Micro-lending

I realize you were nervous about posting this, but like your other blog posts, I think your voice needs to be heard because it bravely says what so many others realize, too.

Please, keep speaking up.

Dear Tori,

thanks a lot for this post and the video on your website. I think it is very important to have a critical eye on all development activities - including these that are being "hyped" by the media and that at first glance seem to be flawless.

I am a Kiva donor myself and was therefore very much interested in the findings of your Episode 9. I am still convinced that micro lending is a more effective way to relieve poverty than most classic charity aid. However, I am now more aware of the challenges and constraints.

It shocked me that apparently the lending organisations do not invest in entrepreneurial training! I see this as a crucial factor for the success of the whole idea.

I will definitely go on reading about this topic and try to find out more about innovations in the field.

This is very interesting to hear. I have been filming different borrowers with the Grameen Bank over the course of two years and I think a key ingredient to their success is their weekly meetings. There is something about coming together in solidarity and being accountable weekly among a group that provides a network of which to learn about business and keep you motivated.

I too found that certain people were beyond help, but by having the weekly oversight, they can get people on track quickly and assess what the problems are. Usually failure to come out of poverty was a result of health issues (or old-age in one of my cases), just as bankruptcies in the US are often due to health problems.

I think the key to success is keeping the 10% flat interest rate and meeting weekly. It is simple and proven to be successful.

The fact that they also need to be profitable keeps the bank workers on their toes. The new branch I was following became profitable within 1.5 years. Pretty remarkable.
Hope this helps in the discussion.
Holly

Very interesting post. I’ll let others hash out whether microfinance works or not, and I’ll just make a very specific comment that interested me. The notion that the vegetable seller couldn't succeed because she set up shop next to five other identical stands doesn’t sound quite right. Business skills training is obviously a great thing if the MFI has the resources to provide it, but you have to be sensitive to how the informal sector operates, particularly with regards to consumer behavior. In most African countries where I've spent time, each town or each part of a bigger city has "the place" to buy a particular good or service. If you decided to sell vegetables on the other side of town to out-fox your competition, you might find that no one buys from you, even the people who live near you, because that's not where you're SUPPOSED to go to buy vegetables. Does it look absurd to see 5 women selling the same vegetables next to each other? Or 4 "Michelin" shops in a line? Or six tailors right next door to each other? Yes, from an outsider’s vantage point, but for whatever reason, that's what many consumers are accustomed to. So, in the context the vegetable sellers, perhaps the issue becomes that because of the loan, Woman A can now own her stand rather than rent it from someone. Or perhaps the challenge becomes how well each of the five women market to their circle of family and friends (of the 4 marketing Ps, perhaps promotion is the best analog), rather than expecting that innovation occur on product, price, or place. Is this an ideal system? No. Is it capable of being disrupted? Sure. But more likely by a major player bringing significant scale than another informal sector participant. That’s a very long winded way of saying that I wouldn’t blame the MFI for funding such an economic activity, and that I’ll bet a huge percentage of MFI loans (that get repaid time and time again) not for consumption purposes are used to fund businesses that we would consider not competitive or not adding much value.

In regards to Luke's comment here. I am not very familiar with the culture as I haven't witnessed it first hand unfortunately. I am curious, would you reckon it possible to stimulate a different business model for the local businesses, such as those vegetables stands? If you were, for example, to encourage a new stand on the opposite side of the city and help promoting it to the surrounding areas? Or would the people still go to the same place for their vegetables in spite of the convenience of a closer place and of all the promotion efforts?
Thanks.

Before adding alarming sounding figures on interest rates of 30-55% interest on loans, it might be helpful to better explain why that is the case. This is microcredit - by definition, these are small loans. Administrative costs, not just the travel costs you mention, are necessarily high.

Kiva carries an FAQ covering just this topic: http://is.gd/LjHw

Oh my god..where to start:

Firstly I think it's tragic that every blogger suddenly wants to become the next "White man's burden" writer.

While all organisations and industries should be open to suggestion and criticism you would hope that those working in developing industries with the aim of supporting the poorest people in the world would have some respect for each other's organisation.

Tori may write: "I should start by prefacing my comments with the fact that I have total respect and admiration for the hard work and passion that the entire Kiva team has invested in their work. "

...but in inability to even check the Kiva website to answer some of her own queries doesn't do her any favour as a blogger or journalist. Where is the respect? Also she appears somewhat naive about a number of areas:

1. High interest rates:

Any blogger worth their salt knows about the importance of "link love". Here's a link where Kiva explains the situation regarding high interest rates:

http://www.kiva.org/about/m[…]_microcredit_interest_rates

I think the explanation is entirely fair. If you want to pick an argument with Kiva why not find out what their angle is instead of making one sided claims?

For the record there are six links in the article above - all for Tori's own site (nothing like getting your pound of flesh plug-wise)


2. "none of them had succeeded at pulling themselves out of poverty"

Again..Tori didn't bother to look at Kiva's site:

http://www.kiva.org/[…]/microfinance#11._Is_microfinance_the_solution_to

Re Poverty, What did you expect - that they'd build a pool and buy a car. These are micro loans - how much money do you think you can make with such a loan? There's a huge way to go before anyone steps out of poverty. But, where it works it puts food on the tables of families where perhaps there was none before. This is no magic wand. The sums we are talking about are tiny. Did the writer really believe that these people, once they had their Kiva loan would join the middle classes? It's a step and a chance and hopefully a slight lightening of the load and a little bit of hope.

Of course they will still worry and business will be hard and some businesses will fail. They are in the developing world. But it's a chance. A chance that Tori obviously doesn't think is worth taking.


3. "one woman in Mozambique started a vegetable stand… right next to the other 5"

As has been pointed out that...that is the deal. I used to live in Hanoi and there was a shoe street and a cloth street etc. That is how it works in countries where there is no money for marketing. You go where people go to buy your product. I too have been involved in trying to look at income generation for poor families and I know it's frustrating and difficult to find gaps in the market that are open for investment but the people you are selling to are poor too.

What are you going to do, start selling flat screen tvs in an out of town supermarket? They are farmers looking for a route to market - in every sense.

3 "None of the micro-lending organizations I met with were providing any type of formal business skills training to their recipients. "

Now this is an interesting one...you don't say Kiva..you say "organizations" plural. This suggests to me that while Kiva is taking the rap for all things bad in micro credit in this article - that you are actually talking about a number of organisations. Was Kiva just a high profile peg to hang your hat on for this piece? (you get more hits for your website that way).

Anway, I can't speak for where you are - I now live in Cameroon ( and no I don't have any formal links with KIVA except for admiration at their work and a friendship with employees and fellows there)

Here in Cameroon the local partner is GHAPE - and as it says on their website: "This package contains micro-credit, training in business development services, training in life skills, basic health issues including HIV/AIDS, gender equity and counseling, and base line research. Our motto is Service and Development. " http://www.ghape.org/

From what I do know of GHAPE I know the above to be true. Ordinarily I'd take you at your word that you found otherwise but your angle and errors to date make me want to question it.

4 Over-burdened Loan Officers
I feel for them and it's tough and I know a couple of KIVA fellows on the road here who spend a great deal of time documenting the people who have received KIVA loans. But that support regarding business remains. You already complained about the high interest rates (needed to serve such small loans as explained above) - perhaps you would suggest higher rates to pay for more people?

5. " * According to a UN study, only 10% of micro-lending organizations are self-sufficient. The majority (including the Kiva partners I met with) rely on donations and subsidies to stay in business."

Was anyone claiming otherwise..and again - more misleading data of mixing micro lenders generally and Kiva as a whole. From a funding point of view Kiva is all about soliciting private donations to help people living in poverty. Where possible, their partners also look for donations. I know for a fact that the Kiva fellows I mentioned are, as we speak, leafing through grant application details to try and find further funding. This is not a commercial bank. This is people lending money and creating a method of repayment and a system whereby the poorest sectors of society have access to credit.

Again..some thoughts from Kiva on this subject that you didn't bother to check, link etc:

http://www.kiva.org/[…]/microfinance#10._Can_microfinance_be_profitable

6. "I found it amusing that most of the Kiva loan recipients I interviewed had never heard of Kiva."

Oh how hilarious. Oh how you must have laughed. You're enjoying this aren't you? Not sure your amusement is well placed in an article on poverty but..anyway...laugh on. You have already mentioned their partners - they exist. The people who lend on the ground (like Ghape in Cameroon) are the ones who have the day to day dealings with the loanees. I have no idea why you would think otherwise.

***

Okay - so you say you are nervous about this entry. Not nervous enough because you have gone ahead and printed this without any real research and any real understanding of your subject matter.

Those Kiva fellows I mentioned - they paid to be here - young bright people who could be earning money but they paid their own money to come and work in a place that is not excactly the most glamourous. This is something that makes KIVA very different from most orgs. This is a real job of work (not awful mural painting voluntourism) with people with real skills and experience and still they are not drawing a wage so that Kiva can help more people. They start at 6am every day, as do all their colleagues and they work till it is dark. Those online details you mention - they struggle to upload them on ancient computers with snail paced internet links.

