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

A marketing image from the microfinace organization Kiva, featuring Truphena Anyango, 29, in her pharmacy, Mikindani, Kenya, 2009 (

Sue Halpern and Nicholas Kristof have been engaged in an exchange about microfinance, following her recent NYR review of his new book (co-authored with Sheryl WuDunn), Half the Sky: Turning Oppression into Opportunity for Women Worldwide. The first part of their conversation can be found here. The next installment appears below.

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

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

Nicholas Kristof: I remain a fan of Kiva, partly because it has done such good work in popularizing microfinance. It’s true that I, along with most other donors, didn’t appreciate the degree to which the people we were supposedly lending to were really symbols more than actual partners. But Kiva’s CEO and co-founder, Matt Flannery, was so non-defensive in acknowledging this—an example for all bankers!—that I found his responses disarming and ultimately decided that Kiva’s approach was more a matter of marketing than deceit.

This kind of issue arises all the time in development. For example, I’m a fan of Plan USA, a child sponsorship organization, and most sponsors probably think that they are helping a particular child. But in fact, most of the funds go to the community, not that particular child, because that’s more effective. The child sponsorship is a bit of a gimmick, but it works in building connections and getting people to support development. As a result, I’m a big supporter of Plan, and I’ve seen the great work it does in communities with the support of those sponsors.

Likewise, I think development organizations need to do more to slice and dice assistance, so that donors can pay for a girl’s schoolbooks for a year, or pay for a “safe birthing kit,” or a teacher’s salary for a month, and so on. Now of course, it’s always more complicated than that. The schoolbooks won’t do any good if there isn’t someone making sure that the teacher shows up at the school. And the safe birthing kit is fine, but what happens if the woman needs a C-section? And the teacher’s salary is crucial, but what about teacher training—or monitoring the teacher so that he doesn’t trade grades for sex? Helping people is always a complex, comprehensive process, but that’s what bores donors—and so organizations struggle to find ways to get them to pay for a particular person to do a particular thing. It’s a fine line between creating marketing and false advertising. In Kiva’s case, it was both somewhat misleading and blindingly effective; as a Kiva lender my main aim is to help people—and in that respect, I’m convinced I more than got my money’s worth.


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