clear that few if any MFIs offer lower interest rates to Kiva clients. This would ‘spoil the market’, as market fundamentalists would say. So Kiva clients (if such a distinction is even made) get exactly the same offer as other non-Kiva clients in the main. OK, I found one MFI – Xac Bank in Mongolia – stating that it offers Kiva clients the Kiva margin earned at the END of their Kiva loan, placed in a savings account at Xac Bank. This sounds better than if it were used to inflate managers/owners own salaries, but, still, it usefully helps to develop new savings clients for Xac Bank probably more than it helps fulfil Kiva’s stated aim to create jobs and incomes for the poor.

To which I replied in the same venue:
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November 25, 2009

Fresh (Southern) Voice on Kiva

Posted by David Roodman in Uncategorized Tags:

Most of the verbiage about Kiva recently has come from northerners. Here’s Kenyan Margaret W. Karuri, who founded the microcreditor People Microcredit Investment Bureau (PEMCI). PEMCI was a Kiva partner until it was upended by regional violence after the Kenyan election two years ago. She defends Kiva while arguing that the cost of its capital for partners such as PEMCI is not trivial:

Kiva is a noble innovation which has changed the lives of many across the globe. I feel like some of us are playing the “devils advocate”. Not bad, as long as we come up with some constructive recommendations and suggestions on how Kiva can improve its administration. To Kiva, Kudos’ for the good work you are doing. My advice, “All things work together for Good”. Other than kill a noble initiative like this, let us suggest ways, in which we can further grow the idea, improve on it, and ensure that it continues to deliver on its mandate. Today it is Kiva, who will it be tomorrow? We don’t want to discourage innovative ideas and mechanisms that are essential in changing the way we carry out the microfinance business.
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November 22, 2009

Real P2P vs. Virtual P2P

Posted by David Roodman in Uncategorized Tags:

The demand for direct connection is baffling to me since most donors absolutely refuse direct connection to the people in need that are closest to them. Consider: how often do you or your friends take advantage of the opportunity to give directly and establish a connection by giving $20 to the guy standing at the corner with the cardboard sign saying, “Will Work for Food”?

I’ll bet the answer is “never.“ And there’s a very good reason for that. You believe that to actually help that person you should give the money to a knowledgeable intermediary like a homeless shelter that will do the research to understand this person’s situation, and ensure the money you give is actually used in a responsible way.

So if you would only give to an intermediary in order to help someone on the street outside your home, why do you want to do away with intermediaries between you and a person on the other side of the world whose circumstances you don’t understand at all?

That’s Tim Ogden on Kiva: The Play.

So I guess I like feeling connected enough to know the recipient’s story (and incorporate it into my story about my life), but not so connected as to feel uncomfortable with my own wealth.

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November 13, 2009

Kiva: The Play

Posted by David Roodman in Uncategorized Tags:

You’ve read the blog post, scanned the tweets, digested the New York Times story…now see the play. Or read it anyway:

BILL: Hey, what are you looking at there?

PENNEY: Huh? Oh, this? Just the most horrible news ever.

BILL: What? What happened?

PENNEY: Look at this article by the New York Times. It’s an article on Kiva.

I love this!

Major Hollywood studios, you know where to find me.

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November 9, 2009

New York Times on Kiva, GlobalGiving, Etc.

Posted by David Roodman in Uncategorized Tags: ,

[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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October 25, 2009

Reflections on the Kiva Story

Posted by David Roodman in Uncategorized Tags:

Just over three weeks have passed since I first blogged on Kiva. The journey since then can be measured in other ways, and at extents I never imagined: several hundred tweets, 50 comments on this blog, nearly a score of blog posts elsewhere, 10,000 hits to the original post, a reply from Matt Flannery, and a Kiva web site revision. I have written little more till now on Kiva; I have been busy, I already had a long turn at the microphone, and I preferred to watch the reaction blossom.

[Update: I just noticed Kiva changed the tag line on its home page. Was: "Kiva lets you lend to a specific entrepreneur, empowering them to lift themselves out of poverty." Is: "Kiva connects people through lending to alleviate poverty." Nice.]

What to make of it all? For one, the experience shows the attractions of specificity and controversy. A blog entitled “Nonprofits Sometimes Simplify Explanations to Donors of What They Do” would have been a bigger story but would not have garnered much attention. And it helps to blog topics of natural interest to those who tweet. More generally it demonstrate the remarkable power of electronic social networks to propagate ideas.

All that is fine. I am thrilled with the interest. But I also know that the greatest occupational hazard in my business is letting (modest) success like this go to one’s head, distorting one’s judgment and one’s judgment about the quality of one’s judgment. What matters more is whether I have done good. Will my writing make any poor people better off?
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October 16, 2009

Kiva Revamps How It Explains Itself to Users

Posted by David Roodman in Uncategorized Tags:

In response to my post of two weeks ago, Kiva yesterday overhauled the page on kiva.org that explains how Kiva works. Matt Flannery, Kiva’s CEO and co-founder, tweeted:

Spent afternoon with Jeremy, Gerard and Premal making the site more transparent: http://www.kiva.org/about/how

To see what it looked like before yesterday, visit the GiveWell blog’s striking apposition of two images. The first is the old “How Kiva Works” page. The second is from a 2007 Kiva brochure that explains to microcredit lenders how Kiva works, with a different diagram. (Holden Karnofsky of GiveWell got that image from Tim Ogden of Philanthropy Action, who got it from me, who got it from Jeff Raderstrong of Gumball University.)

