Kiva is a fraud, a criminal enterprise, and perhaps more…

UPDATE: The criminals at Kiva have written an unofficial response to this entry. Their basic excuse is that there are inherent costs in the administration of small loans- as if that excuses their crimes, as well as the rest of the data discussed in this entry… Either way, we have the capitalist perspective on the subject now: it’s okay to charge as much as you want because lending money is very, very hard work.

Stop whining that there are no alternatives. If you want to contribute to worthy charitable causes that support the poor and oppressed, please consider your local Red Cross chapter, Amnesty International, the Anarchist Black Cross, Food Not Bombs, or Farm Friends. Thank you for not supporting global capitalism.

Since this entry is now being linked from Kiva’s own blogs, please note that this entry is addressed to my fellow Anarchists, the people who are regular readers of this blog. It is not meant as a mainstream-capitalist criticism of Kiva. See my other updates below for more mainstream criticisms of Kiva and microfinance in general.
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UPDATE 2: Also read db0’s criticism of Kiva.
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UPDATE 3: Another entry on this topic! I’m encouraged to see the blog Can We Save Africa writing about it, and also linking to this article from Louis Proyect on the evils of microfinance. Keep them coming!
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UPDATE 4: Also please view this video about microfinance, and why it is the wrong way to help the Third World, at the Global Sociology Blog.
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If you’re thinking of spending a few dollars to help some people in the third-world this Christmas season, please do not support Kiva Microfunds (Kiva.org). All Anarchists need to be warned that Kiva is a loan shark operation, a fact which is advertised nowhere on their site for obvious reasons.

The way Kiva works is, they have contracts with “Field Partners,” that is to say loan shark operations, in various third-world areas and send them the money to be loaned. These operations then loan the money to destitute people for interest rates anywhere from 10% (!) to 40% (!!!), and in the past even 60% (!!!!!). According to the Kiva site (if you look carefully at the statistics page for each loan shark, there is a Kiva average shown for “average interest rate”), the average interest rate is 35.25%. The loan sharks then split these criminal profits with Kiva. So even if Kiva is technically doing nothing “wrong,” their profits come from criminal operations1.

Wikipedia lists their current “Field Partners” with their stated interest rates. The only outlier, REDC Bulgaria (with a stated 1% interest), has ceased their partnership in 2006. I will not speculate as to why.

Kiva’s goal is to “alleviate poverty.” And yet they and their “Field Partners” have made more than 17 million dollars so far, a figure calculated by “Portland,” an interested party who did some investigating. For “Portland,” the main issue here is not that Kiva is reaping profits on the backs of the destitute, but that Kiva presents a false front of being charitable while burying the interest rate data.

I have no such qualms. In my mind, what Kiva does is wrong on both counts. They are a fraud and a criminal enterprise, and perhaps more.

When I say “perhaps more,” it’s because of the self-reported figure of 98+% repayments. This figure worries me. With the criminal interest rates they impose on these poor people, one expects more defaulting. What do these unscrupulous loan sharks, with the law on their side, do to those who try to default? Since I have no evidence either way, I won’t make any positive statement, but there is definitely a danger here that anyone who participates to Kiva is encouraging violence as well.

This is my clarion call to all Anarchists and all people who have any compassion whatsoever: please do not support Kiva, expose them instead. Put your money where the heart is. And be wary of any “non-profit” which selflessly claims to help the poor. Check them out first.

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1 Some people may argue with me that the laws in those “countries” are different, and that therefore what the “Field Partners” are doing is not criminal in nature. But this is addle-headed. If there was no law in a “country” against murder, and someone was going around killing people, I would still call it criminal. What they are doing is criminal in nature: I know it, you know it, and Kiva knows it.

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41 thoughts on “Kiva is a fraud, a criminal enterprise, and perhaps more…

  1. Th3_ACist November 22 2009 at 14:50

    It shows on a couple websites that the normal interest rate for local lenders is 60% to 800% on the wiki page, obviously it’s fraud to not put there interest rates on there page. But they seem like there just providing a service right? Granted they become more up front with there interest rates…Love the site btw and the book! Helped immensely in my life.

  2. db0 November 22 2009 at 21:58

    Compared to the alternatives available to those people who wish to get a loan on those countries, Kiva is far better. As Acist said, when Kiva has a 30% interest, it’s guaranteed that the average local interest will be close to 80% and most likely more.

    Obviously Kiva is not a long term solution but I do think it’s better than the available alternatives for those people such as charities or local loansharks.

  3. Francois Tremblay November 22 2009 at 22:01

    What? Db0, I am rather flabbergasted that you support these criminals. It doesn’t matter how high the other interest rates might be in that locality; slashing someone’s arm instead of cutting it off is still a crime.

