Disappointing: Kiva is hosting loan-sharks

I once supported Kiva as I thought that even when flawed, it’s doing its best to support people. But now I see that they don’t even try.

Loan Sharks
Image by DennisSylvesterHurd via Flickr

I was a cautiously-neutral to the service of Kiva. Even though I was excited when I first discovered it, the criticisms of micro-lending and the fact that such a service is impossible to make any actual change and serves mostly to give a “feel-good” feeling to people in the developed nations made me lose a lot of that excitement.

Still I still had made a few loans at the beginning, and as those were paid back, I simply re-loaned them to people who would be charged as close to 0% interest as possible. Unfortunately. Kiva makes this selection extemely hard. Harder than it needs to be. Not only do they not display the interest the partner will charge to the person you are considering giving a loan to, but the interest rate charged by a partner is also the last thing you’ll find about them. It’s like Kiva is consciously trying to cover up the absurd fees some of their partners are charging. They do not even provide a search function based on interest rates which would at least come extremely handy.

But still, until now I was tolerant to the idea of Kiva mostly because even though most of their partners where charging a high amount, it was still lower than the median rates of their area. However this has now changed for the worse. Not only do most partners now seem to hover around the median, but I’ve just seen one of the most digusting examples I could find within Kiva

This partner charges double the interest and makes double the profit that most lenders in their country. This is a loan-shark put simply. And yet. This is a Kiva partner. Pathetic. I don’t even know if this partner existed like this from the beginning of Kiva or if they increased their interest rates later on. Their URL number seems to indicate that they were one of the earliest.

This is the last straw for me. I can’t even remain neutral in the face of how Kiva uses the mutual-aid sentiments of people to support the debt-enslavement and debt-abuse of the most unfortunate. Until Kiva can provide a way where people can discover those partners which charge close to 0% interest (Do you have any anymore Kiva?), then I would suggest you stay away from it. It seems Kiva is simply becoming a useful tool in the hands of those who only wish to profit on the backs of the poor.

A way to help the third world without charity

Kiva is a Microfinance project which aims to help alleviate poverty in the third world. I think it’s a small step in the right direction and worthy of our support.

Image representing Kiva as depicted in CrunchBase
Image via CrunchBase

Through one of reddit’s recent advert campaigns, I’ve come to discover Kiva, a non-profit project trying to alleviate poverty through micro-financing of entrepreneurs in (mostly) third world or developing nations. It’s quite an interesting attempt at this issue really. While Micro-financing (MFI) is not something novel anymore, the idea of utilizing the Internet to make it very easy for distributed people all over the world to provide credit for particular causes.

This is in fact I believe the most important part. While MFIs are quite a worthwhile way to provide credit to those falling between the cracks of the financial system, it must have been quite difficult for people with some spare money to contribute to it. Kiva is the necessary step which finally makes it easy to connect those with money, to those who will distribute it. That it adds a personal touch and a sense of connection of lender to borrower is just the icing to the cake.

The thing I like the most about Kiva is that this is not a charity. While there is a general charitable aspect of it – specifically in the sense that lenders do not receive interest on their loans and have a risk of losing some of their money – as a whole the concept is made so that people get a chance to receive funds for their purpose (whether entrepreneurship or personal) and then return it as a whole but on better terms.

Why is this noteworthy? For me, it’s quite important not to be a charity event as I consider charity to be the wrong way to go about solving poverty issues. I won’t get into a lot of details but in a few words it insults both charitor and beneficiary and it promotes a passive and victim mentality. Nothing really an Anarchist likes to promote. On the opposite side, the Kiva and MFIs at least push people to find a way to put the money to good use and then be able to repay it. If trains people to solve their problems with those of us who have it better giving the leg up.

And this is the most important part. Simply giving money to the poor in order to get them from one day to the next is just hiding the problem under the carpet. Helping the poor overcome their problems with their own solutions and empowering them to continue thinking this way is the important thing.  And I believe Kiva is a small step in the right direction.

Of course, compared to what should happen to finally resolve the problem of poverty, MFI is a drop in the ocean. However in a world where those of us who want to help feel so helpless to do so, the idea of helping people learn to stand on their own two legs is something.

