Kiva: A great idea that isn't exactly what it seemed - how to find a charity you can support
Filed under: Make Money Fast, Charity, Fraud, Consumer Ally
The online micro-finance charity Web site Kiva rose to be a shining non-profit success story in the recession years. It marries the trendiness of social entrepreneurship with an almost perfect combination of online applications. If you haven't used the site before (and, full disclosure, I've been donating above-average amounts for about a year), try it.It's hard not to be fascinated and compelled by the hundreds of people in mostly developing countries (U.S. candidates were added this year) telling their stories, asking for not much more of an investment in their business than we fat Americans spend on lunch at Subway. I've made loans to budding clothing sellers in Mongolia and Tajikistan; a struggling restaurateur in Cambodia; and a nascent women's' transportation cooperative in Pakistan. One borrower, a young man from Ukraine with a wife and child who wanted to expand his cab company, actually paid me back in full. I took the money and gave it to another entrepreneur. It's quite a feeling to personalize charity in this way. And from a non-profit perspective, it's a Holy Grail, a killer app, a nano-Nirvana: It makes the donor happy, and keeps dollars coming in.
Except I found out recently that's not how Kiva actually works. Not quite.
And I'm not too happy about it. Neither, as it turns out, are a lot of other people. Discussions have been bubbling online for months. The short explanation is that Kiva is sort of like a Heifer International, those folks who send you a holiday season catalog with pictures of cuddly farm animals you think you can personally buy to donate to people in a poor village -- when in reality you're contributing to a general fund. (Kudos to Heifer's Web site for being far less calf-centric than its catalog). On the Kiva site, most of the loans have already been made to the entrepreneurs. You're just "backfilling" the micro-credit lender's risk. To Kiva's credit, it has made its explanation more clear on its Web site, using language like: "Most Field Partners then use the Kiva lender funds to backfill the loan they've already disbursed to the entrepreneur," though that still sounds a little bit B-School for most of us.
So what's really at issue here? One online commentator says camps have formed: Those who have learned what Kiva is doing, and aren't too happy about it, and those who have learned and think it's OK. There are others who say, move on, already, the sponsor-a-child charities have been doing this for decades. After some thought, I'm going to keep donating to Kiva. Here's why.
- It's trying to be more upfront about how its system works. A lot of charities aren't.
- It's found a successful model that, however incrementally, addresses one of the most painful issues of our time: The disparity in wealth between the handful of first-world countries, and everyone else.
- Intentionally or not, Kiva's had to become very transparent about how its money is spent, and that's the most important question to ask about all charities. How much of your dollar goes to overhead, and how much to the people who really need it?
But more to the point of what we were discussing earlier, it's all about who gets how much of your charity dollar. Fortunately, the Web provides two great ways to perform due diligence before you give: Charity Navigator, which lists topics as diverse as how to avoid the donate-a-junker-car offer (seek a charity that actually uses the cars, or deal directly with the charity itself) to some great lists, like: 10 Highly-Paid CEOs at Low-Rated Charities, to 10 Charities Drowning in Administrative Costs. By the way, Kiva is too new for Charity Navigator to have rated it. Heifer Foundation gets two out of four stars, Heifer Project International three out of four.
And then there's Guidestar, the professional-grade research tool, where you can search out charities and review the tax documents that non-profits are required to file by law, such as the often-revealing Form 990. This little treasure can, in fact, yield such information such as the history of Americans for Balanced Energy Choices, which sounds like an environmental group, but was, in fact, funded by the coal industry, used to go by the name Center for Energy and Economic Development, and, today is known as the American Coalition for Clean Coal Electricity.
So, if you feel like you need to take more control over your charitable giving, you have some tools. And make sure you read all the fine print when something seems, well, too good to be true.
Reader Comments (Page 1 of 1)
11-29-2009 @ 12:48AM
Brian said...
Does anyone know whether the money I loan to Kiva actually goes to the country I designate? I guess I shouldn't be surprised that the actual mechanics of the process are different than what I thought they were, but I am pleased that the $ are going to generally help the people who need it. Wish they hadn't have bent the truth in the first place though.
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11-30-2009 @ 12:06PM
Andrew said...
Brain, as someone who has visited the local organizations that Kiva partners with I can tell you for sure that all of the people on Kiva's site do indeed get loans, and the updates that you receive are real and about that actual person. I don't like the comparison to the Red Cross here because it makes it sound like Kiva is taking your money and using it for its operating expenses or something like that, its not, you can donate to Kiva directly if you want but all of the loan money goes directly to fill loans.
Also, if a loan is not funded on the site than the partner does not get payment for that loan so in reality you are providing the money that the local partner gives out to the person that you see on the site. The only thing people seem to take issue with is that loans get handed out to the person before it is fully funded on the site (which has been clearly stated on every loan page since day 1). Do you really want a person who really needs this money to wait around for lenders on Kiva to fill this loan, which can take up to 30 days? The system Kiva has set up is the most cost effective and fair way to operate and I think they should applauded, not attacked for it.