As I commented on Tim’s post, what I found interesting about the second image is that it shows that Kiva has been capable for at least half its history of explaining how it works, clearly and accessibly. That Kiva showed a different picture on its web site therefore reflected a choice, not just an accident caused by scrambling to keep up with its growth.

Check out the new page. It’s quite a transformation. I’m impressed with its precision and transparency. I do wonder whether Kiva can shorten it. The second image mentioned above seems to tell the same story more simply. Easy for me to say. And the site, like nearly all microcredit sites, remains less than clear about the diversity of microcredit’s uses and impacts. Not all Kiva borrowers are entrepreneurs, for example, nor empowered by microcredit, nor lifted out of poverty.

But the bottom line here is that Kiva has made a quick and long stride toward keeping Matt Flannery’s promise of more transparency. I think Flannery’s response to my criticism blended grace, humility, and quiet confidence. The world would be a much better place if all charities, all organizations for that matter, were as open and responsive to criticism as Kiva has been. I trust the Kiva folks will keep refining. I will visit them today.

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October 12, 2009

Matt Flannery, Kiva CEO and Co-Founder, Replies

Posted by Matt Flannery in Uncategorized Tags:

[I am honored to host Matt Flannery as my first guest blogger. My October 2 post about Kiva generated copious commentary and tweeting. Accepting a guest strays somewhat from the construct of this blog, but seems highly appropriate in this case.--David Roodman]

Hello Everyone,

This is Matt Flannery, Co-Founder and CEO of Kiva.

I recently read and enjoyed David’s article “Kiva Is Not Quite What It Seems”. The article is well-written and thoughtful, and has generated a lot of passionate responses. I’m writing here because I thought it would be helpful to hear from Kiva, as part of this dialogue, to increase understanding about what Kiva does and where it is going.

I see Kiva as a public property, “owned”, in a sense, by its three main constituents—the entrepreneurs, the lenders and the MFI partners, all of whom we serve. It is a delicate balance to serve all three at once. Sometimes it may seem that, for a particular decision, one has to benefit at the expense of the others. However, this is a short-sighted way of looking at things.

I firmly believe that, in the long run, each of Kiva’s constituencies want the others to be well-served, as they are all inter-connected, and rely on each other in their shared efforts towards poverty alleviation. What is needed to create this environment of mutual support is rich communication, promoting greater understanding around the challenges and needs of each constituent.

The Kiva website serves as the hub for that communication to take place. However, large gaps in communication still remain. We at Kiva have a long way to go to increase the level of understanding between the three parties and this article sheds some light on certain areas where we can improve.
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October 6, 2009

More Kiva Kibitzing

Posted by David Roodman in Uncategorized Tags:

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October 2, 2009

Kiva Is Not Quite What It Seems

Posted by David Roodman in Uncategorized Tags: ,

[Update: Matt Flannery, CEO and Co-Founder of Kiva, replied to this post as a guest blogger. Kiva has also changed its site, and I have blogged more.]

This post is so long it needs an:

Executive Summary/Long Story Short
Kiva is the path-breaking, fast-growing person-to-person microlending site. It works this way: Kiva posts pictures and stories of people needing loans. You give your money to Kiva. Kiva sends it to a microlender. The lender makes the loan to a person you choose. He or she ordinarily repays. You get your money back with no interest. It’s like eBay for microcredit.

You knew that, right? Well guess what: you’re wrong, and so is Kiva’s diagram. Less that 5% of Kiva loans are disbursed after they are listed and funded on Kiva’s site. Just today, for example, Kiva listed a loan for Phong Mut in Cambodia and at this writing only $25 of the needed $800 has been raised. But you needn’t worry about whether Phong Mut will get the loan because it was disbursed last month. And if she defaults, you might not hear about it: the intermediating microlender MAXIMA might cover for her in order to keep its Kiva-listed repayment rate high.

In short, the person-to-person donor-to-borrower connections created by Kiva are partly fictional. I suspect that most Kiva users do not realize this. Yet Kiva prides itself on transparency.

I hasten to temper this criticism. What Kiva does behind the scenes is what it should do. Imagine if Kiva actually worked the way people think it does. Phong Mut approaches a MAXIMA loan officer and clears all the approval hurdles, making the case that she has a good plan for the loan, has good references, etc. The MAXIMA officer says, “I think you deserve a loan, and MAXIMA has the capital to make it. But instead of giving you one, I’m going to take your picture, write down your story, get it translated and posted on an American web site, and then we’ll see over the next month whether the Americans think you should get a loan. Check back with me from time to time.” That would be inefficient, which is to say, immorally wasteful of charitable dollars. And it would be demeaning for Phong Mut. So instead MAXIMA took her picture and story, gave her the loan, and then uploaded the information to Kiva. MAXIMA will lend the money it gets from Kiva to someone else, who may never appear on kiva.org.
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