So initially I was quite furtive in my first loan. I only gave out 25$ to one person and waited to see what would happen. Well, today I am glad to say I got 1.2$ of those back from the first return. Once I have it all back, I’ll be able to use it then to refinance someone else or even the same person if needed. This, along with me recently proposing to some rich online person to join Kiva as well, gave me the incentive to put my hand a bit deeper in my pocket and also to spread the word. Hence, this post.

kiva-redditThere’s also some other interesting thoughts about Kiva I’ve made. For example, one can also withdraw their money once its been returned. This means that one can theoretically use Kiva as a kind of savings account as well, in a sense hitting two birds with one stone. Both doing something about poverty and also having a small modicum of diversified security. Sure, it’s not getting interest and you may lose part of it, but it’s so spread out that it’s unlikely you’ll lose a lot and furthermore you can personally manage its risk to an extent and I am assuming it’s safe from bank runs.  Just an idea anyway.

This post wouldn’t be complete without me mentioning what I think is the biggest criticism about Kiva: Interest rates.

You see, while Kiva does not charge any interest rates for giving the money, the partners who actually are in contact with the borrower and serve as the intermediary between Kiva and entrepreneur, do charge an interest, and this interest can go quite high. To the tune of 50% even! On average, at the time of writing, Kiva has an average interest rates from partners of 23% but this varies wildly. I’ve seen 1% as well.

While Kiva does a pretty good job of explaining why MFI interest rates are so high, one also needs to consider that the interest rate sharpness is relative. While in comparison to the developed world they are astronomical, compared to their local money lenders, the interest rates are downright free. Local money lender average is at around 86% and I’ve noticed a lot of areas where it’s over 100%! So I think if someone really needs a loan, an interest rate of 70% less than one would get through local channels is a much better help.

Of course this does not mean that all partners have it so high. One can easily discover those who have it as low as 4% or even 1% and since Kiva provides the capability to search by partner, one can easily just look and provide loans with the lowest interest rates possible. Of course, you shouldn’t expect to be able to find such partners on areas with high risk and poverty as that would simply be not sustainable. Personally I prefer to use the word search and look for “coop”. This way I usually find entrepreneurs who are having a cooperative as a partner, which at least tells me that the money I give out is not going to fund worker exploitation for profit.

I think Kiva is a very nice idea and certainly a step in the right direction. It’s not the most radical of concepts but every little bit counts. I also like the idea that as a movement, it can also combine the powers of both the left and the right spectrum of libertarianism. Both those of us who want to do out little bit to fight poverty without insulting those we help and those of us who want to spread entepreneurship values.

Oh, and as a bonus fact, Kiva also supports groups. This means that when you lend money, you can do it as part of a group of people. And would you know which people are the ones who have lent out more and by a large margin? Atheists 😉

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How much are we all to blame for the situation in the 3rd world?

The developed nations are living the good life while billions are starving and homeless. This article explains why we share part of the blame.

Countries fall into three broad categories bas...
Image via Wikipedia

Another day, another argument. This time a socialist from reddit is taking exception to my previous article where I explained how the developed nations have taken summarily the role of the bourgeoisie against the 3rd world which is becoming the world’s proletariat. Specifically his argument seems to be that workers do not share any of the blame for the situation in the world but that it’s rather only the fault of the Capitalists.

He then asks for proof to the contrary and this is what I hope to tackle today.

Because you are accusing me and millions upon millions of other workers of exploiting other workers. I think its quite understandable that you prove to me that a link exists between the poverty of the oppressed workers in the third world and the relative prosperity of those in the first.

Alrighty then. Here we go.


There is ample evidence today to know that the nations we call “the 3rd world” today, did not become so by themselves. If you look at any of those nations’s history, all of them have been at some point in their past colonized by an imperialistic nation. Those nations that engaged in Imperialism as the ones we call today “developed”. The cost of this “development” was the supreme exploitation of others through slavery, taxation and outright theft. This not only slowed down the development of these nations but it outright put them quite a bit back, paving the way for the miserable people living within to be used as cheap labour by our current breed of exploiters.

But what does this have to do with workers? I claim that any person who benefited immensely from the atrocities of his ancestors, shares a moral responsibility to make up for it. To deny this is to claim that the son or grandson of a brutal dictator who plundered his way to wealth, deserves all his inheritance.

