Lofty title, but unfortunately this is not going to be a philosophical debate about developing world aid and whether you should give it. I just make the assumption that if you can, you should.
No, I have recently been awakened to a different set of issues. Let’s start with saying that my favourite way of giving is through Kiva. I’m seriously in awe of the what they’ve done here. I once spent some time working for Unicef (another organisation I really believe in) and realised how difficult it is to deliver aid for true sustainable development. One reason? Giving is simply not enough. What you need to do is to give people the skills and ability to make their own future. You may have heard the Chinese proverb: “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.” So that’s what impresses me about microfinance projects. They are focused on small scale projects and designed as loans, rather than handouts. So you can help someone start a shop or help a farm buy a new cow. Kiva achieved something special by using the web to allow individuals to get involved in mircofinance directly. You can literally choose where you want you loan to go - so you are directly funding another individual or group somewhere else in the world.
Now, I’ve been pretty happy with the loans I’ve made. I choose them on the basis of my own criteria. However, there has been a massive increase in the amount of funds available on Kiva as people have flocked to the concept. On top of that, Kiva made it easier for you to get your money back during the term of the loan - which most people then re-loan to another project. By making the funds accessible earlier, there was a sudden increase in supply of funds. A result of both of these factors was that there were not enough projects to fund. Clearly this was something Kiva was working on already, as they had been adding more field partners - who are the ones that actually manage the projects on the ground. However, with all this massive supply, I’m sure there was pressure to get new field partners going and get more projects going really quickly. And that means that it becomes much harder to maintain the quality of projects on offer to lenders.
So what I’m worried about - thanks to an ongoing conversation on the Kiva forum - is the question of quality. I’ve been happy to assume that someone at Kiva looks at each project and says, “yup, that meets everything our funders want.” After all, Kiva (like Ebay or Amazon) are a brand that we’re trusting. Unfortunately, Kiva is just a small organisation that assists us to get out money into projects. They’re non-profit and leanly staffed. So even though they have checks and policies, not everything can be checked to the same degree of certainty. The question everyone on the forum’s been talking about is - are some of these loans unethical? With limited descriptions, you have to rely on a lot of trust. You also have to rely on the field partners being diligent. How do you know your funds aren’t helping narcotics, terrorism or something else equally bad? It may sound far fetched, but just think about it. Imagine you live in a developing country and you hear about field partners looking for projects. Overseas money is being handed out to help improve businesses. How long do you think it will take for those involved in illegal activities to start looking at getting their hands on some of that?
Obviously, this is where Kiva and its field partners are important. However, my concern today was about the ‘grey’ areas. Things that aren’t illegal (and so not immediately excluded by Kiva policy), but that you may not really want to support. One Kiva supporter highlighted a loan for chicken feed that looks like it might be raising cocks for cock fighting. It may be illegal in the US and Europe, but in Thailand, the Philippines and Vietnam (and many other parts of the world) it’s a pretty popular ’sport’. At first, I was questioning whether the person that raised the concern was really just blowing hot air over some poor chicken farmer, but after reading her points, I have to say it looks like she was right. And that leads me to my starting point. Is it ethical to fund these grey loans? Just because we’re doing something ‘ethical’ (microfinance) does that mean it has to meet various other ethical standards too? Not everyone that believes in ‘doing good’ believes the same things about animal cruelty. I don’t have the answer, by the way. My thoughts are that it’s extremely difficult for Kiva to start banning loans for projects that aren’t illegal in the country of origin, but that maybe the descriptions should be clearer and should come with warnings about the activities you may be funding.
So you do need to place your money carefully on Kiva - look at the track records of the project/field partners, not just the borrowers. Watch out for discrepancies on the Kiva site (repeated loan listings, incorrect pictures, or things that just don’t make sense). I’m not going to stop lending, but I’m going to start taking more care to read about what I am funding.
Full disclosure: Here is my lending page so you can see what I’ve funded http://www.kiva.org/lender/jtw
One Comment
The lack of ethical standards in the microfinance industry is striking in view of the very elaborate financial standards that have come to govern it. There is a variety of reasons to explain this phenomenon. The first reason has its base in the history of the industry: as long as financial services were offered by non-profit organizations, which in turn were supported by non-profit investors, the civil society character of the industry ensured reasonably fair treatment of customers. The second reason has been the drive to involve private sector capital in order to meet industry targets. This course was pursued with such vigor that many players turned a blind eye to poor treatment of customers.