(2009-11-07) Kiva Directness And Transparency

David Roodman kicked up a storm when he noted that Kiva doesn't work the way you think it does. 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... And in a new report on what happens to investors when microfinance institutions collapse, DanielRozas computed from data on kiva.org that the failure of just three lending institutions caused 93% of all Kiva defaults to date. No doubt many of those institutions' borrowers were faithfully repaying at the time of collapse. Conversely, if a borrower defaults, the lender will often cover for him in order to maintain a good reputation on Kiva. So whether you get your money back as a Kiva user depends overwhelmingly on the solvency of the lenders, not the borrowers... Kiva brings microcredit and microchips to child sponsorship. Like sponsorship charities, it is all about stories: it was inspired by them and it succeeds by telling them. As a result, it operates in a pincers between the giver's desire for personal connection and the costs and constraints that imposes on business of serving poor people. In fact Kiva can be seen as an ingenious finessing of this old tension. Technology has brought down the cost of transmitting stories and images. (Story Telling, Advertising)

There's a whole series of posts, including a response from Matt Flannery, CEO of Kiva.