Controversy about Kiva’s P2P Microlending model

Via Tactical Philanthropy)

David Roodman wrote a post on his Microfinance Open Book Blog titled “Kiva Is Not Quite What It Seems“:

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.

Roodman argues that while Kiva is misleading donors, the process they are using is good:

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

Read more details about this controversy via the Tactical Philanthropy commentary, which links to the source material.

The main explanation given is that donors demand the illusion of personal giving, even if professional organizations know it is not an efficient aid mechanism, so they feel compelled to ‘cheat’ for the ‘greater good’.

3 Comments Controversy about Kiva’s P2P Microlending model

  1. AvatarAlain Hemelinckx

    the main issue with kiva and micro-finance in general is non transparency… it ends out as micro finance being just a small ticket consumer loan business where no max/ceiling debet rate is applied ( ie today the average interest rate cherged to “customers” is 31%… and when people can not pay their loan back , some MF institutions are consolidating the debts with a new loan.. and when this new loan will not be paid back, then customers will get a new and bigger loan to pay back the 2 loans… Does it not strike you ?… If we don’t pay attention MF is likely to become a consumer loan business with the benefits for big banks that they don’t have to deal with any complicated legal framework ( barely none in some countries ).

    what we need for the consumer loan business and micro finance is transparency and ethics… Ethics does not mean fr a bank to work for nothing. Ethics for MF who sound like the following baseline ” we’re helping people, with a profit when we can, but

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