The dark side of Kiva’s microfinance

By | July 13, 2013

Kiva is definitely one of the most uniquely powerful websites on the Internet because it allows citizens of the first world to give small loans to people trying to start a business or make ends meet in the third world. There have been plenty of differently people to come out in support of Kiva over the past few years (see . While the intentions of the people talking about the positive aspects of Kiva are usually pure, the fact of the matter is that there seems to be a dark side to this microloan website.

The Failures of Kiva

The main failure of Kiva seems to be its lack of transparency. Although there are pictures and related information about many people in third world countries listed on the website, the reality is that not many people really know where their money is going. Kiva states that it is their goal to help people life others out of poverty, but it’s hard to tell if this is actually happening. The main issue is that there is no direct connection between the lender and the person receiving the money on the other side of the world. Kiva is the only organization who is able to see the real data behind the site, and many people see this as an issue when it comes to transparency.

Lenders also have no recourse when a loan goes into default. Kiva says that it deploys volunteers to keep tabs on some of the loans around the world, but the problem with microloans is that it is basically impossible to keep tabs on everyone. Anyone who makes a loan through this website needs to realize that they could be throwing money down a black hole. There is nothing that you will be able to do if your loan goes bust.

Why is Kiva Needed?

If you read the fine print on the Kiva website, you will notice that the money is not going directly to the people posted on the site. In fact, all of the money that comes from the lenders in the first world is actually sent to microfinance institutions in the various countries of the borrowers. In other words, the money may not even be going to the people who are posted on the Kiva website. If the money is actually being sent to another financial institution, then why is Kiva even needed in the first place? Why not just connect the lenders directly to those microfinance institutions?

A Disclaimer is in Order

If Kiva is going to continue taking loans from people in Canada, then they need to make sure that the lenders understand what is really going on. The fact of the matter is they are not sending money to the person in the picture, and the lender probably does not realize that as they are using the Kiva website. The best course of action for anyone using Kiva is to look for an alternative website where lenders are connected directly with the borrowers in other countries. While Kiva has done a lot to raise the popularity of microfinance websites, the reality is that a better system is needed with more transparency.

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