Kiva: Truth in Lending?

Micro-lending site Kiva.org has become an increasingly popular way for Americans to contribute to economic growth in developing nations. The fact that Kiva seems personal--those who donate can see a picture of a specific person and read their story--and that lenders don't have to invest a lot to make a difference has drawn all sorts of people into the world of micro-finance.

In recent weeks, though, Kiva's methods have been questioned.

A recent blog post by David Roodman provoked a firestorm when it became clear that lenders are not, in fact, giving their money directly to the person whose picture they see and story they read. In fact, the donated funds are put into a pool and lent to borrowers who, may or may not, be like the ones in the pictures. Many lenders balked at this, as it disrupts the personal connection they thought they had made.

Microcredit plays a constructive role in poverty alleviation. But, unfortunately, the feel-good model of microcredit advanced by KIVA has simplified the complex, multi-dimensional challenges surrounding poverty while preempting more complex discussions about breaking the cycle of poverty.

Kiva played an important role in bringing the idea of microfinance to the general public. However, the illusion they fostered led with a first world desire for global connections and feeling good over a critical approach of the complexities and solutions to global poverty.

There's been a lot of talk about how to solve this problem. Should lenders be connected directly with the recipient of their loan? Lenders certainly like that option, though the headaches of implementing it make it unlikely. Should lenders give directly to a particular microfinance institution? It's possible, though there isn't currently a site like Kiva for these institutions, making them harder to find as they're scattered across the web.

Maybe fixing Kiva isn't the answer. In fact, it seems that most micro-entrepreneurs around the world have access to money if they decide they need it. It's not the micro-finance idea isn't a good one, but that it has worked so well. Now, the bigger problem seems to be budding entrepreneurs who do not know how to make the most of the money they're lent.

Kiva did not invent microlending, but packaged an experience that was very appealing to the first world marketplace. While it is good to see people in America's consumerist culture offering money to micro-entrepreneurs in the developing world, there seem to be ways that their money could be better used to help those same people.

These entrepreneurs deserve to have the best chance of business success possible. To make that happen, someone needs to teach them basic business skills, help them set up simple websites, and introduce them to e-commerce. They also need access to small business centers where they can check email, make photocopies, even make phone calls.

What is the future of Kiva? Will lenders continue to donate, despite the lost personal connection? Right now, that seems up to the lenders, and they seem undecided, though definitely disgruntled.