  4. WorBlux November 23 2009 at 5:13

    Not only that, but it hasn’t been demonstrated the Kiva type programs significantly improve lifetime earnings.

  5. Db0 November 23 2009 at 9:28

    The solution is not to rail about Kiva, the solution is for the people to redesign their society so that they do not need it anymore. But you cannot force that, and taking away such small improvements is not going to help or make any allies.

    You have to ask yourself, if one of those people taking the money from Kiva was to see their lowest interest rate lender stop because it’s not perfect, forcing them to turn to the local loansharks, would they be then positive to the actions of those who stopped it?

    It’s good and easy to rail against imperfect solutions from the privilege of our first world lives but it doesn’t help anyone. Kiva is at least a way for some people to at least dip their toes into direct action and mutual aid. If we can show them that it’s ultimately not enough to make a difference, perhaps then we can suggest our own alternatives. But just condemning is short-sighted destructive criticism.

  6. Francois Tremblay November 23 2009 at 16:41

    I see. So we should go around slashing people’s arms because it’s better than cutting their arms off. Thank you for the ethics lesson db0.

    • Cameronian April 21 2012 at 9:42

      Your analogy is weak. Initiating force to physically harm others is one thing; granting them a loan that they want to take is quite another. Who made you the arbiter of how much interest is too much? Who put you in charge of the economic decisions of others?

      • Francois Tremblay April 21 2012 at 13:16

        My analogy reflects the fact that we should not harm people, period. And that’s not “weak.” If you deny that, then prove otherwise.
        As for your voluntaryist argument, I’ve debunked voluntaryism many times on this blog. Your argument does not hold water.

  7. Anonymous November 23 2009 at 21:09

    If you were to actually read kiva’s website, you would realize that kiva obtains none of its funding from the loans that pass through it. It operates 100% on donations and grants from other charitable institutions.

    But it’s clear to me that you have no interest in facts, only in making outrageous claims. Have fun with that!

    P.S.: I’m an anarchist too, justt not the jackass kind that tries to get others to do what I want them too :)

  8. Francois Tremblay November 24 2009 at 4:10

    What a bizarre insult. Please do tell me, anonymous coward, what exactly is it that I am trying to get you to do. I have not given any orders to anyone, or threatened anyone. I also have not insulted anyone, which is more than I can say for you.

    Also please name my “outrageous claims.”

    Yea, I think it’s pretty clear where YOU come from.

  9. db0 November 24 2009 at 5:14

    You make a weak analogy fallacy Francois.

  10. Francois Tremblay November 24 2009 at 5:29

    What do you mean? How is it a weak analogy? It’s a perfect analogy for this situation. You’re saying that hurting people less than others hurt them is justified.

  11. Francois Tremblay November 24 2009 at 15:34

    I’ve disabled anonymous comments due to a heckler on this thread.

  12. Th3_ACist November 24 2009 at 17:32

    “What do you mean? How is it a weak analogy? It’s a perfect analogy for this situation. You’re saying that hurting people less than others hurt them is justified.”

    I think he means if 80% interest or greater is cutting someones arm off and a 30% rate is slashing their arm, then it would follow that any interest rate above 0% is therefore violent and unacceptable. I imagine if someone could do it cheaper they would undercut kiva and gain market share.

  13. Francois Tremblay November 24 2009 at 17:33

    “it would follow that any interest rate above 0% is therefore violent and unacceptable”

    … of course it is.

  14. Th3_ACist November 24 2009 at 19:25

    Aren’t the people free to not take the loans if it is detrimental to them? I just feel like Kiva is a voluntary enterprise, barring any info on the 98% repayment being violent in nature. Although I am interested as to how you get repayment from a poor person with no house…anyone looked into that?

  15. Th3_ACist November 24 2009 at 19:31

    Although upon thinking further this could be considered an investment fund, when people donate does it just go into one of the “Field Partners” banks then the partner loans it out for profit? Meanwhile the person who donated is left out of the loop? Wild stuff here…

  16. Francois Tremblay November 25 2009 at 4:06

    You may not have noticed, but this is an Anarchist blog. Not a voluntaryist blog.

  17. David Gendron November 25 2009 at 15:15

    Db0, I don’t understand why Kiva is a good thing for you. Kiva is way worse than even voluntaryists organisations!

  18. db0 November 27 2009 at 4:52

    Francois I’m not saying that at all. This is why it’s a weak analogy.

    Going by weak analogies I could use fluffy pillows and degrees of fluffiness to argue my point. It’s all nonsense and irrelevant. This is nothing like deliberately harming people because we’re not the ones who put them into that situation. On the contrary we’re discussing what possibilities for help we can offer.

