Guest post! I’m delighted to share this post by Sean from the excellent, and at present quiet, screenwriting blog Writing About Writing. (He also exists in the real world where he is a splendid fellow.) It’s about microlending service Kiva, which I’ve mentioned before. Sean – thanks for this, a privilege to have this insight!
Hi everyone, I’m Sean.
Morgue has asked me to share my experiences with Kiva, the microfinance website.
Kiva provides lower-cost loans to the world’s working poor, and Kiva is what that this post is about, eventually. But first I’m going to talk about myself for a while (ha ha, you fool Morgue, giving me this platform!)
I’ve wanted to address poverty for a long time, ever since I did a primary school project that opened my eyes to what my life was like in a developed country, and what I could have expected if I’d been born in a developing country instead. I felt lucky and guilty at the same time.
Anyway, ending world poverty was one of my long-term goals that would occasionally pop into my mind: “Oh yeah, really must do something about global poverty one of these days…”
Flashforward to me getting older. Statistically, half my life was over, and I hadn’t done anything substantive about poverty (apart from those World Vision 40 hour famines when I was that primary school kid).
I heard about Kiva through a workmate, who asked for a Kiva voucher as a going-away present. All very worthy, I thought at the time. But I was also impressed that she’d forgone the usual beautiful bowl/platter/piece of jewellery that a leaving workmate would usually get from the rest of us, for something as abstract as a voucher for a good cause.
Anyway, the Kiva seed was planted, which grew to me checking out the Kiva website, mulling it over, and eventual some action. I asked my relatives to give me money for my birthday last year, rather than the extra DVD/pair of socks that I didn’t really want or need. From that money, I made my first Kiva loans.
Okay, so what is Kiva? Kiva is an online conduit that closes the gap between ‘wealthy’ lenders (that’s me!) and people seeking loans in developing countries. Run out of San Francisco, Kiva was set up in 2005, and now has 572,389 lenders (or so!). Lenders provide their money for free – a lender (almost always) gets their money back in repayments, but makes no interest on the loan.
As a lender, I’m provided with summaries on loan applicants from across the developing world. There’s a description of what the loan will be used for – loans are usually for inputs into a small business e.g. buying stock for a shop, or animals as livestock – and some personal details about the loan applicant, which helps humanise the loan. After viewing the summary, I then have the option of loaning US$25 towards the loan applicant (through PayPal), and this US$25 is combined with loans from other Kiva users to fully fund the loan.
Kiva provides loans through field partners based in the countries concerned. The field partner acts as the liaison between Kiva and the borrower: field partners write up the details of the loan on Kiva, and are responsible for the repayment of the loan. As a lender, I can follow the progress of the loans being repaid, and hear updates on how the loan has made a difference for the borrower.
I get to choose my priorities for the loan portfolio. I usually fund women through Kiva – women have relatively little control over the world’s wealth and resources, so I feel like I’m working to redress that in some small way as well. It doesn’t always have to be business loans either – I’ve lent money to someone who needed to replace their roof in the Philippines.
So what are the issues – nothing is perfect, right?
A field partner did suspend repayments on one of my loans for a time due to political/economic turmoil in the country concerned. They’ve since resumed repayments, as they’ve been able to do so.
A bigger deal was when I realised that field partners charge interest to borrowers, and that this level of interest looks exorbitant by Western standards. There has been some criticism of Kiva for not making this plain enough on their website, which I sympathise with. The fact that field partners charge interest isn’t hidden, but IMO it’s not highlighted either.
But after thinking about it, I accepted that the level of interest needs to be measured against the costs of processing loans, and also the rate of inflation in any given country. As far as I can tell, the lending rates are considerably better than would otherwise be available. Kiva defends the field partner’s loan rates here, saying they need to be high in order to cover the costs of the field partners.
Kiva itself makes no money from the loans they are helping to process. As I make a loan, I have the option of also donating US$3.75 towards the running costs of the organisation. Plus Kiva has various corporate partners and supporters.
So, where am I now? I feel good about my Kiva loans. I’m not going to single-handedly deal with global poverty like I used to dream of. I’m not some kind of Economic Superman. But in a small way, I feel I am making the lives of some people in the world a little better in some ways. That’s what Kiva gives me, and that’s why I like it.
Sean, do you have any reaction to the link Morgue gave many moons ago regarding Kiva? http://www.raptitude.com/2010/12/the-straight-dope-on-kiva/
Thanks Svend, that’s interesting.
Mostly, my feelings are reflected in that link – Kiva is, on balance, something I support and remain engaged with. But the question does get more complex the more I learn!
There are a few things that come out in that post and the comments that go beyond what I’ve talked about above.
First, the way that loans are pre-funded, so as a lender your money is not going directly towards the person you’ve lent to – rather it’s going toward the field partner who has already lent it. But that point is a little academic to me – the field partner wouldn’t have been able to lend without the expectation of Kiva/lender support. And I’d rather people get the money when they need it.
Second, that loans are often used for emergency funding rather than necessarily the business I’ve lent it for. Essentially, I’m fine with this, as long as the loan applicant doesn’t run into financial trouble as a result.
Which leads to the third point, that microfinance should be supported with other elements, such as building business skills and financial literacy. I agree with this. Is it a reason to stop providing microfinance before those skills are developed? On balance, from what I know now, I don’t think so. But it’s a good point which requires other work to address the problem, and more thinking/investigation on my part.
Four, and widest of all, is that microfinance supports a capitalist model with all the flaws that entails, and that the capitalist model is intrinsically a problem. I have a lot of sympathy for this position, and at heart, this is one of the great political dilemmas for people who want to see change – does one engage with the system or reject the system entirely? Again on balance, I choose to engage with the systems that exist while hoping to understand and ultimately improve them.
Thanks, Sean
Sean’s response to those points is like mine, only with the benefit of thinking it through more 🙂 Thanks Svend, and Sean, for this exchange