Our standard of life is high because our ancestors ruthlessly plundered the wealth of whole nations for their own benefit. This wealth through inheritance and supply-side economics eventually enriched the whole society.

This is not to induce guilt. I see no point in feeling guilty for the sins of the fathers since there was nothing one could do to stop it, neither does guilt invoke action. However our moral responsibility remains and will remain as long as those nations remain woefully inferior to ours. I wish to dispel the unbased notions that the western nations deserve their superior standing because we’re somehow better than everyone else.

The exploitation trickles down

The Capitalists of today prefer to outsource their factories and other means of production to undeveloped nations so that they may get the biggest surplus value possible. This surplus value, created with the labour of the extremely exploited nations does not even have a chance to improve their own lives even a bit through supply-side economics, but rather it is transported across the world.

The developed world nations are thus getting all the surplus value created by the exploited nations and then use that extra material wealth to create yet more exploitation and wealth. The definition of a Capitalist. And summarily, that is what we are. Our western societies as a whole have the wealth (initially achieved through imperialism), which they invest in order to make more wealth for themselves.

The worker that lives in that society gets to enjoy to surplus value along with everyone else. He may still be exploited but in a much smaller degree than any other time in history. This is why the Capitalists can successfully argue how you can just get a better job, or get retrained to a more lucrative position and whatnot. In our society, Capitalism retains the impression of functionality only because it floats on the foam of the blood of everyone outside it.

So what does this have to do with the worker? The fact that we are participating in this scheme means that we are at least partly responsible. By consuming the products created by such exploitation we are endorsing the continuation of this tactic. The Capitalist would not make a profit when people refused to buy shoes made by 13 year old girls and thus such a practice would eventually stop. Same for horrible conditions, wages and whatnot.

This would have two possible results

First, the capitalist would increase the working conditions and payment of his workforce to a point comparable to us if he wanted to sell in this market, at which point it cannot be considered exploitation from a national scale. This would have the effect of course that the prices of those goods would not be able to remain as low for everyone. Is this a worthy price to pay for equality and a clean conscience?. I say yes, but our friend has a different opinion.

Why should workers suffer in any way, to let the boss profit? Should not the workers in the importing nation demand to the government that only products produced by unionized workers earning an acceptable wage be imported? Yes I say, and let the capitalists take the cost! Not the workers!

But such an action would have the same effect. The only difference in the second case is that you involve the government (with all it’s impotence and protectionism of the Capital) to do what you should and could have done yourself. The end result will be the same though. The prices will raise and the “workers will suffer”.

The second option would be that since the Capitalist cannot make a profit from transporting and selling the cheap products to the developed nations anymore, he would instead attempt to sell them to the local population. To be fair, this option would probably be a possible outcome of the first scenario since the cost of transportation would decrease the profit too much.

So what happens then? First of all, the wealth that this nation produces does not leave it. It means that, at least, the lives of those societies are enriched, in a similar way that a worker reaps the rewards of his own labour. Certainly, the money goes mostly to their capitalist bosses but, at the very least, supply-side economics guarantees that the wealth which is kept in that nation is at least spread around.

Then, it also means that local businesses for the developed nations will start popping up again. Since the profit margin drops when having to transport and the worker costs in the developed nations are as high as here, Capitalists will prefer to invest in local businesses. This will boost the production of each nation in turn (as opposed to the current system where all the factories are outside) and increase the proletariat.

And finally, the last effect will be, unfortunately, increased exploitation. Once Capitalists cannot buy cheap labour in China and sell it expensively in Germany, the natural course of Capitalism will assert itself. Exploitation will increase. Wages will drop. More working hours will be demanded etc. The standard stuff with which Capitalism undermines itself and raises the awareness of the working class.

With one difference from the current situation. It will be universal. The workers of the world will be exploited at an equal degree. No more will the Indian see the American earn 10 times as much by doing half the work. No more will the French consider his countrymen superior because they happen to have a much better lifestyle than the Egyptian and thus “must be doing something right”. The workers of the world will go through the same struggle and become for once, internationally, comrades.

And when that happens, Capitalists of the world beware!

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