What's the deal? Where does the money go on Kiva.org
Nov 11th 2009 3:00PM
Updated Nov 11th 2009 4:29PM
In an October 2009 blog post, David Roodman, a research fellow at the Center for Global Development, had no idea he'd set a chain of events in motion that would rock the world of person-to-person lending. But that's exactly what happened when Roodman questioned how the popular non-profit charity, Kiva.org operates.
In the past, celebrities like Oprah Winfrey had extolled Kiva's virtues. But with one seemingly simple blog post, Roodman got donors and interested bystanders asking "where's all that money really going?"Kiva had been promoting itself as a link between small individual lenders and borrowers -- often in impoverished countries seeking small amounts to support their family's farms and similar businesses.
Roodman's post that Kiva's website was lacking in transparency sent shock waves through the person-to-person lending community. "The person-to-person donor-to-borrower connections created by Kiva are partly fictional," he wrote. "I suspect that most Kiva users do not realize this." An interesting irony since Kiva prides itself on transparency.
Who are you funding?
It's easy for lenders to assume they're loaning money to the person whose picture they see on Kiva's site. But, if you read very, very closely, you'll see that the people on the site have already received their loans. Your loan is going to someone else.
In addition to not knowing exactly where the money is going, seemingly, most Kiva lenders don't realize that quitting Kiva is next to impossible. Kiva fails to make that option one that can be found by searching (rather diligently) the site. An issue Kiva has yet to comment on, despite WalletPop's numerous requests to gain instructions to terminate an account.
On Monday, Kiva issued a response to the media attention the post likely earned the charity. In it, the Kiva acknowledged "the process of pre-disbursal of loans can be confusing." The company went on to say "it's important to understand that the people on Kiva.org truly do receive the loans that are shown on the website. Furthermore, Kiva does not get any portion of the loan. What is different from the casual user's impression is that the farmer's loan is administered by an MFI [microfinance institution] that is local to the farmer, and that the loan is disbursed before the funds are raised on the website."
Kiva also stated they're glad donors are interested in the operational details of Kiva.
But analysts say donors should be more than "interested". They need to be aware that they're connected to a microfinance institution, which technically negates the need to use Kiva in the first place.
For more information, read a blog posting from Kiva co-founder and CEO, Matt Flannery, on Kiva's blog.
Gina Roberts-Grey is a freelance writer specializing in consumer issues.