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There’s been a great deal more conversation about the gap between the Kiva story and the Kiva reality since my post on Monday. You can see a mostly comprehensive guide to the conversation here (and I really recommend reading through the first several articles there if you’re not familiar with the debate). The most important update is that Kiva tonight posted a new, more complete description of how it operates. I want to react to various points made in the debate and to Kiva’s update, clarify where I stand and ask a few more questions.

First, Sean Stannard-Stocton and Sasha Dichter have pointed out that one of the reasons that people are upset to find out how the process actually works is a perception that non-profits are simply a conduit of money from donor to beneficiary. The non-profit is not given any credit for adding value in the process. I think this is absolutely true in general—and it’s one reason that I’ve argued in the past that donors shouldn’t be upset that a cow isn’t a cow. The non-profit on the ground needs to have the discretion to assess a particular situation and shift resources to what will do the most good. However, this argument doesn’t apply to Kiva. Unlike child sponsorship agencies and alternative gifts purveyors like Heifer International, Kiva is just a conduit. They are not making loans or assessing needs on the ground. They are simply connecting their users to microfinance organizations.

Which brings us to the second point, and Kiva’s updated description of its operations. I think the new version is pretty well-done, accurately depicting how the Kiva process really work, though the language about repayments could be clearer. But as you read it through, it becomes quite clear that in fact Kiva is a conduit between its users and microfinance organizations, not individual borrowers. The big question outstanding is do Kiva’s users want to be connected to a microfinance organization or do they want to be connected to a specific borrower? The huge difference in popularity between Kiva and Microplace (which, by the way, should take a page from Kiva’s new document and provide a much better description of how it works) would indicate the latter. Given Kiva’s new description, if a user wants a connection to a specific borrower, then it is now clear that Kiva does not do that. If they want a connection to a microfinance organization, why do they need Kiva? Why not just give the money to a microfinance institution (presumably many of them have caught on to the power of connecting to individual donors)? Kiva’s role so far has been to prove a market no one knew existed. Now they’ll need to figure out what additional value they can add.

Third, I think it’s important to point out that there are two very different sets of questions being raised in the debate. The set that’s gotten the most attention is the transparency question. The other set, which I raised in my “Even More Questions About Kiva” post, is whether there are problems with Kiva’s process. I don’t think this set of questions has gotten enough attention. The fact is that Kiva’s repayment process is open to abuse. Commenter Tim Rann on David Roodman’s original post makes it clear that people in the industry have noticed this. Elie Hassenfeld’s analysis of the differing repayment rates that MFIs report to Kiva and to MixMarket shows that MFIs are shifting repayment funds around (and Kiva’s new document acknowledges this). Right now they are shifting in favor of Kiva but they could just as easily shift funds to Kiva’s detriment. Kiva’s more transparent description of their operations does nothing to change this.

Finally, I want to make it absolutely clear that, in general, I think Kiva is operating the way that it should if it wants to do the most good for people in need. My critiques are about very specific issues that are fixable (some of which Kiva has now fixed). Kiva should be separating loans from the vicissitudes of the funding process and should be minimizing transaction fees on the transfer of funds. I hope Kiva comes through this controversy intact. But that’s going to require donors to start operating the way that they should. Throughout the debate I’ve tried to draw attention back to the ultimate source of the problem: donors who demand that non-profits provide a person-to-person connection no matter what the cost and the negative consequences. It’s this demand that leads well-meaning non-profits to create an illusion to placate donors. But then the donors tend to turn on the non-profits when the illusion is pierced. I truly hope the outcome of all of this conversation is lots of Kiva users, and lots of other donors, who are willing to accept less connection in favor of more effectiveness.


Interesting post. I would however like to caution you against making casual statements like “Why not just give the money to a microfinance institution (presumably many of them have caught on to the power of connecting to individual donors)?“ Kiva has staff who work closely with and audit partner MFIs to make sure that repayments are happening on time, that the amount of Kiva funds that a partner MFI is receiving does not account for the entirety of the organization’s portfolio to ensure diversification, etc. In addition, Kiva also sends out volunteers such as Kiva Fellows to perform borrower verification and work with partner organizations on other such activities to ensure that fraud is not being committed. The type of work that Kiva is doing already (and will continue to perform going forward) is not something that most individual lenders can perform easily on their own - but is critical in ensuring that partner organizations are using lenders’ funds responsibly.

October 22, 2009


thanks for the comment. However, it’s never been clear to me how much auditing Kiva does beyond basic due diligence. Their reported process for evaluating partner risk ( appear to rely mainly on self-reported data. The fact that Kiva Fellows developed serendipitously (rather than as part of a plan for more rigorous audits) and are volunteers, many without any professional experience in development or auditing also raises a red flag.

Given all that, Kiva obviously provides connectivity to a much greater range of MFIs than an individual borrower could hope to reach.

October 23, 2009

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