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Is Kiva hosting loan-sharks?

June 6, 2010

Image representing Kiva as depicted in CrunchBaseImage via CrunchBasI’m  glad to see more questions emerging about microfinance.  dbzer0 has an interesting post about the exorbitant rates that borrowers from Kiva’s partners have to pay.  He writes,

until now I was tolerant to the idea of Kiva mostly because even though most of their partners where charging a high amount, it was still lower than the median rates of their area. However this has now changed for the worse. Not only do most partners now seem to hover around the median, but I’ve just seen one of the most digusting examples I could find within Kiva

This partner charges double the interest and makes double the profit that most lenders in their country. This is a loan-shark put simply. And yet. This is a Kiva partner. Pathetic. I don’t even know if this partner existed like this from the beginning of Kiva or if they increased their interest rates later on. Their URL number seems to indicate that they were one of the earliest.

This is the last straw for me. I can’t even remain neutral in the face of how Kiva uses the mutual-aid sentiments of people to support the debt-enslavement and debt-abuse of the most unfortunate. Until Kiva can provide a way where people can discover those partners which charge close to 0% interest (Do you have any anymore Kiva?), then I would suggest you stay away from it. It seems Kiva is simply becoming a useful tool in the hands of those who only wish to profit on the backs of the poor.

The whole blogpost is here

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6 Comments leave one →
  1. Jen permalink
    June 7, 2010 7:54 AM

    oh, man. I’m struck by my own ignorance again! I guess I need to stop trusting the NY times to tell me where to invest my money!

  2. Jen permalink
    June 7, 2010 9:16 PM

    So, I have been doing some checking into this, because the blog post bugged me. Kiva offers their official answer (which for some reason I can’t copy directly into here), but you can click on help from the home page, FAQs, search for interest rates. I also did not find it very difficult to discover what interest rates the places I loan to are charging their clients (the help topic explains how to do it, but you just click on the finance company name, and it’s right there on the page), and certainly none of them were as egregious as that one cited in the blog. yes, I’d be happier if they charged less, but at the same time I’m not sure I’d call many of these places “loan sharks.” Can Kiva do better? Yes, I think so. But I also don’t think it’s productive to throw the baby out with the bathwater. Here are a few links to the opposite argument/POV on microcredit.

    http://www.cgap.org/p/site/c/template.rc/1.26.2617/ (yes, this is associated with the world bank, I know, it’s a problem)

    http://www.adb.org/Documents/Books/interest-rates-microcredit/Microcredit-Understanding-Dealing.pdf

    http://www.huffingtonpost.com/elisabeth-rhyne/why-are-microfinance-inte_b_593359.html

    • June 8, 2010 1:08 AM

      Jen, this was what I thought as well at the start but there’s two things to consider. While Kiva’s partners initially had lower interest rates than the median, currently they are hovering around the median themselves or exceeding it as in the example above. The average interest rate of Kiva partners have increased from 22% to 34% in ~1 year. This is pretty concerning.

      Second, the way that Kiva makes it very difficult and time consuming for people to find out lenders with low interest and it in facts makes people more careless to whom they lend to (if only to get it over with). I know that I was very annoyed when after 6 attempts, I couldn’t even find one lender with interest rates at the least significantly lower than the median (i.e. at least 10 percentiles).

  3. October 1, 2010 5:35 PM

    Thank you very much for reproducing Db0’s arguments against Kiva. I have also written an entry on the subject from an anarchist perspective:
    http://francoistremblay.wordpress.com/2009/11/21/kiva-is-a-fraud-a-criminal-enterprise-and-perhaps-more/

    The more people who write about this, the more momentum will be generated against Kiva and their “do no evil” facade.

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  1. Kiva is a fraud, a criminal enterprise, and perhaps more… « Check Your Premises

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