They travel daily on dangerous terrain and I know what makes it worthwhile for them is to see the support from the local people and the genuine gratitude for their help. And yes, the success stories too.

Recently I saw the GHAPE members marching on women's day - a huge group of staff and borrowers who wanted to show their support to such an incredible organisation.

It's very easy for "first time film maker Tori Hogan" to chance upon something that largely works and try and subvert it to get a few internet hits on her site (those six links) by trying to be overtly negative about such an incredible organisation.

And people who know Kiva know that, compared to the success rates of most development practices, it works as often as can possibly be expected.

I'm tired of this post "White man's burden" backlash of people travelling the world pointing their fingers as saying..that doesn't work, that doesn't work.

Because a great amount of it does work - and if, as a result of it, people haven't yet reached the levels that you judge to be "succesful" then perhaps that says more about your western perspective and negative frame of mind.

Finally - I got here via a link on Twitter. Modern social media - this kind of stuff can be read around the world in several minutes. People read it - people cancel Kiva accounts, people living in poverty don't get the credit and the chances they craved.

You did that. You did that based on anecdotal evidence, poor research and jumping to conclusions.

Wow... so sorry Tori, in my opinion, you do not deserve an attack, questions and dialogue and criticism of course, which is what I think you were looking to spark when you started this, but not an attack. If and where your facts are wrong, I think it is important for people to point those out, but I applaud you for taking this project on and providing a critical eye on development with a goal of sparking debate. I think one of the best features of your site is that you encourage discussion and comments after each piece.

If the "You did that." were even valid at all, I will take the blame for putting your piece up on twitter in the first place. I put it up, and other pieces critical to industries I work in that I see, not because I necessarily agree with all of it, or in some cases any of it, but because I think that the act of THINKING about the other side of opinions we have is important.

I'd encourage people to read "White Man's Burden", but then go out and read Sach's too.... and Collier while we're are at it. Read "Dead Aid" and then read the responses from people who think she is dead wrong. Then we can make your OWN opinion, based on lessons we have learned in our own lives and the opinions we have read.

I also think it's important to recognize that the opinions of all those authors listed above, all those who comment here, Tori, myself, and anyone with either a positive or negative opinion on micro-credit are making their opinions only based on what they are exposed to, as we all do. One of our Cambodian staff members comes from an island in the river near Phnom Penh. He talks of how there are micro-credit agencies walking down the dirt roads handing out cash, each family taking on debt from a new micro-lender when they can't afford to pay back the previous loan. This is in Cambodia, where there is no credit agency and nothing to stop people from taking on more debt in a spiral. His opinions on micro-credit, based on his experience, are quite valid in their negativity.

On the other hand, I have seen people here who did have plans, and did know how the wanted to make money off of their loans and were able to pay them back and improve their lives, little by little. They didn't take out micro-loans to buy TVs (as some do here perhaps not understanding that, when using it in your home, a TV doesn't usually help you pay itself back!). For those who have found success, their opinions of micro-credit being a huge positive change agent in their lives is indeed valid as well.

Perhaps one of the problems is that people assume that Kiva, legally a non-profit organization, only partner with other NPOs. This is of course not the case - they partner with both commercial and non-commercial banks. Not all are in the business of educating, making sure people don't take on loans without a solid plan, etc and are not claiming to be. In the same vein, Kiva is open on their website about how their system works: they are basically giving MFIs interest-free loans from which to give more loans (Kiva isn't actually giving money to individuals in any way). This and that they partner with commercial MFIs is on their site, but perhaps the general public doesn't get that, hence the confusion when they find out.

As Kiva is indeed an NGO, and works directly with many groups, both fabulous ones doing education as pointed out above and ones doing little more than trying to sell loans, perhaps the best question is not whether or not "Kiva" is good, but what partnerships do they have that are having the BEST impacts and how can THOSE be maximized and the least effective or perhaps negative ones be dropped? If Kiva is in effect giving MFIs free money, then it is in Kiva's best interest to give that money to groups who will not abuse that privileged, and they surely look to do that.

Tori pointed out that, in some cases where she visited, loan officers are stretched too thin. Once again, this is likely the case in some places and not in others. In the areas where it is, or in areas like Cambodia where there seems to be a new micro-credit organization or bank on every street corner, the speed at which the industry is growing seems to far outweigh the ability to monitor it. Areas where credit agencies exist likely have a better time preventing people from getting a micro loan from each bank on the street before going into substantial debt, but some areas, like here in Cambodia where I live, that is not the case.

I recently heard the CEO of Grameen Bank for Asia talk about her work and impressions of micro-finance. She expressed the same concerns I have, that if the impact on the individual and family level is not looked at, we could be causing harm and not know it. She stressed how important follow up was and how knowing and surveying and understanding the realities for the end users of these types of grants and loans is so important for us to understand in order to improve systems to be more effective.

By providing a forum for people who have seen and experienced both the pros and cons of development to share their ideas and lessons learned, I think you are doing a huge service, Tori. The negative views need to be heard so that we can improve the way we operate and so that we can better form our arguments against those whose opinions we disagree with. Thank you for providing a platform through which we can do so.

I do not think that Tori is advocating for all NGOs or micro-credit to stop working by putting these blogs/videos out. I think she is asking US to think, question, learn, and then VOTE RESPONSIBLY with our money. WE, the donors of the world who are reading this, are the ones who have a responsibility to put our money into areas/people/organizations we believe in. The more we know about organizations and the realities of development, the better we can make educated votes with our money. For me, I am more likely to donate to a group where I can say "what are you doing differently now than you were 2 years ago and what mistakes did you make that led to that change" and get an honest answer. "No mistakes" = no trust from me. If groups like Kiva, or any NGOs or businesses as well, are open about the realities of the very complicated systems in which we all work, which is very rarely black and white, open to talk about both the negative and positive impacts of their actions and the areas they are looking to improve, what more can we ask? Perhaps some will argue Tori's videos/blogs are too simple, and I agree they take something very complicated and try to make it black and white, which is impossible. What they DO do though, is get us to think and discuss, and I appreciate that.


I hope this can open up to a point where people who have the loans themselves and have lived both the positive and negative side of micro-credit can air their opinions rather than us observers. In the meantime, we should talk to THEM and ask and learn. By doing so we can improve what we do.

Learn to talk with them
For it you do not talk with them
You will not understand them
You will fear them
And what one fears
One destroys
- Chief Dan George

Tori - YOU got us talking. You got people thinking about this, which hopefully leads them to asking more questions and giving money to groups they have more understanding about. You are inspiring a lot of people to learn more. YOU did that. And you should be proud.

Daniel writes:

"I also think it's important to recognize that the opinions of all those authors listed above, all those who comment here, Tori, myself, and anyone with either a positive or negative opinion on micro-credit are making their opinions only based on what they are exposed to, as we all do. One of our Cambodian staff members comes from an island in the river near Phnom Penh. He talks of how there are micro-credit agencies walking down the dirt roads handing out cash, each family taking on debt from a new micro-lender when they can't afford to pay back the previous loan. This is in Cambodia, where there is no credit agency and nothing to stop people from taking on more debt in a spiral. His opinions on micro-credit, based on his experience, are quite valid in their negativity."

You're right...your opinions - and Tori's and the second hand telling of another person's tale. What I have tried to do is to link you to actual facts that is beyond your own anecdotal evidence.

If you had written this article simply about micro credit as a whole then I would have had no argument whatsoever. But you didn't - you hung it around Kiva. Kiva is a big name and is well-loved and it's internet-sexy and Googleable etc. That's what sells the article and that is why I am arguing.

So both Daniel and Tori write in a style easily running their experiences of micro credit together and it's hard to see the join between Kiva and other lenders. As a result Kiva is taking the rap for all bad practice here. Who is going to lose out as a result of this article..the nameless, faceless lenders or Kiva?

But let's look at Kiva's website again:
 
"Kiva has 1.7% Default rate for $34,529,235 in ended loans"

http://www.kiva.org/about/risk/overview

That doesn't sound like:

"... micro-credit agencies walking down the dirt roads handing out cash, each family taking on debt from a new micro-lender when they can't afford to pay back the previous loan."

Does it?

(and I am not entirely sure you aren't mixing up micro credit lenders with your bad old fashioned high interest money lenders.)

Now I have added some anecdotal evidence of my own in my comment above. But I have also bothered to actually look at the Kiva website and add links where appropriate.

Did Tori not look? Did she not bother? Did she not want to undermine her own arguments? What about Daniel - easy to tell a second hand tale than actually look for real, and no doubt audited, figures.

Easier just to recall conversations that can't be quoted with people without names?

And while discussion and debate can be very positive indeed - when one side doesn't offer any tangible evidence beyong the retelling of questionable anecdotes then it's not valuable discussion. When one sides lumps together the worst excesses of an industry and yet comes up with only one name to blame - is that fair?

What it is is damaging and, seemingly, baseless accusations regarding an organisation that does incredible work. It actually seems to cross the line from genuine "fair comment" to libel.

And don't forget these comments, links and justifications didn't get here by magic. If, instead of a number of queries with Tori's points, people just accepted her thoughts - then what damage might that have been done.

