Most people in the Kiva debate have stated that the fact Kiva loans have already been funded prior to them appearing on the Kiva website is misleading, but that this pre-funding approach is better for the entrepreneurs that Kiva’s users are trying to help. However, it has also been pointed out by many that DonorsChoose, a website that let’s donors support projects in public schools, really does offer the opportunity for donors to directly fund a project.
Here’s a comment I just received from Mike Everett-Lane, former executive director of DonorsChoose Northeast:
The central issue, to me, isn’t that the pool of money is fungible (i.e., my donation goes into a large pool, out of which the partners are funded, out of which individual loans are made). Nor is the question of microphilanthropy vs. the need to fund overhead. The issue is that Kiva implies that the lender’s choice helps determine who gets a loan.
Kiva gives the impression that if lenders do not fund a project, that project will not happen. Right now there’s a project with $250 left to go, and it “expires” in 8 hours, 15 minutes. That gives me a sense of urgency. I might even give the whole amount. But if the loan has already been made, then the “expiration” isn’t true. There is no real choice.
I worked for a number of years at DonorsChoose.org, and I can tell you that giving donors an actual choice is hard. Good projects will go unfunded. You have to return credits to donors who have partially funded a project that never happened, and convince them to reapply those funds to a new project, which itself might not be fully funded, etc. Tracking it all is no piece of cake, either. But if you don’t do all of this, you’re not being transparent, and you’re not giving your donors real choice.
I don’t believe that microphilanthropy (or microfinance, peer-to-peer giving, etc.) is a good solution for most problems. DonorsChoose.org has an advantage, in that they are funding discrete classroom projects within public schools, but do not have to fund the infrastructure of the schools themselves. Most problems just couldn’t be solved in this way. (”I’d like to fund only the violas in the orchestra, please.”) But if you’re going to advertise yourself as giving choice to the donor, you’d better do it.
I am volunteering with one of Kiva’s U.S.-based partners, and I have given to both Kiva and DonorsChoose. I think they are both great models, and Mike brings up an interesting comparison here but I am having trouble imagining how Kiva could give donors a “choice.” In contrast to DonorsChoose, “giving” on Kiva is actually lending, not a donation. Personally, I trust that MFI underwriters are better at deciding if someone is going to pay back a loan than I am, solely on the basis of a picture and paragraph about them.
But does Kiva advertise donor choice? On Kiva’s website, under the “About” section, you see the sentence
“The individuals featured on our website are real people who need a loan and are waiting for socially-minded individuals like you to lend them money.”
Is this true? No, the entrepreneurs aren’t waiting for you, specifically, to lend them money. In that sense, this is false advertising, and Mike’s probably right that Kiva shouldn’t promise something they can’t deliver.
However, it’s important to realize that at some point these borrowers were waiting for funding. Donors may not be choosing whether to give a loan to someone, but microfinance organizations, at some point, are. We have to turn good people down all the time – any loan consultant would agree with me. Once they are on Kiva, our organization has already decided to lend to these clients anyway. We cannot put only “risky” clients that we wouldn’t lend to on Kiva, because that would be a huge adverse selection problem (I think I’ve got my economics terminology right).
I’d be interested to hear from more Kiva lenders here. I’m wondering how many of us actually think our loan is allowing the borrower to get funded. I can’t really speak for “most lenders” because I am too involved with the actual process.
Just FYI, Kiva holds community conference calls once a month that are open to everyone. The next one is Tuesday, October 20th: http://www.kiva.org/about/inside/2009/10/02/community-conference-call-october-2009.html
This might be a good discussion to bring to the call.
Thanks for the link to the conference call. It will appear in my Daily Digest post this evening.
Such a fascinating discussion.
We just launched http://www.worldflix.org, a web-based platform where global basic needs
projects can post descriptions of their programs and their funding
needs, along with embedded digital video clips that function as mini
documentaries about the projects. This in turn creates a web-based
portal for philanthropy, where potential donors can view the stories,
make personal connections with the projects, and then make immediate
micro-grants to their chosen causes, right on the same webpage. Donors
are later able to watch the growth and success of these projects
through additional videos. We have not “pre-funded” any of these projects so the donors will actually be in total control of who and when the funding will happen.