A Revelation in Washington — A Yawn in Tanzania

CGD research fellow David Roodman (my former colleague) made waves recently with a blog post about Kiva.org, the famed and beloved non-profit organization that promotes itself as a link between individual lenders in rich countries and individual borrowers in poor ones. The reality, David noted, is more complex. Perhaps you want to donate $100 to the farmer and mother of four in Malawi whose photograph colors the Kiva.org homepage. You click on her photo, donate, and voila—the link is made. Not quite. As David explains, by the time the photo is posted, that farmer has probably already received (and even repaid) a loan from the same institution.

This revelation caused a stir—the New York Times wrote an article about it, David's blog received more than 10,000 hits, and there was a flood of Twitter postings.

What's all the fuss about? Steve Rosenzweig, another former CGDer who has worked for the past five months for a Kiva.org partner in Dar es Salaam says: "I really enjoyed reading David's blog, Kiva's response, and the Times article, but the whole thing is kind of funny because what he wrote about is something I could have told you after one week here. There, it makes big news."

Kiva has been refunding MFIs for already disbursed loans for the last two years, but clearly most users and supporters didn’t realize this.

But why do loans need to be “refunded”? Why not fund them directly? "Well," says Steve, “to wait for the loan to be fully funded on the Kiva website would delay the usual procedures for disbursing loans. When clients apply for a loan, they expect to receive it within two weeks, and they often depend on it to buy supplies… If they had to wait for the funding to come through from Kiva (which would require making the transfer, not just getting it fully funded on the site), it would cause a delay."

Even as the revelation caused a stir in the countries where Kiva lenders live, the debate doesn't seem to have reached the Kiva-funded MFIs themselves, where business continues on as usual. Says Steve: "It’s amazing. There is such a disconnect between the two worlds."