I think it's a very sensitive subject that requires cold, hard facts before people start making such serious accusations.

I can almost hear you screaming into the computer there, Steve. It seems this has struck a chord with you. I do not know you or know your background, but it sounds like you have had positive interactions with Kiva and their work, which is great.

I have work to do today, so I will keep this brief, I think the "fact" that is misconstrued, not on Kiva's website as they explain how their process works, but perhaps in your opinion and others.... My understanding (and Kiva folk, feel free to correct me if I'm wrong of course), is that "Kiva has 1.7% Default rate for $34,529,235 in ended loans" is loans to BANKS, not loans to individuals. The guy who works for the MFI going around getting people loans does NOT work for Kiva, hence why Tori said no one had heard of them. Kiva makes loans to BANKS. The banks then can go out there and get loans and pay back any way they like. Of course Kiva wants to hold them to high standards, but at Kiva's own admission, some of their MFI partners are better than others. Some are NGOs or indeed well run social ventures, not going out to give loans to just anyone, but to the right people. In Grameen's model, as pointed out in a comment above, there are local meetings so that those who have loans can share ideas, perhaps learn more business skills etc.

Other MFIs are just like any bank, giving a loan to those who ask and qualify without the other frills and perks of the model Muhammad Yunus brought popularity too. Yes, that is OK, they are commercial banks and do not need to add education to their mix. But, I think the point is, is that Kiva should, and is obviously prioritizing, as an NGO, make sure they are investing in the RIGHT MFIs. With the volume of money Kiva has, and the fact that they are giving interest free loans to BANKS, not to individuals, and then those banks are giving out loans at 30+% interest, Kiva is in a position to continue to shape the industry, as they have been doing. Here in Cambodia, many of Kiva's partners are the commercial bank type. Once again, that does not make them "bad", but it does add to the number of loans going out in Cambodia without some of the education needed for people to understand the debt they are taking on. With continued monitoring and leverage on the Kiva side, rewarding those lenders who follow best practices or perhaps even helping to spread more of the needed education themselves (asking their partners to include "What does a loan mean and how should I know if I should take one" type materials or a slew of other potential ideas), they can continue to improve the industry.

Tori's video is from real live human beings who she met in her travels. They received loans from banks that Kiva funds. She is pointing out that Kiva gives interest free loans to banks and those banks turn around and charge 30% on those loans. This is all clear on Kiva's website, but obviously not in the general public's mind. Tori's research, I agree, can not be projected to the industry as a whole nor to Kiva as a whole, but she does indeed have first hand research from a small area so can speak to those specific cases. I can attest that in Cambodia there are people who are taking on more debt from more lenders than they can handle - Kiva funded banks and not. There is no credit agency and very few monitoring systems to prevent that. Of what I know about micro-credit here, Kiva has picked some of the better banks to partner with, and the Kiva fellows I do know here are hard working and committed to making sure Kiva's banks are good apples. It is a hard task though, for people just entering a new country and often a new industry. And Kiva is still young and learning now to function with the large publicity and cash it receives. In my personal opinion, the more Kiva does to make sure they partner with the BEST MFIs, the better the industry will become.

Daniela said:

"The guy who works for the MFI going around getting people loans does NOT work for Kiva, hence why Tori said no one had heard of them. Kiva makes loans to BANKS."

Really?

Okay - partners in Cambodia: (from Kiva's website)

AMK
http://www.kiva.org/about/aboutPartner?id=109

"AMK has received numerous prestigious awards in its 4.5 year history, including the CGAP Global Financial Transparency Award for two years running (2005 and 2006), and the MIX GLOBAL 100 (Washington-based)composite Ranking of AMK as the Highest Microfinance Institute in Cambodia (and 18th in the World) for 2006, based on outreach, efficiency and transparency."

HKL
http://www.kiva.org/about/aboutPartner?id=106

Hattha Kaksekar (HK) was established in May 1994 by OCSD/OXFAM-Quebec, a Canadian organization, and became a Non-Governmental organization (NGO) by registering with the Cambodian Ministry of Interior in November 1996.

World Relief
http://www.kiva.org/about/aboutPartner?id=9
CREDIT was started in 1993 by World Relief US in Cambodia and was registered as a private limited liability company (LLC) in 2003. Today, World Relief Corporation has a 74% shareholding in the company, World Relief Canada owns 17% and World Hope International has the remaining 9% share.

A deep commitment to excellence has earned CREDIT two consecutive awards from CGAP for financial transparency in 2006 and 2007. CREDIT is proud of the impact of its work throughout Cambodia and continues to deepen and strengthen its services to work ever more towards its goal of empowering lives.

Maxima
http://www.kiva.org/about/aboutPartner?id=61
Maxima Mikroheranhvatho Co. Ltd, or "MAXIMA for Household Economic Development" was founded in March 2000 by a group of friends with the objective of providing financial services to low income clients in individual, groups and micro-enterprises, and to mobilize savings.

The aim of MAXIMA is to provide sustainable access to credit to its clients to start new businesses or expand existing ones in order to generate more income for the households

Daniela writes:

" I think the "fact" that is misconstrued, not on Kiva's website as they explain how their process works, but perhaps in your opinion and others.... My understanding...etc etc"

This is my point Daniela...you only think you don't know...you use phrases like "my understanding".

You write: "feel free to correct me if I'm wrong of course"

You are not even sure yourself and yet you take it upon yourself to argue so strongly against Kiva. And again you are incapable of making a distinction between the very worst offenders and Kiva and its partners.

Again...a long post with not one fact. Not one. Just heresay. Damaging heresay.

Now I am not claiming Kiva is perfect. And some young ambitious film maker with a copy of "White man's burden" in their back pocket can go around and find a few people who have a very hard life - that is not difficult in a developing country. She may find it "amusing" that people haven't heard of Kiva (I still find it incredible that she used that term) but Kiva works with partners...no one is claiming otherwise.

And she can lump all the bad stories she hears together and blame it all on Kiva...but you have not ONE FACT. Not one. Only things you think you understand.

Now you may well be right about the whole micro credit industry. And you may well be right about small elements of Kiva. But your inability to actually provide any evidence does you little credit and potentially does Kiva great harm.

Not one is saying anyone one is perfect. If Kiva closed down tomorrow would Cambodia be better off?

Daniela - you run a "voluntourism" organisation - something of a dirty word in development.

Yesterday on twitter you wrote:
http://twitter.com/danielapapi/status/1991740661
"I often think Cambodia 'd b better off if all NGOs left."

Earlier you "tweeted" in referring to this piece:
http://twitter.com/danielapapi/status/1991740661
"some MFIs act more like car salesmen"

Now - you seem to have an issues with NGOs and, in particular, micro finance. To refer to MFIs as car salesman and then refer to a piece about Kiva is, I believe, wrong. Very wrong.

You have also said:
http://twitter.com/danielapapi/status/1992060691
"forwarded to Kiva's management team who I know/like alot. Let's see what they say. I know they care about their impact & aim high"

They care about their impact and aim high? Not exactly car salesmen then are they? And they aren't exactly:

"walking down the dirt roads handing out cash, each family taking on debt from a new micro-lender when they can't afford to pay back the previous loan" (as you claimed in an earlier comment).

By the way - where are their comments? Did you really forward it?

You also repeat here your "high interest" angle without referring back to the very reasonable and entirely transparent Kiva answer on this I posted earlier.

As I said before...come back with facts instead of things that by your own admission you only think you understand.

Micro finance will not save the world. Chances are it won't even drag people out of poverty on its own - but as I said - it is a step.

Taking rich tourists on bike rides, as you do, may help too ( http://www.pepyride.org/ ) and you deserve some credit for that. But are you so confident in your own achievements that you can stand up against Kiva and throw these acusations at them and suggest that Cambodia would be better off if all NGO's left?

Either way - you'll be glad to know I am calling it a day. It no longer seems a sensible way to use my time to argue against someone who is unwilling to make any arguments other than those that even she is unsure as to whether they are correct.

Over and out.

I agree, this, and your obvious anger/attacks vs. constructive conversation, are indeed a call to end writing. I am sorry that you feel you need to take this anger out on me, on Tori, or on anyone for that matter, especially when those writing are trying to engage in a productive conversation. I want to clarify five points:

1) I do NOT think Kiva is bad. I did not say Kiva had "car salesmen" employees, nor did I post the link to this blog on twitter to attack Kiva nor agree with Tori. I posted it, as I have posted many other things I both agree with or am skeptical of, because I think they provide a perspective that people should read about, think about, and then form their OWN opinions about. Is that not how we learn? If we only look at one side of an issue, how can we consider it in its entirety? As I stated, I don't think all NGOs are good, or that all MFIs are good, nor do I think they are all BAD! I RUN an NGO for goodness sake. I stated NGOs can't pull out of a country because the transition period would be too hard before people started looking to their governments for services rather than us. I think that often times NGOs can de-power governments and on the whole here in Cambodia have created certain spaces (areas in education and others) where the government no longer feels the need to take on certain responsibilities, but I DO very much believe in capacity building and do I believe in responsible micro-lending. Because I live in Cambodia and know for a fact that indeed some MFIs do use what I would consider "car salesmen" like behavior, does not mean that I disagree with the industry as a whole nor with Kiva or all of their partners. I means that I think the industry can improve, as well as the NGO world, and that is why I do the work that I do each day. I think Kiva and their team believe that as well, which is why THEY do the work they do each day. As social entrepreneurs, they aim to change the current paradigm of the way we work, in their case, micro-loans. And I am sure, as social entrepreneurs, the same passion for change that led them to start this venture will continue to lead them to improve it and the industry along with it. Pointing out problems does not mean I don't agree with the model nor the groups involved, it just means I too agree there are ways we can improve our work, if we are all willing to look at the problems head on and make improvements as we can.

