An extremely timely blogpost was made a couple of weeks ago by David Roodman about Kiva, which I was just e-mailed today. In the post Roodman outlines a lack of clarity in how Kiva presents the loans you can fund. In short, nearly all Kiva loans are prefunded. That is the person you want to give money to may have already received it from a microfinance organization. Roodman carefully discusses the implications for this highlighting the problem of a lack of transparency.
The founder of Kiva,Matt Flanery, responds to the blog post here (here).
At this point it might be important to remember an important part of microcredit and money in general, that it is fungible. If we loan a woman in Bangladesh $100 to buy cloth, but she would have purchased the cloth even without the loan but instead uses the $100 to send her children to school. Then the loan was in fact for schooling, even though she said it was for cloth. If Kiva shows a proposal that says they will loan the money to a woman in Bangladesh, but instead have already loaned her that money and use that money to loan to a store owner in Bolivia, which they later post. The money is fungible.
I think I'm OK with what Kiva does, just like Roodman. I do like that Kiva's founder stresses the importance of transparency in his blog post. I applaud Roodman's for his in depth discussion of Kiva.
Thanks to Roodman if I decide to continue with this project every semester we will know how Kiva actually works.
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