Kiva.org isn't charity. It's a loan. The person you lent to will use the money you lent to build up their business, and then they'll pay you back.

TPS is right - Kiva.org isn't charity, it's microlending. You loan a small amount of money, the person uses it to build up their business, and you get paid back (usually) within a few months. That's not charity - that's just being able to leverage a large number of people who can loan small amounts of money. Microlending is extremely effective in developing nations to help people build up their businesses. I think the guy who won the Nobel Peace Prize last year won because he created a large and effective microlending institution (or he might have won another Nobel - I don't remember the specifics).

however, back to the idea of feeling bad by giving, it's okay to feel good about giving money to charity. I think we're trained, to some degree, that giving to charity to be a selfless act where we don't feel any personal benefit for performing it - the problem is that we do. People like to give money! It's not bad to give money! Defining charitable acts in terms of what is more honorable or "worth more" does more to harm the idea of charity than make charity more effective.

Echoing what was said above and I wrote a bit about Kiva in this askme.

Also, if a person needs the money, they generally don't care why you did it, unless they have to, and if it doesn't hinge on the blood of the innocent (or does), many won't care.

I guess I thought more of it as charity simply because I intend to roll over any repayments into bigger loans. TPS is right. I should think of this as helping people who are trying to help themselves.

I got it twisted, and as always, MeCha set me straight. :)

I know I've done her a good turn, and I've decided to give to a new entrepreneur each month.

From what I've read, it appears that it would be much more effective to give one larger loan to just one entrepreneur. The flaw in micro-lending is that it ends up functioning a bit like payday loans because the amounts are not large enough to capitalize a proper business (i.e., one that eventually hires employees and has path towards self-financing).

Here's a short New Yorker piece that outlines criticisms of the micro-loan programs.

I'm not at all trying to say that giving through Kiva is anything but good. But it seems more to me like a charitable act than an act of economic development.

I've read that article and others like but disagree with your " But it seems more to me like a charitable act than an act of economic development." Small entrepreneurs need finance and most banks have long ignored them. The fact that microloans don't finance expansion and new employees is built into the programs.

Certainly there is a need for next tier funding but that requires other structures that folks like Google.org and Soros are trying to develop.

The flaw in micro-lending is that it ends up functioning a bit like payday loans because the amounts are not large enough to capitalize a proper business (i.e., one that eventually hires employees and has path towards self-financing).

Well, first off, a payday loan is one that's generally charging outrageous interest that keeps people indentured to them to their detriment, and Kiva and their partners aren't do that. And second, what exactly is your definition of a "proper" business? There are plenty of small businesses in America that rely on short-term credit to pay employees, order supplies, etc - wasn't that the whole point of the bailout, to keep that credit available to American businesses to prevent them from going under? I don't know why it would be a bad thing to make the same financing avaiable to businesses around the world.

The flaw in micro-lending is that it ends up functioning a bit like payday loans because the amounts are not large enough to capitalize a proper business

This is a Western perspective. For people living hand to mouth on 50 cents a day, a loan of 10 or 20 bucks IS enough to start a "real" business - buying 20 chickens and selling eggs, renting a sewing machine, shit like that... To us it seems trivial, but there are people in that part of the world who need 20 bucks and can't get their hands on it, and this 20 bucks can get them on their feet and self-sufficient.

Certainly there is a need for next tier funding but that requires other structures that folks like Google.org and Soros are trying to develop.

Exactly. My concern is that people who participate in Kiva might think they're accomplishing something they're not and that might make it harder for groups like Soros' to get the attention it needs.

a payday loan is one that's generally charging outrageous interest that keeps people indentured to them to their detriment, and Kiva and their partners aren't do that

A payday loan, as I was using it, is a short-term loan that covers temporary cash shortfalls, but not one that could be used for capital investments. The interest rate is a separate issue. I know that Kiva isn't charging usurious rates and that's not the issue I'm concerned about.

And second, what exactly is your definition of a "proper" business?

I defined it in my parenthetical: one that employs more than the just the sole proprietor and is, to some extent, self-financing. I'd also add the notion that a business should be able to exist and function beyond the life or involvement of the sole proprietor.

There are plenty of small businesses in America that rely on short-term credit to pay employees, order supplies, etc

Sure, but those companies are already established business with multiple employees, fixed assets and collateral available for financing. That they rely on short term secured credit is a matter of capital efficiency. A sole proprietor can function with Kiva-type short term credit and an established business can function on short term secured credit, but I don't think you can make the jump from one to the other without additional capital investment.

I don't know why it would be a bad thing to make the same financing avaiable to businesses around the world.

I don't think it's a bad thing. I explicitly said it's good. I just think more capital is required per borrower if Kiva intends to accomplish the grander goal of developing small businesses.

This is a Western perspective.

Fair enough. I certainly have a Western concept of a "proper" business and what the goal of economic development is. But I think Kiva has a similar goal in mind (and certainly many people who give to Kiva have that goal in mind).

Again, I don't think Kiva or other micro-lenders are wrong to do what they are doing. I am concerned that they may not achieve what they've set out to do.

As a still relatively new contributor to Kiva as of this year, in part due to arse_hat's endorsement and links, I know what you're saying about wanting to give more... there are so many people who could be so close to getting a start on the ground. That I get.

But denigration? That idea doesn't seem to fit. These are loans to people who have put major effort at minimum to bettering their situation, and I'm sure most of them work damnably hard. These are loans, as mentioned before, which when repaid can be used to help another person in turn. It's a beautiful idea.

And honestly? sometimes my mind gets caught in the cogs between hey! in this country it only takes 800 USD to start a viable business... and dear gods, how much poverty must there be that it's all it takes.

There shouldn't be guilt in being in a position to help, and actually helping. Please feel good that you're doing something.

"Certainly there is a need for next tier funding but that requires other structures that folks like Google.org and Soros are trying to develop.

Exactly. My concern is that people who participate in Kiva might think they're accomplishing something they're not and that might make it harder for groups like Soros' to get the attention it needs."

I really do hope that most Kiva lenders know that they are not building employers but just helping hard working individuals pull themselves up, one rung or so, the economic ladder.

"I don't know why it would be a bad thing to make the same financing available to businesses around the world.

I don't think it's a bad thing. I explicitly said it's good. I just think more capital is required per borrower if Kiva intends to accomplish the grander goal of developing small businesses."


For the past 30 years the goal of microloans has been to give people with little chance of employment a way to turn ambition and effort into a revenue stream.

I do hope that people can see that this is just a way to give a person and his or her family a chance at something better. I do hope that they also realize that this is not moving those folks into the great bourgeoisie.

There are needs beyond what microloans do, but microloans are not there to do that. If the microloans message is getting garbled then all of us who have been supporting this for so long need to speak up and explain what it is microloans are meant to do.

I haven't spent enough time in the third world (mostly Haiti) to really say I know what I am talking about but microloans do seem to me like one small part of getting people some money, some dignity, and some pride in what they do.

vers, thanks for your comment.

Becoming self sufficient is hardly insignificant.