    At the moment you’re not suggesting anything practical, just saying that people should not be using Kiva even though it provides a tangible improvement over their current conditions. This is destructive, not constructive. You should know better by now to assume either a perfect solution or nothing at all.

    @David: Kiva is good for you when the better alternatives do not exist or are not feasible. It’s also good because it allows people to try and help without using charity and the domination it implies.

  19. Francois Tremblay November 27 2009 at 5:08

    “Going by weak analogies I could use fluffy pillows and degrees of fluffiness to argue my point. It’s all nonsense and irrelevant.”

    I’m not following you. Usury is harmful. Pillows are not. What point are you trying to make with this nonsense?
    (yes, I do agree that “it’s all nonsense and irrelevant”: at least, what you just said is)

    “This is nothing like deliberately harming people because we’re not the ones who put them into that situation.”

    So, because you are not responsible for the pre-existing situation, you’re not responsible for the harm caused by Kiva and their partners if you participate? I’d say you definitely are part of it.

    “At the moment you’re not suggesting anything practical, just saying that people should not be using Kiva even though it provides a tangible improvement over their current conditions. This is destructive, not constructive.”

    What a ridiculously arrogant statement. Is it “destructive, not constructive” to tell someone to get out of the way of harming others? I am helping people fulfill their values a little better by telling them about a fraud and a lie being perpetrated. And you call that destructive?

    Here’s an alternative: get involved in… ANARCHIST groups and causes. Don’t get involved with capitalist usury. Get involved with good causes, not frauds.

    Your attitude seems to be “speak no evil.” That is a very unethical position to hold.

    “You should know better by now to assume either a perfect solution or nothing at all.”

    Do not pretend to be teaching me lessons.

  20. muz November 28 2009 at 14:13

    @Francois: the point of a micro-loan scheme is to have an elaborate field programme, instead of just handing out cash and then turning the other way. These field programmes take incredibly more work per dollar loaned than what your average western commercial bank does. Hence those high interest rates in all microfinance operations. The high repayment rate (althoguh 98%+ sounds a little extreme) is due to the small scale of each individual loan and the practical support in whatever that loan is used for. E.g. when you lend money to a mid-sized firm, they are going to use it for bigger investments (let’s say a new product line), which pay of only in the long-term and are risky. But a farmer who buys 2 cows from his micro-loan in a programme that has been calculated and well thought through will be able two pay you back + interest simply because you know 100% that cow is gonna give milk. That’s the beauty of micro-finance, that maybe only 100$ are needed to kick off a profitable operation and real improvement. (This whole argument goes completely independent of whether or not microfinance increases lifetime income etc.) Of course I’m not 100% sure about this argument, but you didn’t mention any of this. Thank you.

  21. Francois Tremblay November 28 2009 at 16:05

    Thanks for the lesson, but it doesn’t really have anything to do with what I talked about…

  22. Db0 December 2 2009 at 2:09

    Gah you’re a frustration to talk to Francois. Whatever. You’re not worth the effort.

  23. Francois Tremblay December 2 2009 at 2:13

    You seem to be repeating this pattern over and over. FYI, other people have no problem understanding me, even if they disagree. The problem is probably with you, not me.

    You don’t seem to be really interested in discussing this issue. If you ever are, then please post again. If you’re only going to display more arrogance, then forget it.

  24. Db0 December 2 2009 at 2:17

    I understand you just fine, I just don’t care to put up with your arrogant attitude in order to explain such thing. You act like a goddamn impetuous child every time someone disagrees with you and it’s frustrating.

    It’s not that I’m not interested in discussing this issue, it’s that I’m not interested in getting in a shouting match with you, because that’s all you seem to be capable of.

  25. Francois Tremblay December 2 2009 at 2:19

    How am I engaged in a shouting match? I pointed out the arrogance of your comments and argued my position. To reiterate it again: usury is harmful. It doesn’t matter how much you do it (although Kiva does take it to rather dizzying heights). A system where there is no usury is better than one where there is none, even charity. I’d rather give to charity than to loan sharks.

    How is my position “arrogant” and “impetuous”? Can you point out your rationale for any of these attacks, or are you just pouting in the corner?

  26. Francois Tremblay February 16 2010 at 20:41

    After thinking about db0’s suggestion some more, I have added links at the top of the entry to a few organizations worth supporting. Send money to these guys instead of kiva.

  27. db0 February 18 2010 at 3:40

    If you want to contribute to worthy charitable causes that support the poor and oppressed, please consider your local Red Cross chapter, Amnesty International,

    Before you support some of there orgs, check out Broadsnark’s post on how she became an anarchist where she puts forth her experience with non-profits.

    [...]But, in the end, the nonprofit work wasn’t much better than the for profit work. We were helping people, but not as many as we should have been. We were government funded. When I calculated the percentage of tax dollars that actually went to direct services, it made me want to cry. Some of the grants went through so many agencies that, by the time each agency shaved their overhead costs off the top, there was virtually nothing left.[...]