2) The "fact" that you are arguing against and claim I am failing to make is that Kiva does not make loans to individuals, they make loans to banks. This IS a fact, stated on their site. The other fact I have is that people I have talked to about Kiva often do not understand how the process works (once again, not Kiva's fault, just a common misconception about how the system works). BANKS get INTEREST FREE LOANS from Kiva. That is Kiva's goal - to empower them with the capital they need to go out and make more loans (to which they charge their own interest rates). Of COURSE the banks are going to return the money, why? So they can get more interest free loans. It is possible that the actual lenders might not have paid the bank back or the loan might have been paid out in advance of the profile even hitting the site, if the MFI is reporting that way to Kiva. As such, Kiva's loan return %'s are actually the % returned by BANKS, not individuals. THIS IS NOT NECESSARILY A BAD THING! I am not saying this is a bad thing about Kiva, I am saying that I believe the general public does not understand how Kiva works with partner banks and how their funding eventually gets to the end user. If people have a misconception of how Kiva works, they might find it "funny" that end users don't know about Kiva. If people think they are giving their money to Kiva and then the Kiva team is bounding off to rural Cambodia to hand over a small bit of cash to a farmer saying "This $20 is from Jennie in Ohio! She sends her best regards!" then they might be confused by the realities of the system. Of course Kiva CAN'T administer all of the funds they have themselves - so they have to use partners. Some of those partners are better partners than others. That does not mean that Kiva is bad, nor the partners. It is just a fact that loans are administered by Kiva's partners, so the results to the end user of the loan are only as effective as the partners themselves. Any areas where Kiva can exercise their power of their partners to encourage best behaviors, reward those who take care and pride in the work, and weed out any bad apples will not only improve Kiva but the industry as a whole. Individual MFIs do not have as much power to change the system, nor do individual NGOs, but Kiva is in a unique position to continue to influence how the whole system works due to the volume of their funding and the scope of their reach. It would be unfair to blame any or all failures in the industry on the biggest player, but I do think it is fair to say Kiva has the power influence change, which is something they are already doing by existing in the first place.

3) I use words like "might" and "correct me if I am wrong" because I think that is polite. I also do indeed want people to correct me if I am wrong, as I hope you do too.

4) I met Kiva's management team and one of their founders when they were in Cambodia. I did indeed send this on to them saying, as I have said here, that I respect their work and them as individuals but that I want to understand better the complexities of the issues they have to deal with in their jobs and how they are changing the ways they operate to continue to improve the system (as should be all of our goals in all of the industries in which we work!). They did indeed write back with well thought out responses and I did encourage them to add their thoughts here. I can not speak for them, but I know if I were them and I had read all of the comments above, I too would be afraid to join what has now turned into a personal attacking email chain. It is sad too, because I think discussions like this can be constructive and positive if people respect each others right to disagree.

5) I run an educational non-profit organization, and we fund it in part through volunteer and adventure tours. If you are following my blogs so closely, you will also know that I am as skeptical as anyone, and likely even MORE critical of the "voluntourism industry" than others. I realize now that perhaps the reason you seem to be personally attacking me is that we had different opinions as well on this blog series on voluntourism: http://workingworldcareers.com/[…]/ I had not realized the connection and I am sorry if my long winded opinions there were offensive to you.

PEPY has built 6 schools in Cambodia in the last 4 years, but as schools are only as valuable as the education going on within them, we focus on teacher training, access to quality materials and mentors, and non-formal education programs to inspire leadership in villages where many students have no access to school at all as they are already working in the rice fields or spending half of their year over the border in Thailand working as day laborers (or worse).

I have lived in Cambodia for nearly 4 years. We have over 35 Cambodian employees and I believe in my work wholeheartedly. I am the first to admit we make mistakes and have a LONG way to go to improve our impact but also proud to say one of the best things we are is self-critical and open to change. We could have walked away after building a school and doing a bike ride through Cambodia, patted ourselves on the back, and gone home. Instead, we stayed. And we asked questions. And we continue to learn, and make mistakes, and admit them, and learn more and improve. The same goes for Kiva. They have an amazing concept, a passionate and honest management team, and they have a HUGE task ahead of them to provide micro-loans and continue to improve their industry - just as we do to improve education in Cambodia. Are we, PEPY, going to solve all of the educational problems in Cambodia? No, the government would need to help with that more too, and they too are taking steps to improve. Is Kiva going to weed out all of the bad apples MFIs in the world? No, for the same reasons and more. But does that mean that we both shouldn't try? Of course not.

I will say my goodbyes to you with a recent quote from Obama which I love:

"I'm not naive. This goal will not be reached quickly – perhaps not in my lifetime. It will take patience and persistence. But now we, too, must ignore the voices who tell us that the world cannot change."

I think it's important that we recognize that the people involved with this discussion are primarily interested in sharing and improving the work that is being done out there. I strongly suspect that Tori will find the time to interface with Kiva directly about her questions and experiences with the organization, as Daniela already has.

I know more than a few Kiva fellows who have expressed some of Tori's concerns, and I trust they are doing their best to improve the system based upon their experiences. As an organization, Kiva has coasted on a wave of tremendous positive press for quite a long time now, without many questions posed about their methodology or impacts. As with ANY tool in development work, we should, as a community be debating and examining its merits as thoroughly as we can, with civility and respect (which I feel Tori and Daniela have both done).

Lets elevate this discussion a bit, shall we, and assume we're all here for the right reasons.

Full disclosure: I am currently serving as a Kiva Fellow in Paraguay. The role of Fellow does not limit my ability to be critical of Kiva. We Fellows often ask (well-informed) questions about the efficacy of our work. (One outstanding discussion of microfinance occurred here: http://fellowsblog.kiva.org/[…]/)

But, with all due respect, Ms. Hogan completely misses the mark and I think it’s important to clear up some of her errors.

Re: Point 5 and the topic of sustainability.

One of the most fundamental facts about Kiva’s work is that it LENDS capital to its partner MFI’s. It does not donate any money to anyone. Before starting a relationship with an MFI, Kiva ensures that the MFI has multiple other funding sources. Kiva is adamant that no MFI be completely dependent on Kiva capital. Yes, some partner MFI’s rely on donated capital to reach more clients, but how Ms. Hogan got from there to “Kiva capital endangers sustainability” is baffling and her conclusion is very misleading.

Re: Point 4 and Overburdened Loan Officers.

There’s no denying that loan officers must work very hard to maintain their portfolio (to make enough money to keep an MFI afloat, loan officers must process a high volume of small loans). Again, though, Ms. Hogan’s numbers are misleading. 300 clients sounds like a lot, but the loan officer will only need to give weekly or monthly attention to those who fall behind in payments.

Ms. Hogan also mentions that some loan officers expressed frustration that they did not have time to “counsel” clients on their businesses. At most MFI’s, it is not the loan officer’s job to counsel clients on how to run a business. Loan officers are not trained to offer advice or strategy to the 50 or 60 different types of businesses they find in their portfolio at any given time. Some MFI’s may offer business training and capacity building, but many successful ones do not.

Loan officers and their colleagues are also constantly thinking of creative ways to manage the high demand for loans. M-Banking (read about it here: http://fellowsblog.kiva.org/2009/05/14/m-banking/) for example, is one promising innovation. Also, one of our roles as Fellows is to support our MFI’s in finding ways to confront inefficiencies in their systems.

At best, Ms. Hogan’s criticisms should be leveled on a case-by-case basis at any given MFI. As a broad criticism of Kiva, though: swing and a miss.

Re: Point 1 and Interest Rates

As an earlier commenter mentioned, Ms. Hogan should have read the Kiva website. Microfinance is expensive. She also has the answer right there in her post, but chooses to use a parenthetical to dismiss it. Poorer clients DO live far away. Collecting payments IS expensive. This topic has been analyzed at length in myriad other publications and venues.

Finally, I want to repeat: Kiva and the microfinance industry are not above criticism, questioning, or investigation. In my time in Paraguay, I have seen plenty of things that I would like to tweak or change about the way the working poor access credit. To be effective, though, a well-publicized critique like Ms. Hogan’s needs to demonstrate a better, more thorough understanding of how the microfinance industry works and of Kiva’s role within it.

"However, I soon discovered that micro-lending is not the panacea to poverty that the world wants to believe."

I'm sorry, but is this really the kind of rhetoric that Ms. Hogan thinks will support intelligent analysis? Does she seriously believe that her interviews are enough to come to this overwrought conclusion?

