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.
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.
There’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 😉