Tim Ogden, the author of one of the posts critical of Kiva on his blog Philanthropy Action, offers this comment on my post about the debate around Kiva:
I’ve updated my post because a close reading of the Kiva documents suggests that even the revised money flow steps you have isn’t quite right. MFIs don’t repay Kiva unless the volume of new loans is less than the repayments. In other words Kiva uses a portion of new loans to credit the accounts of older loans. Again, there’s nothing fraudulent about this (it’s basic accounting) and it’s the right way to keep overhead costs down. But it’s just another place where the illusion of person-to-person connection doesn’t match up with reality.
You ask the right question about what to do about this. Ideally change comes from the donor-side. Either they agree that they like illusion and promise don’t to get angry with non-profits who create the illusion for them OR donors finally understand that illusions shouldn’t be necessary in the first place and everyone agrees to be more transparent and realistic.
To be honest I don’t hold out much hope of either happening.
So the battle is Kiva’s spin on their operations and whether or not it is misleading. But the war is the illusion of person-to-person giving. This is a big deal. Kiva is a super successful organization, yet as everyone in the debate seems to agree, the best way for them to operate does not fit donors’ preconceived notions about what is best. Therefore promoting the fact that they use the best process will almost certainly lead to less social impact.
I’m really not sure what to do about this. To me it speaks to the massive education/public relations push that our sector needs to achieve. This is why I’m involved in groups like the Alliance for Effective Social Investing and why since the beginning of my engagement with that group I have been focused on how the group can help change the public conversation about philanthropy rather than just how it can help people measure social impact.
The narrative of the social sector needs to undergo radical surgery. We need to give rise to a new narrative in which smart donors invest in high performing nonprofit organizations who are vested with the authority to make tough decisions about effectiveness. Today’s narrative of nonprofits as simply conduits for donors to give money through as a way to support individuals saps our sector of strength and leaves us with an anemic nonprofit ecosystem.