I am a Kiva lender and I can assure you I do not see micro-lending as a panacea. What I do see it as is one way to encourage individuals who otherwise would not have had access to capital to develop the potential for improvement in their lives, however slight that may be.

Having read Ms. Hogan's various posts in her "Beyond Good Intentions" series, I suggest that there is great irony in the title. Whatever she had hoped to accomplish in embarking on this series of "adventures," her reflections are, in my opinion, largely superficial, and do not lead us much of anywhere beyond her own good intentions.

Ill start by saying that I support the work that Kiva is doing.

Having read the comments before viewing Ms. Hogan's film, I watched it expecting some scathing critique on the work Kiva was doing and was surprised to find something much more balanced. A few specific examples, both positive and negative, to raise broader questions.

While I think Steve's responses were some of the deconstructive criticism I have ever read in a development debate, I feel that Nick's points about interest rates, roles of loan officers, and sustainability are exactly the types of discussions that we should be having about microfinance and in particular about Kiva as they have become such a household name.

Steve while you shout about the transparency of Kiva and how all Ms. Hogan needed to do was go to their site, I would argue that it isn't so black and white and that just posting the information on your site doesn't make you entirely transparent. What percentage of lenders do you think realize that Kiva doesnt directly fund the people on their sites or that while Kiva is a non-profit, many of the MFI's they fund are definitely for profit? Now I understand how it works, and Im not criticizing the process, but I do think that Kiva is very misleading in they way the present themselves to potential lenders.

When you go to kiva.org there are multiple prominent links for you to lend as well as a diagram that has you, the lender, directly linked to the entrepreneur. Understanding that Kiva is a non profit I would expect most people lend without any understanding of local MFI's or that their loan will be repaid with interest rates that are often (by western standards) shockingly high. This information, while it is there, is much more difficult to find on Kiva's site. Does that make Kiva transparent? I believe that anyone in development would agree that there is a huge problem in that donors (or in this case lenders) aren't properly educated about where there money is going. I thin in this case, both the lenders as well as Kiva need to be doing more to bring the 'facts' the forefront.

Steve you drone on about facts yet you use probably the most misleading one of all:

"Kiva has 1.7% Default rate for $34,529,235 in ended loans"

Now your average lender will read that and think, "Wow 98.3% of entrepreneurs pay back their loans, what an amazing organization." When, as Daniela points out, those are loans to banks, not the individuals on the Kiva site. There is intentional confusion there because its far easier to get people to fund a single mom who wants to start a vegetable market in Peru than it is to get funding for AMK Cambodia or any other local MFI.

Now the bigger question, do the ends justify the means? I would probably argue that they do. But is there anything wrong with someone coming along and exposing those means and being just a little bit critical?

Steve you wrote on your blog, "Everyone knows the sound bites – very few understand the arguments," don't be too quick in deciding which of those camps you belong in.

Development work has a long way to go and the only way we are going continue improving is through constant critical self evaluation, not by patting ourselves on the back for our small successes especially when their long term effects are completely immeasurable.

Thanks for sparking the discussion Ms. Hogan

Thanks to the Kiva people for their honesty and disclosure.

Adam Vaught - above - not so much.

Google "Adam Vaught " and Pepy and you get 523 entries - describing him occasionally as a Pepy intern, ride leader, volunteer etc.

It's clear that the Pepy Network have a real problem with Kiva. And it's not too surprising here that Adam agrees with the Pepy Ride manager Daniela Papi and chooses to disagree with me because I had issues with her lack of facts.

I'm now very interested to work out why Pepy has such a problem with Kiva and why it's now reached a point of contacting Pepy colleagues and participants to back up arguments alread stated.

Seems more and more like Cambodia-based inter NGO squabbling.

Again for full disclosure...I have no links with Kiva beyond knowing a number of volunteers who have come to work here in Cameroon.

I have no reason to argue their case beyond admiration for their achievements.

I'll say it again, I support Kiva's work. Your google search probably didn't tell you that Ive been a Kiva lender for over two years now; I feel they are accomplishing some great things and continue to move in the right direction. Does that mean I think they have solved the development puzzle and have all the answers, no. I am as critical of them as I am of PEPY and I encourage everyone else to be same.

It's in this vein that I don't have any problem with Ms. Hogan's film. It presents her views on the subject based on the people she interacted with. At no point do I see her passing judgment on Kiva or trying to draw sweeping conclusions. She simply asks questions, provides a few specific examples, and encourages debate.

Your criticism seems to revolve around the fact that she could have dug around and found those answers on the Kiva website. Fair enough, as a filmmaker yes she probably should have.

But rather than looking at her film as an expose on the truth about Kiva, I look at it as an average Kiva lender who is learning the realities of how her money is being used. It's easy for those of us in development community, who have firsthand knowledge of how MFIs work, to point the finger and call her naive, but I would image that a good percentage of Kiva lenders would have the same response she did.

What amazes me, is that despite your amazingly aggressive tone Steve, you don't actually disagree with anything Ms. Hogan argues. From high interest rates to over stretched loan officers, lack of MFI supported training to sustainability, your only argument is that she could have found that information on the site. Now you would argue that it is her fault for not doing her homework, I would take another angle and say that if a filmmaker working on a film about Kiva didn't come across that information why would you expect your average lender to.

I think one of the biggest improvements that can be made in development as a whole is to continue to educate the average donor on how to donate, who to donate to, what questions to ask, etc. All I would argue in terms of Kiva is that they could be doing a lot more than burying the nuts and bolts of how their organization works at the bottom of their page and letting lenders walk away misinformed. But they're not because the way they operate now is so much more marketable as evidenced by all the amazing press they get.

Again, do the ends justify the means? Maybe. I didn't stop donating to Kiva once I learned how things worked on the ground. But you also can't expect people to be happy if/when they stumble on the reality of the situation and are upset because they feel like they have once again been misled by a non profit painting a rosy picture in order to secure funding.

Until they are actively trying to educate their lenders on the realities of how they work and how local MFIs work I find it hard to sit a commend Kiva on their transparency.

If you have anything to say about the actual content of my post, I would love to hear it.

 

Really interesting:

          "In extremely poor areas of Cambodia and Mozambique, there simply weren’t enough economic opportunities for loan recipients to capitalize on. It was very difficult for recipients to come up with profitable business models given these constraints."

In my time in Mozambique, I found this to be true-- there's so little money circulating that even if you build a good business there's a ceiling on how well you can do, and that ceiling is pretty low.

I think this speaks to the need for outside capital in the form of SME investment (not just micro-loans) *and* buyers for goods and services. It shouldn't be as hard as it currently is for African entrepreneurs to sell their products in global markets.

This is not a criticism of Kiva; it's a reminder that we need lots of different solutions to tackle poverty, beyond the "blockbusters" like micro-lending.

I would prefer not to continue a debate which continues to get hurtful and personal, but as this now involves an incorrect attack on my organization, I feel the need to correct the facts.

PEPY has 6 board members, three of whom are Kiva lenders. Many of our foreign interns and staff are also Kiva lenders.

I, and PEPY, support both Kiva, the Kiva interns we know here, and the management we know in the US.

I do NOT agree with Tori that you can jump from a few cases to assuming that the whole organization is the same way. I also think Tori clearly was in the majority camp of the world that does not understand how Kiva works and hence "found it funny" that the individuals she met did not know about Kiva.

If I had jumped into this conversation earlier, I would likely have focused on those points, but I jumped in because I knew that I had put her piece up on twitter in a hopes of sparking discussion on MFIs and that Steve's hurtful attack of her with what I thought was a damaging and myopic ending was unfair. And as I knew "I did that", by connecting Steve to this blog in the first place, I felt I needed to speak more about her RIGHT to express her opinion. What she saw, a loan officer overstretched and what she deemed "high" interest rates were facts (if those people were telling the truth and I don't see why they wouldn't be) in those specific cases. You are right Steve, that does NOT mean that that is the case in all areas, and Nick is right too that she clearly did not put efforts into understanding why interest rates are high. I agree with Nick MUCH more than Tori.

BUT I think that we should NEVER attack people for putting findings of issues or mistakes they see in development up for debate if they are also willing/trying to spark a conversation and learn more. If Tori wasn't asking us all to comment and just put an add out saying "KIVA IS BAD (I interviewed 3 guys)" then that would be a different case. It is clear to me that she didn't understand all about how Kiva works with MFIs and I agree Nick, to be a better reporter she should have gotten Kiva perspective and a greater understanding of the industry before putting this out. That said, she is not a reporter for the NYTimes but indeed a girl with a camera who was very brave and went around the world and pointed out a LOT of true misunderstanding and failures of development/micro-finance/voluntourism industries and then ASKED for our opinions.

Tobias, thanks for jumping in too to try to bring us back on track to the topic. Thank you Nick for stepping in and bringing us back to what this conversation should have been about from the start: the realities of micro-finance. I am glad you came in with the facts to counter some of Tori's ill-informed opinions.

As this piece in Tori's series is supposed to be about micro-loans in general and perhaps focused too strongly in both the blog and our comments on Kiva, I still hold true to these three thoughts on the issue:

1) Micro-Finance does great things for some, and in places like Cambodia where the streets seem saturated with MFIs and there is no credit agency, for some people MFI loans have ended them in a worse situation than where they started. More education, in my opinion, is needed for the general public in Cambodia to understand how MFIs work.

