Kiva & the illusion of person-to-person giving

Photo by Alexbip

The past couple of weeks have seen drama for Kiva, the successful funder of international person-to-person loans—drama on the blogs, anyway. Bloggers criticized Kiva for misleading donors, of telling a persuasive story about its operations that wasn’t strictly true. Folks criticized Kiva for the very thing that made it a successful fundraiser—the storytelling that moved us to send them money and put photos on our refrigerators.

There is a happy ending, though. In the end, Kiva responded to the criticism, changing its marketing copy and its website. Like all good tales, though, there are a couple of lessons worth learning. These apply to person-to-person giving and to fundraising generally.

How Kiva Works

Through kiva.org you can make loans to “entrepreneurs”, typically in the developing world. Kiva’s website shows photos and stories of these folks, who come to Kiva for loans for businesses or emergency expenses.

It’s powerful fundraising. You see who you help. Some entrepreneurs even send back reports, so you learn how it’s going. You’re making a loan, not a gift—so the money comes back. And you get lots of statistics about the loan, the repayment rate and so forth.

The trouble is, the borrowers haven’t even heard of Kiva. They’re clients of microfinance lenders (MFIs) in their home countries. Kiva partners with these MFIs to vet borrowers, collect payments—and to collect the stories and photos that appear on Kiva’s website.

David Roodman, who sparked the debate with a long post examining the way Kiva works, summarizes Kiva’s business well—

Kiva brings microcredit and microchips to child sponsorship. Like sponsorship charities, it is all about stories: it was inspired by them and it succeeds by telling them. As a result, it operates in a pincers between the giver’s desire for personal connection and the costs and constraints that imposes on business of serving poor people. In fact Kiva can be seen as an ingenious finessing of this old tension. Technology has brought down the cost of transmitting stories and images.

The problem, as Roodman and others saw it, was that Kiva didn’t really work as they described. The cost of obtaining those stories seemed high. And Kiva’s website featured countdown timers with exhortations like “Only 7hrs 35min to help Kamal fund her tapestry business.” Trouble was, Kamel had already received her loan—the MFI gave her the money when it took her photo for the website.

Kiva had a story problem. What they claimed was a true story—you loaned to a particular entrepreneur—wasn’t exactly true.

Just A Story Problem

Nearly everybody writing had no problem with Kiva’s operation in practice. It was efficient and humane. Putting yourself in a lender’s shoes, can you imagine asking for a loan, having your photo taken and being told that you’d know in a few weeks whether you in fact have received it? That’s not lending, that’s sorority rush.

And nobody now is taking issue with Kiva’s use of MFI partners. The translators and loan officers needed to vet borrowers, collect payments and get these stories back to English-speaking donors—all of that may be expensive, but the expense benefits folks on the ground. For now, nobody’s criticizing Kiva’s efficiency.

How Kiva Fixed All This

Kiva listened very well. Matt Flannery, Kiva’s CEO, even posted a response on Roodman’s blog. Kiva changed their marketing copy. They changed their tag line to “Kiva connects people through lending to alleviate poverty” (the old one talked about lending to specific entrepreneurs).

Kiva’s response was astonishingly thorough.

Lessons Learned

1. “Empathy increases generosity. The pictures and stories on the Kiva site increase understanding between various parties that would otherwise operate in completely different universes.” That’s Matt Flannery, Kiva’s CEO and co-founder replying in his guest post on David Roodman’s blog.

2. “If you’re going to advertise yourself as giving choice to the donor, you’d better do it.” That’s Mike Everett-Lane, formerly of Donor’s Choose, commenting on tacticalphilanthropy.com.

3. Openness buys an organization benefit of the doubt. Even in his initial post, David Roodman acknowledged that statistics in plain view on Kiva’s own website caused him to question Kiva’s message. There was clearly no skulduggery involved.

4. Listening pays. Kiva responded to the criticism with action. It altered those marketing materials, and Matt Flannery responded quite graciously in a guest blog post. But before any of that, Kiva’s staff listened.

   That listening, and that response, ultimately drew praise from the critics. David Roodman summed it up:

   I think Flannery’s response to my criticism blended grace, humility, and quiet confidence. The world would be a much better place if all charities, all organizations for that matter, were as open and responsive to criticism as Kiva has been. I trust the Kiva folks will keep refining. I will visit them today.

For more Kiva conversations – a post on my blog, Code, Camera, Action, outlines the story. The comments in particular, summarize how Kiva resolved the issue. For more detail, see this list of excerpts from the Kiva debate or Tim Ogden’s post linking to the major blog debate.

Tags: kiva microfinance