To Kiva or not to Kiva…?

By Bryan • Finance, random world • 3 Nov 2009

kivaFounded in 2005, Kiva is a internet based organization which allows people to lend money to small businesses in the developing world through partnered microfinance institutions.  In a nutshell, microfinance can be viewed as a development tool that provides financial services to low-income clients, usually in developing nations who traditionally lack access to banking and related services.  Endorsed by the likes of Bill Clinton and Nicholas Kristoff, Kiva.org is probably the most recognizable non-profit involved in facilitating this form of financing.

Essentially, one will browse through potential clients on the Kiva.org webpage and choose whom you believe is worthy of your loan.  Clients share their loan goals, credit history, loan amount wanted and present loan acquired.  Clients are expected to repay loans within a year, thus returning ones initial loan.  The partnered microfinance institution takes an interest cut and you are returned your initial loan.  

There is a better synopsis on their webpage.

After reading a Slate article detailing the process a few years ago, I opened up an account.  Given that I wasn’t in a solid financial position to front any cash at the time, I just used the account as a medium with which to browse client projects and get a better feel for what micro finance is all about.  The projects seemed quite promising and I decided that it was something I would like to jump into when my financial position was better.  I was keenly interested in donating to countries that I had travelled too, namely Mongolia, Vietnam and Cambodia.

Today I ran into another Slate article regarding Kiva.  But this one took a dramatically different approach and questioned the high interest rates and the impact of microloans in alleviating poverty.

This led to another site detailing what has apparently become quite the  debate regarding the honesty and transparency of Kiva practices and the rationale of Kiva lenders (a kind of ‘pat yourself on the back’ approach vs. altruism).  I haven’t read through half of it year, but the debate is good with both sides weighing in. 

I was thinking about dumping a hundred or so dollars into Kiva.  However, aside from questions regarding the use of my own student loan as a loan for someone else…there appear to be other issues regarding the concept of microloans.

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