2) More education is also needed, in my opinion, for the general public in donor countries as well to understand how Kiva works. If people understood more about how it works they would understand these facts: Kiva gives interest free loans to banks. Banks give loans at <30%> to individuals. Kiva is there by giving banks interest-free capital to use, ideally to make more great loans. Kiva's reporting on loan returns is from banks, not individuals, as it depends on how the bank reports that information to Kiva. These are not things wrong with Kiva, these are misunderstandings among many of how Kiva works as many think Kiva gives interest free loans to INDIVIDUALS, which is clearly not the case.

3) Kiva has expanded and shaped the MFI world and will continue to do so with their huge capital base. I say again, I like Kiva, it's people, and it's model. I encourage all NGOs, my own included, to continue to aim high with our future goals and to aim to not only improve the area we are working in, but aim to shift the industry towards improvement as a whole. This is the same challenge I gave to the Kiva management team when I met them, and continue to support today. If Kiva continues to improve their monitoring and bank selection, like following up on banks which might have been fabulous to start and are reverting to practices Kiva does not support later, then Kiva will continue to improve the industry through their power of their investments in GREAT MFIs. I commend Kiva for having garnished the support, both funds and publicity, to indeed improve the industry as a whole.

And finally, as for an attack on a PEPY intern, why is it wrong that someone I have worked with joins this conversation? I linked this on my blog and those who follow my thoughts likely also feel strongly about the issues I am passionate about: education, lessons-learned in development, the dangers of volunteer tourism when not linked with "good development", and open discussion/debate as a means of improving how we all work. Thank you, Adam, for sharing your opinions.

Steve, thank you for the email apologizing if I felt these attacks turned personal. I did indeed, which sparked me to join the conversation to begin with. I appreciate the apology and look forward to following along with constructive debates on these topics.

Perhaps we could all use a little reminder of the motto we had on our wall in the PEPY office: "It's not personal, it's PEPY." This meant, we encourage debate, we encourage disagreement with the management, development norms, government actions, my personal actions, etc and that the act of bringing those disagreements out into the open and the ensuing (none personal) debates do indeed bring us all to a better understanding of the issues, how the world sees them perhaps differently than we do, and more ideas for how to improve moving forward.

I think/hope this series of conversations has indeed done that for all of us, made us all more aware of the range of realities with relation to how MFIs work, made Kiva more aware of how the public understands Kiva's ingenious model(or doesn't), and reminded us all that thoughtful, honest, factual discussions about a topic, even when we disagree, lead to good things.

Thanks to all who put there opinions out there.

Daniela - thanks for your comment and there's much there that I agree with and elsewhere I think it's time we just agreed to disagree. I certainly appreciate the thought that has gone into your response.

On a much much wider topic away from Kiva and more about "social media" as a whole or citizen journalists or whatever you like to call them.

You state: "she is not a reporter for the NYTimes but indeed a girl with a camera who was very brave and went around the world"

And I think that is the problem.

Facts are facts are facts. It does not matter if you are a first time blogger, a film maker making their way in the world or, as you say, a reporter for the New York Times you have a duty to get your facts right. Especially if you are making such serious and damaging acusations.

This is somebody who is receiving substanial funding to do this and when you feature in Oprah magazine then the world is watching and you have to deliver - and deliver responsibly.

http://www.beyondgoodintent[…]om/press_coverage_oprah.php

Tori, at least, clearly thinks that her findings are are of relavance and importance in shaping the aid/development industry.

But, you can't just interview a handful of people and think you know about Kiva. I refer you to a comment from a member of the Peace Corps, an organisation that also got the Tori Hogan treatment.

He said:

"The episode kind of annoyed me because it just takes a look at a few Volunteers in a single country program. It's a big question to ask -- do Peace Corps Volunteers help? The agency is almost 50 years old, close to 200K Volunteers have served, and each Volunteer's experience is different, and dependent on their own disposition, attitudes, breaks. To answer the big question takes more than a few minutes and some interviews with current Volunteers at different places in their service term. The filmmaker didn't feature an interview with a single host country national, she offered no statistics, no perspective or context for Peace Corps's role in Madagascar. Peace Corps service is tough -- in the beginning (year one) it can be intimidating and uncomfortable -- and true, you don't always see the fruits of your labor in the short term. I would have expected more from the film asking such an important question."

http://peacecorpsconnect.ty[…]-corps-volunteers-help.html

Now the effectiveness of the Peace Corps is another debate but we are seeing a pattern here.

Tor herself said:

“In reality, people think that if you’re critical about aid, you are antihumanitarian. But we fail to recognize that these are people’s lives that we are affecting. And it’s not okay to not be sure about whether or not we’re doing it well. There’s too much at stake here.”"

http://www.gse.harvard.edu/[…]/16_hogan.php

And that's right on so many levels. Just as aid is affecting people's lives so is criticism of aid.(and I mean both the givers and receivers) And criticism of aid that comes up to no journalistic standard is absolutely damaging if it can't reach even a basic level of balance, understanding and genuine in-depth research.

As she, herself, said: "it’s not okay to not be sure"

And in this case Social Edge and the Skoll Foundation should take a look at themselves for hosting this piece. Blogs are not free from the rules that govern newspapers - and fair comment is only fair comment when the facts it is based on are correct.

On Tori's website there are stats on the hundreds of hours of tape she has filmed for this series. All well and good but perhaps a few more hours spent on research and interviews might have helped. She said she taught herself to be a film maker...maybe, but not a journalist.

But her film will be seen as she presents it and taken as fact without the benefit of context. This page will be linked (and who reads all the comments?.

The people who give their time to these projects (Peace Corps, Kiva etc) don't deserve to be free from criticism but they do deserve enough respect to ensure that people do the research and get the facts right and, most importantly, involve them - at all levels - in the discussions.

It reminds of an American intern I once knew of who worked in a streetkid charity in Saigon. He arrived and without taking time to understand the culture was shocked by what he saw. He emailed their entire donor database claiming he had uncoverd terrible wrong doings and asking them to stop donating - amongst other things he claimed - the kids weren't even clothed properly, they wore pyjamas and at meal times they ate pork fat.

Even a rudimentry understanding of the culture would realise that....Vietnamese people wear pjs and they eat pork fat.

But more than that, we can't hold western definitions of success and apply them to developing countries. That intern lost a very important organisation a great deal of money and utlimately harmed the young people they were trying to help.

Tori spent one year travelling across eight countries. Many people working in development spend years and years of their lives in some of the harshest surroundings and anyone who has worked in any developing country culture know it takes years to understand how things work in each country individually and also to work out what success looks like and what the challenges are.

Like I said, no one is free from ciriticism but these people deserve better.

Hey all,

I understand what it feels like to be trying hard and receiving criticism. That doesn't feel good. You all seem to care a lot about the people you serve. And while i'm fairly conflict adverse, it makes me appreciate this despute. It's good that we're figuring out what to say and how to say it best, what to do and how to do it best.

I thought I'd add some food for thought:

A relatively new phenomenon in the microfinance world has gotten me pretty excited--I bet some of you have heard of it. Savings-led microfinance is a new practice in which groups of poor folks (maybe 10 people or so) pool their money and loan it out to one another as the group deams appropriate. If 10 people pool their money, they share risk, rather than face poverty alone. If they want a loan, for Malaria meds or agro inputs for example, interest is paid back to the group pot rather than an MFI. And loans tend to be in the 3 - 30 dollar range. It's a relatively simple principle, you know? Social accountability is strong; it offered the solidarity and motiviation we all need--especially those living in poverty. And because the decisions are made by the communities themselves, we are acknowlegding the strength and agency of the poor. All in all, it's a great program. And the feedback from Oxfam and Care--two orgs doing this right now--has been positive.

MFIs can't reach the poorest contingent in the same way; this particular critisicm of credit based microlending is held by many others also. A $50 dollar loan for people living on 1 dollar a day may be difficult to manange--I thought i'd agree with Tori's observation: the poorest contingent may find even the smallest possible MFI loan difficult.

But orgs like Kiva and their partner MFIs (granted, as Daniella said, that they are MFIs doin it right) play a critical role! For the rung of folks above the poorest, microlending can mean the difference between being able to survive a failed crop season, and not. In some circumstances it can mean the difference between being a subsistance farmer, and a budding pastoralist entrepreneur. These are big steps for the world's poor, and we should recognize that when partnering with MFIs who do it right, Kiva is helping folks survive, and survive better. Certainly not every NGO and partner MFI is doing microlending perfectly--but it's an imperfect system. Tori's criticisms, though unfortunately generalized, are accurate in some cases. I'm sure that Kiva headquarters and field staff alike are aware of such criticisms, and are working on it.

There are no 'one stop shop' programs. All the microfinancing in the world won't lift the poorest countries out of poverty. Kiva has it's rightful place in the puzzle, as does savings-led microfinance, as do rights activism, social protection, government involvement, education (like those business skills you want to see, Tori), health service availability, etc.!

