Kiva, Transparency and P2P Microlending
11 November 2009
by Zev Lowe, KF8 Indonesia
There’s been a bit of an ongoing debate about whether or not Kiva is what it seems. *cue ominous music* First, a post by David Roodman, followed by a response from Kiva co-founder Matt Flannery. More recently, Stephanie Strom wrote an article in the New York Times, to which Matt Flannery has also penned a response.
All my friends have been asking me what I think about this. My inbox is bursting with emails, my Twitter feed is … well, atwitter. Meanwhile, I never knew when I signed up to represent Kiva for 10 weeks in Indonesia that I was also signing myself up for a much longer-term commitment as a Kiva Ambassador. But all jesting aside, as someone who has gone behind the curtain and seen the inner workings of Kiva and one of their MFI field partners, here’s my own personal opinion (not endorsed in any way by Kiva) on whether or not Kiva is actually peer-to-peer microlending.
A Kiva lender and borrower are connected because:
- The lender ties the fate of hir money to the borrower’s ability to repay. In other words, if Wayan Puspa in Bali gets a bad harvest, Bob Smith in Idaho won’t get his $25 back. This is why Bob gets updates on Wayan’s business — because Bob has effectively invested his money in Wayan’s business.
A Kiva lender and borrower may be connected as follows:
- Wayan Puspa may not know about Bob Smith or Kiva being the source of her funds. This largely depends on the MFI Field Partner that’s handling the loan on the ground. I know Kiva Fellows who have gone out into the field with printouts of Wayan’s borrower profile and have shown Wayan the names and faces of all the people who have contributed to her loan, to everybody’s delight. I know that clients have made videos to thank their lenders personally. But there’s no guarantee that this will be the case.
[On a personal note, I wanted very much to do this but I couldn't, because (1) Many Kiva lenders put pictures of their pets on their profiles, and my clients would have been offended by the idea of borrowing money from a dog, and (2) In the religious environment in which I was operating, I did not trust myself to be able to respectfully and sensitively explain to borrowers and MFI staff members that their funds were coming from atheists and LGBT people -- I struggled a lot with this. Despite this, all clients still sign a waiver saying at minimum that they understood that their personal information and images were going to be made public for fundraising purposes, and that they are okay with that.]
A Kiva lender and borrower are not connected in the following way:
- Wayan Puspa usually has already received the loan by the time the fundraising on Kiva happens. Kiva funds will reimburse/guarantee the money that the MFI fronted for Wayan Puspa. If many loans posted on Kiva end up not getting funded, the MFI might not be able to make loans to future clients, but it won’t be able to withdraw a loan that’s already been made.
Overhead You don’t donate through Kiva — you loan. Your entire $25 (or whatever amount) goes to the MFI Field Partner and is earmarked for the borrower. None of this money goes towards operational costs, not for Kiva nor for the MFI Field Partner. Kiva does ask for an optional donation to cover their administrative costs, but this is by no means mandatory. Currently, the suggested donation is 15% of your loan amount, or $3.75 for the usual $25 loan, which most lenders are happy to give.
Transparency The date in which every loan is disbursed is listed on the borrower profile, and you can see that in most cases, the disbursement predates the fundraising on Kiva. Check out this example, in which a profile was posted on Kiva 5 days after the loan was disbursed. The How Kiva Works page has more details.
My take At the end of the day, you’re still investing your money in someone else’s livelihood. I think of it like swiping my credit card to pay for something. I’m still liable to pay for it, even though the details are complex and no money will leave my account for another 30 days. Kiva has channeled $100m in funds to microentrepreneurs in only 4 years. There’s no way that would be possible without working with their MFI field partners, and without operational abstractions that strike a difficult balance between creating a personalized user experience and maximizing efficiency.
Zev Lowe (@zevlowe) recently returned from his Kiva Fellowship in Bali, Indonesia. He is currently researching social innovation at ESADE Business School in Barcelona, Spain. This entry is a repost from his personal blog.
Entry Filed under: Dian Bhuana Lestari Foundation (Dinari), Indonesia, KF8 (Kiva Fellows 8th Class), Uncategorized. Tags: connecting, controversy, Kiva, microfinance, microlending, p2p, peer-to-peer, stephanie strom, Transparency.
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1. mystoryourworld | 11 November 2009 at 10:07
There seems to be a lot of misunderstanding and misinformation regarding Kiva’s transparency, thanks for weighing in on the topic. People get so dialed in on semantics, they forget about the good they can do via Kiva.
-James
2. All sorts of Kiva controversy « Meg's Travels and Other Thoughts | 11 November 2009 at 10:07
[...] Matt Flannery, Kiva’s President, responded on the Kiva Blog and a former Kiva Fellow also wrote an interesting piece that tries to clarify a lot of the misunderstandings. After all this controversy (and I’m [...]
