Kiva Suffers Backlash For U.S. Micro-Lending
By Anna Johnson on July 7th, 2009A backlash has erupted against micro-lending facilitator, Kiva.org, for allowing people to lend to small businesses in the United States.
Kiva has traditionally facilitated micro-loans to entrepreneurs in third world countries. Loan recipients might seek loans of, say, U.S. $500 to help them buy materials for a garment business, or a cow for a business selling milk, or for tools to build a market stall.
To this end, lenders make contributions of $25, $50 or whatever to help the borrower raise their goal amount.
So, while a lender may contribute, and a borrower may seek, a relatively small amount of funding by developed world standards, the funds have the potential to make a massive difference. Simply because they go to people in countries where $500 (or whatever the amount is) goes much further and might, in fact, equate to 3, 6 or 12 months’ average salary.
Recently, however, Kiva announced it would allow people to lend to U.S. based businesses. In response, a Kiva lending team called ‘Unhappy Kiva Lenders’ (UKL) has lashed out at Kiva for this ‘shameful, disgraceful decision.’
According to the UKL group – which has some 421 members (at the time of writing) – allowing people to use Kiva to lend to U.S. businesses undermines Kiva’s mission to ‘alleviate poverty’ and has shifted Kiva from ‘making loans exclusively where the needs are greatest to where they are the least.’
The group believes that money lent to ‘U.S. borrowers (and soon to other countries of the developed world) is money that cannot be used for borrowers in the developing countries….which previously was the whole idea behind Kiva.’
My view on this is probably best expressed by what another Kiva group called the ‘Happy Kiva Lenders’ has said on the subject:
Kiva should:
‘support loans to any geography and let the lenders choose where they want to lend.’
If letting lenders decide for themselves where and to whom they lend isn’t convincing enough, I would also say that lending to U.S. businesses is entirely consistent with Kiva’s mission to alleviate poverty.
Does anyone in their right mind believe there are no impoverished people in the United States? What a cruel joke it would be to tell those people that they can’t request a loan on Kiva because, although they’re dirt poor, they live in a developed country and therefore don’t qualify.
I also question the UKL’s assumption that by allowing people to lend to people in the U.S. and other developed countries, there will be less money to lend to those in developing countries.
Where’s the proof of this? Where’s the proof that lenders will turn away from those in poor countries and flock to people in the U.S.? Where’s the proof that just because people lend to those in the U.S., there will be less money for those in the third world?
What if the opposite is true? What if lenders continue to lend more money to people in developing countries because, on average, they can have a greater impact with less money? What if the ability to lend to people in the U.S. actually brings more people to Kiva, which in turn causes more money to be distributed to all?
In my view, Kiva’s most compelling value proposition is facilitating loans to people in developing countries. But I see no reason why it shouldn’t allow lending to anyone, anywhere, and let the lenders decide where and to whom they wish to lend their money.
Isn’t that what capitalism is about… and isn’t capitalism what Kiva is, in the very best sense, supporting?
Source: Leena Rao, “The Inevitable Anti-U.S. Backlash Has Started On Kiva,” TechCrunch, July 3, 2009
July 8th, 2009 at 11:13 pm
The Happy Kiva Lenders team is having a great time and growing fast! Please join us at http://www.kiva.org/team/happy_kiva_lenders
July 9th, 2009 at 1:11 am
Please note that Kiva requires a minimum loan of $25 USD and higher increments thereof. $10 or $20 loans are below the minimum. Other than this error, thank you for another perspective, and some publicity for the Happy Kiva Lenders team.
July 9th, 2009 at 1:20 am
Thanks for the clarification – corrected accordingly
August 7th, 2009 at 3:35 pm
Anna,
I applaud your support of choice among Kiva lenders! Kiva empowers aspiring entrepreneurs by connecting them with eager lenders. Working for ACCION USA (a Kiva field partner), I’ve spent a great deal of time lately responding to negative feedback about our recent partnership with Kiva to support domestic microloans. Kiva works with field partners to administer and disburse the loans, and we were ecstatic to be able to join with such an esteemed name in the microfinance community.
Unfortunately, much of the criticism we’ve received originates from a misunderstanding of First World poverty and misinformation about our operations. As you keenly recognize, poverty does exist in the United States. Granted, much of it is typically less severe than deprivation in the Third World, but to dwell on that misses the point. To measure poverty exclusively in terms of income does not accurately represent the harsh realities faced by low income individuals. Kiva expands upon this idea with a very thoughtful post on their blog, where they detail the conclusions about their US lending program.
As this article and their summary report reveal, the claim that funds will be diverted from third world borrowers has proven false. June was a record month in foreign lending for Kiva, even as they began offering loans domestically. I admire your insights that Kiva’s domestic launch will attract more borrowers (which has proven true) and that people will diversify their lending geographically (as we have seen they do). It’s refreshing to hear such progressive thinking.
I would like to thank you again for your excellent post and your interest in domestic microlending. I encourage you to begin reading our blog and following us on Twitter (@ACCION_USA). If you have any specific questions or would like to continue to conversation please reach out to us at loan at accionusa dot org.
Sam
August 7th, 2009 at 8:16 pm
Hi Sam, thanks so much for your thoughtful comments! Thanks also for the links to further information about what Kiva and Accion are accomplishing.