Loans to the Poorest: Where Does the Money Really Go?

by Sue Halpern and Nicholas Kristof
from The New York Review of Books

poorafricansSue Halpern: As you know, the controversy over the way the microfinance website presents its work was the subject of a Times piece early this week—a piece that, in fact, cited you. For those who may not be familiar with the controversy, the San Francisco-based Kiva is a wildly successful organization (they’ve distributed about $100 million in loans since 2005) that, through its website, appears to connect individual micro-lenders, people like you and me, for instance, with particular individuals in need of a small loan to get a business off the ground: a soft-drinks vendor in Thailand, for example, or a woman who makes and sells baskets in Africa. The Kiva website is a catalog of these folks, and the lender is able to read each person’s story and choose the one to support that speaks most forcefully to her or him. But as the Times article, which picks up on a blog post from David Roodman at the Center for Global Development observes—and, as I may add, I pointed out in my review of your book—this is actually not how the money gets allocated at all: when you donate to Kiva, your money doesn’t go to any particular person, it goes to one of many microcredit organizations, like the Grameen Bank, or Accion, that in turn supports people like the soft-drinks vendor and the basket-maker.

As you and Sheryl point out in your book, people connect to stories, not to statistics, so from that standpoint, Kiva figured out a very effective way of getting across the larger microcredit story by offering vivid narratives about individuals in need, and in this way pulling in millions of dollars in donations, mostly in small increments. Do you think it matters that the money isn’t actually going to the person donors believe they are supporting? The Times article quotes one of your columns from 2007, in which you wrote that you lent $25 each to a baker in Afghanistan, a TV repairman there, and a single mother running a clothing shop in the Dominican Republic, which suggests that you, too, bought into the illusion. How do you feel about that now? more

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