This debate over Kiva broke out last fall, with the Center for Global Development’s blog post (http://blogs.cgdev.org/open_book/2009/10/kiva-is-not-quite-what-it-seems.php) “Kiva is not quite what it seems”. Roodman (a microfinance expert) correctly states: “In short, the person-to-person donor-to-borrower connections created by Kiva are partly fictional. I suspect that most Kiva users do not realize this.” But he also argues that using a good business model is equally important.

A more recent criticism (http://dbzer0.com/blog/disappointing-kiva-is-hosting-loan-sharks) notes that the interest rate charged by a lending partner for Kiva charges double the interest rates of other lenders in the country. And is that right or fair? Change.org makes an excellent point (http://humanrights.change.org/blog/view/loan_sharks_cash_in_on_microfinances_magic?) highlighting how the boom of microfinance (which has existed far longer than Kiva) has paved the ground for loan sharks who charge exorbitant interest rates in some countries.

An April 2010 NYT article on microfinance and the exploitation that may come with it (http://www.nytimes.com/2010/04/14/world/14microfinance.html?_r=1&src=me&ref=general) noted: “Unwitting individuals, who can make loans of $20 or more through Web sites like Kiva or Microplace, may also end up participating in practices some consider exploitative. These Web sites admit that they cannot guarantee every interest rate they quote. Indeed, the real rate can prove to be markedly higher.”

All of that said, I think the mission of Kiva is sound, and they would be remarkably less successful if they didn’t capitalize on someone feeling good about making a “direct loan” to someone in need overseas. I believe in the power of microfinance, grassroots projects, and other community-driven projects; I also believe in understanding the pros and cons of supporting different organizations, and making choices about who to lend my time and money based on my own due diligence. I’m not saying, “Don’t donate to Kiva!”; instead, I’m saying, understand what might happen if you do. Equally possible is that you change the life of a person or group of people living in abject poverty. You should know you’re taking the risk of having things turn out either way though.