It is because you have different opinions on what the 'answer' is that we will move closer to it. I always try to remind myself that conversations should revolve around the rights of the people.

At the heart of the microfinance discourse is the question of sustainable action.
A novel, perhaps radical, approach to micro-lending is to remove the external financing mechanism altogether and to form village bank pools from the participants themselves. The Women's Empowerment Program in Nepal, a program combining literacy with commercial training, has created more than 1,000 such village banks or savings circles. Interest income that would have gone to intermediary NGO lenders instead go as dividends to the village members! The circles or solidarity groups are a bit larger, 15-20 participants, to generate enough initial savings for projects. The initiative has had success in stimulating a broad range of grassroots economic activity. For more on this grassroots approach see:
http://www.onecountry.org/[…]/e12401as_Nepal_project_story.htm

      
    I’m glad to see that my blog entry and film on micro-lending has generated such a passionate discussion. I think that we can learn a lot from each other through constructive dialogue about these issues.

    I absolutely agree that we can’t generalize the entire field, and I apologize if some readers interpreted my statements as such—I will certainly be more cautious of that in the future. I tried to stay as specific as possible by referencing only my experiences with the particular micro-lending organizations that I met with in Cambodia and Mozambique. I think most readers can recognize that I am only speaking from my own experiences in the field, which is all any of us can do.

    I’d really love to broaden the current discussion out to micro-lending more generally. As I mentioned in my blog, my purpose with this particular episode is to “encourage a meaningful dialogue about the realities of micro-lending.” I didn’t expect for the conversation to end up being so centered around Kiva. I think it’s important to remember that Kiva isn’t a microfinance institution, it's a fundraising organization. And in that capacity they are one of the most successful in the world. They have found a unique way of harnessing the power of their online platform to generate an enormous amount of capital to support the field of microfinance.

    However, Kiva is also responsible for identifying and vetting their field partners, which can be a very difficult task. Even co-founder Matt Flannery has admitted in his own blog to the challenges that are associated with finding solid field partners. If Kiva’s name is attached to these specific loans, they should really do all they can to evaluate their partners well and work to ensure that:

   1) Interest rates are reasonable
   2) Economic opportunities are present in the community
   3) Business skills training is made available to loan recipients, as needed
   4) The partner MFI has enough loan officers to handle the organization’s rapidly increasing caseload effectively
   5) The partner MFI is moving towards a more sustainable operating system

     These five issues listed here are the points I brought up in my blog entry, and I stand by them as being very important challenges that we need to discuss and work to solve. Matt and the rest of the Kiva team seem to be well-aware of the challenges that are often associated with micro-lending organizations, and as Kiva grows I think they are learning a lot about how to do their work in a more effective way. However, for Kiva to be truly effective, it needs to be confident that it is providing capital to an effective methodology in the first place, and this requires a consideration of micro-lending more broadly.

      I worked very hard to ensure that the episode on micro-lending was extremely balanced. In fact, in Episode 9 I speak rather positively about Kiva and the impact the organization is making while also highlighting the general challenges facing some of Kiva's loan recipients, relating to micro-lending more generally. In all of the Beyond Good Intentions episodes I try to leave the issues open for discussion by raising the key questions and inviting viewers to share their opinions via our on-line platform.

    It was great to read Holly, Diana, and Matt’s comments above about the Grameen bank, savings-led microfinance, and village-based banking. I would love for more people to add their thoughts about innovative approaches to tackling some of the challenges that I witnessed. I think that critical discourse is absolutely essential in the field of international development, and I am glad to see that there are so many people who are eager to become part of the dialogue.

I don't know what to state here, but what I feel in my heart makes me to write this down.
I don't know whether it is a good idea to write this.

I will start from something that I just feel I need to write, that people in my small tiny village owe a large amount of debt in the last few years. I will talk about a very narrow area, in my village and some parts of Kandal province in Cambodia where I also went from my bicycle trips near Phnom Penh.

I have not have a chance to learn more about this in any other places, or any other developing countries. So, I can only see some small things that have been changing a lot for villagers in my village living condition because people went from no debt to 10 millions Riel (= about USD $2500), and some people more.

If we look at their family condition and there assets that they have, it's not equal to half of the debt that they owe. So, what is good and what is bad in terms development?

I will not point to any other NPOs or NGOs, commercials or loan officer, or any individuals who put all the their heart, energies, money into the project in order to make change to developing world such as Cambodia. I write to let people who try to make this change know that every place and every people in developing nations might not understand things like you do. They might need more education before using these loans to help their family business or whatever is needed in their living.

Anyways, back in the old days around 10 years ago, I was in secondary school. I remember that the loan was introduced to my village by a co-operation of government and one bank (no need to name). Many people were really excited to get the money. Most people took the loan because the interest was very low. I think, it was 100, or 200 Riel per month out of 1 million ( $1 = about 2700 Reil), anyways, I am not so sure about this but my mum and few others probably remember how much it was.

I remember that my family was living very hard condition while my parents worked really hard to send their kids to school, because they think they did not have a chance to go to school when they were young. The micro loan that was introduced at the time helped my parents to work in their crop more easily. They did not want to take that loan but because of the need of the family and also the interest was so low so they did take it. Many other villagers did too, but they took the loan to by stuff that does not make them profits to pay the interest as well as the loan back. That situation was not so bad because it was just the beginning.

Few years later, the micro loan became more and more popular in my village. My parents, finished their first loan, then they decided to not take any loans any more.

The others continue their second term, then something strange happened. They did not make any money from the money that they borrowed from the loan officer or whoever they took from. They start to jump up to borrow more money from other loan officers to pay to the old loan officer, in order to borrow the money from them again. They already had one debt that they could not even pay, now they borrow another. Guess, what has happened next in their situation like these?

Some ran to another loan officer to borrow money to pay the last loan. Some would go to sell some part of their property to get money to pay interest. They're struggling. They are. Few more years later, the situation was getting worse and worse. I could see the growing of micro finance officers and the lenders becoming better and richer, more new buildings and banks, so many big bank buildings, while many other are in debt may affect to the next generation who have to help pay for this debt. Maybe, the next few generations will be in the same situation as their parents or worse, because in there parents generation they had a lot of resources to survive but now many things have been destroyed.
 
People seem to get spoiled by many things, that has been introduced to them in very recent years. People said it changed a lot. Everything is changed and changing every second, both good and bad, but the bad seems to rise much more faster.

Very recently, about three months ago I went back to visit my parents. I met my old friend that is sick and stayed in the village for the last 8 months. We had a very sad discussion, because we can only watch what has happened in our generation for the last few years, that we feel we know and understand things better. Very few people noted these.

My commune has five villages, and has around 6000+ people. My small village has around 150 families.

Most of the families have had owed lenders and loan officers millions of Riel plus. Some people have nothing to do, and they dont know what to do either. Those people owe 10, 15, or 20 million Riel. The numbers are ridiculous. It hard to believe that those people have this kind of money at home. It just a number. They don't have anything. Some people as far as I know, they owe money several times of all their properties and everything worth in their families.

Things seem not so bad by just looking at the things they have on one visit. I just realized recently too. You can see things are bad by watching what is happening and changing over time. It is all propaganda.

It looks like many people have many fancy things. Those things come for the most part from this lending money too. So, it spoiles kids. And these things are the big problem in the future.

Another place that I went to also has the same issues rising up. I rode my bike to the eastern side of Phnom Penh sometime in the beginning of this year. I asked sellers and the people who work in the ferry, that what do people here do? He said borrowing money.
So, to me this is becoming the career for many people that dont understand how bad it will be if they are not productive.

If the goal of MFIs is to help the poor there should be some sort of education or teaching how to plan and use loans effectively.
There should be a follow up system.

In the website of organizations, there should be realistic information of both good and bad thing. In my opinion, most of the website that does this work showed only great thing they did.

I don't want to name any organization in my letter, because I know that those organization and the people that are working there are the people who invest their time, their heart, as well as money. So, I am sure that their great jobs has been helping the world so greatly. And I really appreciate that. I wish I can do something like them in the year to come.

But, as a child I grew up from a place that I saw people did not have debt and now they have to run away from people. They used to work hard in the past and slept outside because they had to work in the rice field or whatever they did. Now, they run away from home. They sleep out of their house some days because they need to run away from the people who ask them for money.

I said like this because it is just what i feel from my heart I must share when I heard from my mum and friends who live there and I see my village changing.

I do not mean that the lenders and loan officers or other related organizations are bad. But, because the people in the developing countries like people in my village dont think and understand like what people in developed world do. If development work wants to help change or solve the problem, there should be some short of education.

I know many people like the organizations I have mentioned above have more ideas and experiences, and already understand these problem already. I am writing here to just share my thoughts and to let people know that this is happening and to remember these experiences myself so that I can help some sort of development in the future.

If villagers are increasing their debt, then what will they have left for their kids education and future?