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12-01-2009 @ 9:53AM
todd said...
let me see if i get this, someone wants a loan, so they get one from a local provider. the loan is then put onto kiva for someone else to pay off in essence? with the original loan buyer having their debt covered by the kiva payment.
does the original loan buyer paying interest on the loan from the local? or is it charity that's just getting covered by kiva after the loan has gone out?
if that's the setup then there's no real issue, the end person gets their money, the person paying kiva paid for the loan as they were going to anyway, the upside is that the person wanting the loan got it when they needed it.
again, if that is the setup, its actually better IMO.
12-01-2009 @ 9:53AM
Arthur said...
There is a website similair to Kiva called MyC4. My understanding is that you are actually investing directly in companies with MyC4. Also, you get to determine the interest you earn on your investment. So it is actually an investment opportunity, not a charity.
But if you want to view it as a charity, you can just set low (or no) interest rates for the loans you give.
If you are in Canada, there is an organization called Charity Intelligence which evaluates charities and makes recommendations for how to get the most bang for you donated buck.
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12-01-2009 @ 9:52AM
johnjohn2009 said...
This:
that's the most important question to ask about all charities. How much of your dollar goes to overhead, and how much to the people who really need it?
is not correct. The most important question to ask a charity is how effective they are at meeting their goals. "Overhead" can be construed many different ways, and is always larger for small (effective) organizations.
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12-01-2009 @ 11:34AM
midkniht said...
Have any of you thought about _actually_ doing something good for people instead of throwing money around? Next time take that pitiful amount of money and try doing something in your own community, state, or country. Americans need help from Americans too. Just take the recent list of the poorest communities and cities and go to one and try to really make a difference with people you actually see day to day instead of ignoring them and sending a payment out to make up for your own poor morality.
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12-01-2009 @ 1:02PM
rhykin said...
Poor morality? How about best use of my time. Having me fumble around in a local community trying to figure out how to help people who haven't asked for my help is a waste of it. Spending my time working, and then handing over some of the fruits of my labor to someone who knows what they're doing seems a lot more...not stupid. And moral.
12-01-2009 @ 4:38PM
Bengt Bedrup said...
I recommend everyone to read How Kiva Works http://www.kiva.org/about/how as all of the information in the blogpost is easily available.
Also, some of the field partners do in fact not disburse the money until the loans have been funded through Kiva, just check the Date Listed and Date Disbursed in the entrepreneur information. If the money is disbursed before it is listed the field partner obviously (temporarily) funded it out of their own pockets, if it is disbursed after it is listed it is funded through Kiva.
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12-01-2009 @ 4:37PM
Bengt Bedrup said...
I recommend everyone to read How Kiva Works http://www.kiva.org/about/how as all of the information in the blogpost is easily available.
Also, some of the field partners do in fact not disburse the money until the loans have been funded through Kiva, just check the Date Listed and Date Disbursed in the entrepreneur information. If the money is disbursed before it is listed the field partner obviously (temporarily) funded it out of their own pockets, if it is disbursed after it is listed it is funded through Kiva.
Reply
12-01-2009 @ 5:05PM
Bengt Bedrup said...
I recommend everyone to read How Kiva Works http://www.kiva.org/about/how as all of the information in the blogpost is easily available.
Also, some of the field partners do in fact not disburse the money until the loans have been funded through Kiva, just check the Date Listed and Date Disbursed in the entrepreneur information. If the money is disbursed before it is listed the field partner obviously (temporarily) funded it out of their own pockets, if it is disbursed after it is listed it is funded through Kiva.
Reply
12-01-2009 @ 7:20PM
Bengt Bedrup said...
Sorry about the triple comment. I had some problem with the email verification so I reposted with a new email address and confirming the last comment confirmed them all.
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12-01-2009 @ 5:39PM
Rob Daly said...
Just recommending folks read Matt Flannery's post at Kiva regarding the topic of the blog post:
http://www.kiva.org/about/inside/2009/11/09/todays-new-york-times-article.html
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12-02-2009 @ 8:29AM
Adam said...
Hey Guys,
I am currently working at one of Kiva's field partners in the Philippines as a Kiva fellow and wanted to share my perspective. One thing that differentiates Kiva from many of these other charity organizations is the existence of the Kiva Fellows program. As a Kiva Fellow, you are deployed to one of the 144 Kiva Field partners to basically serve as the eyes and ears to the Kiva lending community. I have actually been out the field and have met with the borrowers. As a Kiva lender, hopefully you will sleep better knowing that there are a lot of people involved in making sure that your money is going where you think it is.
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