3. The Kiva Lender and Borrower Connection « Wir sprechen Online. | 11 November 2009 at 10:46
[...] on the Kiva cycle: A lender ties the fate of hir money to the ability of the borrower to repay; http://j.mp/4xQsEr [...]
4. Jan & John, KivaFriends | 11 November 2009 at 12:00
Zev, thanks for such a clear statement. We understand that Kiva needs to be careful of the ‘legalese’ on their website. However, one person stating their ‘opinion’ in their own words carries so much more weight with me. thanks, jan
5. waywardcats | 11 November 2009 at 14:08
Hi Zev,
And thank you so much, I enjoyed this post tremendously.
I would like to address for a moment the portion of your post relating to lender photos. I understand completely why the cultural differences may cause an issue for Kiva Fellows in this regard. I kept a photo of myself on my lender portfolio for quite some time just for this reason; that I wanted to respect my borrowers and allow them a connection with me.
However, Kiva re-worked their Terms of Use a while back. They currently read:
“If you post any messages or other information on the Website, you agree that such messages and information shall be considered Content, and you agree to grant, and shall be deemed to have automatically granted to Kiva an irrevocable, perpetual, non-exclusive, fully-paid, worldwide license to: (a) use, copy, perform, display and distribute such information and content; (b) modify, alter, prepare derivative works of, and/or incorporate into other works, such information and content; and (c) grant and authorize sublicenses of the foregoing. You represent and warrant that you have the right, power and authority to grant the foregoing license.
To the extent you upload or post any photographs of yourself on the Website, you agree that such materials shall be considered Content for the purposes of the foregoing paragraph, and you agree to release, discharge and agree to hold harmless Kiva from any and all claims or liability, whether known or unknown, including any and all claims in connection with the publication, production, processing, distribution or exploitation of such materials, including any claims of infringement of any rights of publicity or rights of privacy. ”
A universal license granting Kiva full unrestricted rights over my image is not something I am comfortable with, and therefore I have reluctantly changed my photo to flowers.
I wish that this was not such a complex issue, and that it was as easy as posting my photo so that my borrowers can feel connected to me. Which is why I have expressed to Kiva my surprise that they require such a license from me.
That being said, i agree completely with your take on the current controversy. I still feel connected to my individual borrowers, and I also feel connected to the MFIs. That is the reason I continue to support Kiva and microfinance.
Thank you,
6. Heather | 13 November 2009 at 07:45
I have to say that I am a little more than offended that you think you should hide the identity (gay/straight) and/or the religious beliefs of members who are extending loans to people. So because if they know I am a lesbian they are not going to take my money? That because one person is straight their money is more acceptable? I find this way of thinking the same type of mentality that would keep some people in the closet. There are gay and straight people alike in ALL countries and to not disclose where and from whom the loan is coming, solely based on sexual orientation only perpetuates that type of logic… or lack thereof, quite frankly. I am very disappointed because you basically just said either I’m not good enough to loan to these people or that they would refuse help from me.
7. James | 13 November 2009 at 16:31
Zev, thanks for your sharing your perspective.
@Zev and Heather: I’m a member of the Atheists, Agnostics, etc lending team on Kiva, and I am not offended that Zev decided against showing borrowers their profiles partly because we provided some of the funds. I see our team primarily as a way to build community among like-minded people, not as something that borrowers must be made aware of. Zev had a job to do, a very worthwhile one, and if some of the pictures and information on borrowers’ pages would have hindered that process, I’m sure he made the right decision. I’m happy to trust Kiva fellows to handle these issues as sensitively as they can.
Of course, I am saddened that the religious environment in Indonesia and many other places means that my help might be refused if the recipients knew about my beliefs, and I imagine it could be even harder to accept this if it related to something unchanging like my sexual orientation or something visible like race. But this seems like a fairly minor example of the costs of such prejudices. There are bigger battles to fight elsewhere.
8. zevlowe | 14 November 2009 at 15:07
@waywardcats I can definitely understand your reluctance to upload your photograph to Kiva’s website given those terms and conditions. I think flowers are a good choice — unlikely to offend anyone. But if you’d like to add a more personal element, might I suggest one of those sites that turns your photograph into a comic-style drawing? Or a build-your-own avatar generator? I’m sure you know what I mean… having a face, even if it’s not a photograph, makes a huge difference. Thanks so much for all your support and your positive feedback. It’s very encouraging to get comments like yours, and to feel like my writing here actually makes a difference!
9. Howard Zugman | 14 November 2009 at 18:38
Hi Zev,
Thanks for taking the time to explain the details involved in the Kiva transaction process. My own personal take on this (and I am speaking strickly on my own behalf), is that I am thrilled to death that a process exists whereby I can effortlessly loan to deserving entrepreneirs and be pretty much assured that they actually receive the loan and pretty much assured that they will pay almost all or all of back to me pretty much on time. Compare this to the almost complete lack of transparency by virtually every charitable organization worthy or otherwise.
I don’t really care what the transactional details are. I do love the postings and videos.
Please keep up the fine work.