I’m joining this conversation as a Kiva lender. If this conversation is about microlending and the roles of Kiva and its Field Partners, then it seems some basic designations of types of key players are in order. I’m going to go by the types of designations listed at the MIX Market (http://www.mixmarket.org). There, institutions are listed by three basic aspects of microfinance capital markets – Demand (MFIs), Supply (Funding) and Partners (Market Facilitators) as follows:
* Demand (MFIs): Bank, Cooperative/Credit Union, Non-Bank Financial Institution, Non-Profit (NGO), Other, Rural Bank;
* Supply (Funding): Apex Institution, Bank, Donor Facility, Private Investor, Public Investor;
* Partners (Market Facilitators): Development Program/Service Providers, Networks, Networks (extended), Raters/External Evaluators;
     * Types of Partner Services: Financial Services, Governance, Institutional Start-up and Transformation, Knowledge Management, Other, Policy Advocacy, Research and Development, Technical Services.

According to the MIX Market (http://www.mixmarket.org/en[…]amp;seType=private-investor), Kiva (http://www.mixmarket.org/[…]/supply.show.profile.asp?ett=1926) is a “Private Investor Fund.” In this microfinance industry role, Kiva’s primary function is to supply debt capital to MFIs. It is not an MFI itself, nor is it a market facilitator claiming to offer any type of services to its Field Partners beyond supplying debt capital at competitive rates. Any additional services it happens to provide are incidental to its primary funding function.

If that’s the main role Kiva chooses to play, that’s fine with me. Doing one thing well is tough enough in this world.

If many of Kiva’s Field Partners also need additional services beyond competitive debt capital, then I’m all for finding ways to get those needed services to them. I for one, however, suggest those additional services should come from sources better suited to undertaking those other tasks than Kiva, such as many of the market facilitators listed at the MIX Market (http://www.mixmarket.org/[…]/partners.quick.search.asp).

Richard, thank you for putting this out there. I do agree that a lot of the confusion about Kiva is people's misunderstanding about Kiva's role. Thank you for clarifying all of the types of players in the system and how Kiva fits in.

I think part of the misunderstanding that people have about Kiva is because:

1) Kiva is a non-profit organization with tax-free status in the US. This alone might make people think it would then be partnering with only banks or groups providing both funding as well as NGO services and support. This is of course not the case and wouldn't make sense for Kiva or the industry as there are likely for-profit partners in some areas who are making better choices of who to invest in than their NGO counterparts

2) Kiva's website says "Kiva lets you lend to a specific entrepreneur..." at the very top of their page and says things about poverty alleviation like "you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community." It takes further digging to realize that your interest free loan is to the bank, not the individual, and that if/when the loan was repaid by the person shown on the site, it was actually paid back in higher amounts than what the individual lender provided, with those additional repayment fees going to the MFI. Once again, not anything wrong with the system, the interest is need to make the system more sustainable, but the issues come with people not understanding the system and then giving Kiva feedback which, like parts of Tori's video, is based on an incorrect understanding of how Kiva works.

3) "Kiva partners with existing expert microfinance institutions." This is what Kiva says on their site and is the key point that I continue to harp on. As long as Kiva grows at a rate where it can do the due diligence necessary to research and identify "expert" microfinance institutions and then continue to monitor them closely to make sure they are indeed following MFI best practices, then Kiva will continue to improve the industry. The Kiva Fellows program is a fabulous tool to do so, and as Kiva continues to grow, even more monitoring might be needed. With thorough monitoring, those groups that are causing more harmful situations (like in the post above by Rithy) will no longer be eligible for Kiva funding and banks will continue to be required to prove that they are indeed worthy of interest-free capital from Kiva.

Kiva's website and it's legal status reflect their motto "Loans that change lives." As Rithy pointed out in the story of the situation on his island, sometimes micro-credit can change lives for the worse rather than for the better. Kiva exists to support "expert" MFIs so that people have alternatives rather than relying on loan sharks and the unethical MFIs out there. All those of us who have seen the positive effects of micro-finance of course agree that these loans can and do "change lives" for the better, and are more likely to do so if the borrower has an understanding of how loans work.

I'll try to be succinct given the length of most of the comments, but there are a few things worth clearing up:

1) Kiva is very much peer-to-peer and lenders are funding a specific loan to a specific person. Of course Kiva acts as an intermediary and there are delays in the cashflow, but it's no different than writing a check to your broker for shares in Company XYZ. Beyond that, I don't understand the comment that "it's probably a good thing" borrowers don't necessarily realize their funds are coming from developed world lenders. On the contrary, many are aware of the connection and many are quite impressed that people from all over the world have taken an interest in their life. I can make this statement after having met hundreds of Kiva borrowers.

2) Most of the issues raised in this piece are not caused by microfinance but rather challenges that face any effort to alleviate poverty. The cost to serve the poor is very high and they tend to live in turbulent, dangerous countries with volatile currencies, high rates of inflation, and limited opportunities for education and employment. And yes, some of their businesses do fail. So too do venture-backed start-ups managed by MBAs. You get the idea.

3) Still not getting why the perfect has become the enemy of the good here. That microfinance can't solve everything isn't a good reason for arguing against it. I'm also confused by the inconsistency of faulting the donor model for being 'unsustainable' while pointing to 'high' interest rates as a problem. Beyond that I think you may be confusing capital with operating costs. Many MFIs are, in fact, sustainable ongoing operations but they require external capital to extend loans. This is no different from any other banking institution - whether for-profit or not.

4) Finally, one or two Kiva field partners is not really representative of Kiva (with nearly 100 global partners) nor is Kiva representative of microfinance. Regardless, the fact that no counterpoint was solicited from Kiva's founders leaves much to be desired here.

In the interest of supporting my comment on self-sufficiency, the link below is from CGAP which shows the distribution of MFIs by operational self-sufficiency ratio. Clearly the majority of the 964 MFIs surveyed more than cover costs through operating revenue:

http://microfinance.cgap.org/[…]/upmarketmfi.jpg

Tori,

You bring up some very valid points and this is a very good discussion to have to continually push MFIs to do a better job. However, I think it's important to note that microfinance (even when run perfectly) can't be solely responsible for lifting people out of poverty. So to make a broad statement like microfinance doesn't work or Kiva isn't succeeding in lifting people out of poverty is a little misguided.

I was a Kiva Fellow in Ghana in 2008 and got a chance to see Kiva and microfinance in action. I actually do agree with some points that you make in your blog. Interest rates are WAY too high. This is the one area that kind of hurt my view of Kiva's policies. The MFIs receiving Kiva money get that loan at 0% interest, but still charge the entrepreneurs high rates and, in my experience, did nothing to pass on those savings. I'm afraid even MFIs with the best intentions see Kiva as a way to increase the success of the MFI and not the success/wellbeing of their clients. While this is not Kiva's fault, I do believe Kiva should take a more active role in encouraging MFIs who receive Kiva money to lower interest rates. I understand Kiva doesn't want to get involved in the MFI's internal workings, but if they really want to help the people that truly need the help, I think they have too.

But back to the basis of this blog, why are you assuming microfinance is solely responsible for immediately pulling the person/family out of poverty? How could anyone living with a corrupt government, with little to no infrastructure, limited access to healthcare, poor education standards, little clean water and next to zero domestic or foreign investment take a loan out and suddenly get out of poverty? Microfinance should be viewed as a small step in a person's life to help attain their goals. It's not a miracle solution. But if the loan means a parent can now pay for another year of schooling for their kids or afford to make a small improvement in a family's diet or pay for their child's immunizations, I see microfinance as a success.

I don’t want to assume, but I'm fairly certain even Premal Shaw (Kiva President)or the Flannery's (Kiva's founders)don’t think Kiva is perfect. The great thing about Kiva is the passion and openness of the organization. They are open to discussions on Kiva's effectiveness and are willing to engage in these discussions to build a better system. This is why Kiva will continue to succeed and continue to help people around the world.

Tori, your observations are exceptionally accurate and don't just relate to Kiva. As you have discovered in your travels, micro-enterprise can take many forms, but really doesn't ever alleviate poverty for a country. The most micro-enterprise can do is help on family at a time, or at times, one community at a time. However, that shouldn't be underestimated. Most recipients are helped by the loan, but a great number need additional funding as is the case for many businesses in any country. The recipients also need advice, which is seldom available with micro-enterprise organizations. Finally, you've witnessed the need for strong, fairly tough up-front underwriting of recipients. This is like any bank. You're not really helping anyone unless you lend only to people who have an actual chance at succeeding. In a drive for interest income, allocating funds, etc. this is often missed.
You are truly insightful. Keep up the good work.

I think that the base of pyramid does need investment, and people living and working at that level, could most definitely benefit from micro-loans and other micro-financing endeavors. I think that in the poorest developing countries, there needs to be more detailed analysis at the levels above the bottom of the pyramid. I agree that if there's no business opportunities, if there's a lack of enterpreneurial training, and or lack of sustainable support systems for the business.
It's not just the bottom of the pyramid that needs investment, but also the immediate levels above that, to create economic opportunities for those investments to flourish.

Micro-finance will not elminate all of the problems in developing countries, but it will provide incentive and momentum, where previously none existed. I also don't think micro-finance is supposed to pull someone out of pvoerty, I think it's meant to provide more affordable finanicng alternatives, so individuals don't have to work for 30 years to pay of the price of a sewing machine.