  28. db0 February 18 2010 at 3:40

    Ergh, forgot the link

  29. Francois Tremblay February 18 2010 at 3:42

    A fair statement, but unless you have specific complaints about the Red Cross or Amnesty International (I assume you have no complaints about the Anarchist organizations?), I’ll keep the links up.

  30. kmeisthax March 2 2010 at 15:06

    @db0: The point isn’t that kiva is better than, say, a loan shark – the point is that it’s still pretty bad, and they don’t mention the obvious case of usury on their website. How can it be voluntary to someone who wants to lend money to third world nations and gets lied to by Kiva thinking that they’re helping local business when in reality they’re just propping up existing loansharks.

  31. gcchelsea March 31 2010 at 13:50

    This article makes a great point (maybe a bit hyperbolic – but I totally agree with the point). I actually like the idea of Kiva and they should certainly be more transparent about these things. I found this article as a result of doing some research on Kiva – was thinking of doing my “charity” bit and I thought microfinance might be a nice way to do a little good!!! So thought I would check on them.

    Anyway, the challenge really is the local market conditions. I’m originally from the Philippines and in a country like that financing sees several challenges:

    1) Inflation: A “fair” interest rate is inflation plus a small margin to cover costs. So if inflation runs 20% (which is not unheard of in a country like mine), 25% interest actually would not be unreasonable (in fact, be pretty good). Some African countries can experience over 100% (its called hyperinflation) inflation rates. It makes lending very, very tricky.

    2) Access to Credit: In the Philippines, getting a formal $500 loan would be next to impossible. There are two alternatives. If you have some collateral, pawn shops are everywhere. They give very low values for your collateral and will charge over 100% effective interest rates. The other is what we locally call “5:6″ loaners. These are typically rich people who semi-formally loan out their money. I’m not sure what the exact rates are these days, but these loans typically will see interest charged on a weekly/monthly rate and if you run the calculation annual interest can easily get to the 100% and above rate. I have cousins that have taken advantage of these 5:6 loans and I know firsthand how tough things were for them. Still, interest rates don’t matter if you can’t get the loan to begin with… Making it accessible would be so hugely important to uplifting the lives of people out there… I do absolutely believe that (fair) loans are better than handouts… In fact, I don’t believe in outright handouts at all.

    Having said that, I wouldn’t go as far as saying Kiva is an outright fraud – but I certainly do think they need to be more transparent about these things and provide real evidence that their rates are at least “FAIR”. And to make doubly sure their local partners are legit. I’m sure the vast majority of people providing funds have never set foot in a third world country. It really is quite a different world out there and what we assume works here in the US (and the way things should be) – don’t exactly translate into a place like the Philippines. I know, cause I lived in a third world country for most of my life.

    I remember telling my parents (they are still in the Philippines) how disgusted I was at my US credit card for charging 18% interest… And they were like, “owh, the banks here (in the Philippines and please note, we are not talking loansharks – well, maybe, but banks like Citi, HSBC, etc.) charge over 22%…” and they actually ask me if I wouldn’t mind borrowing from my credit card for them!!! (I said it was not a good idea, but that’s another story)…

    Will I be lending money to Kiva then??? Alas, more due diligence is now needed…

  32. kiva.org « Michele's Blog May 17 2010 at 0:14

    [...] for a vigorous attack on Kiva see francoistremblay.wordpress.com/2009/11/21/kiva-is-a-fraud-a-criminal-enterprise-and-perhaps-more/ [...]

  33. petercowen August 24 2011 at 14:48

    Why the hell hasn’t someone started a true not for profit finance scheme? Mental.

    • Francois Tremblay August 24 2011 at 22:13

      I dunno dude. I’ve given plenty of alternatives for those who seek another place to put their charity money in, though.

  34. zev December 28 2012 at 22:08

    Francis check your cabinets. check your fridge everything you have ever purchased was marked up to cover costs and to make profits so that others can make a living. therefore I disagree with your position. is having no clothes or food good? of course not it seems that we should all barter instead. well we tried that and due to its inefficiencies money was created. as much as I would like to live in a happy world where nobody gets hurt it is never going to be a reality because people are people. I think it is amazing that these people who couldn’t otherwise get money have an opportunity if they are willing to pay the price . I pay $35 to send a package across the country overnight. I can send it for much less if I want to wait . but I don’t want to wait so the extra cost is my decision. in my opinion you are taking the decision away from the people who want the loans from kiva.

    • Francois Tremblay December 28 2012 at 22:32

      “Francis check your cabinets. check your fridge everything you have ever purchased was marked up to cover costs and to make profits so that others can make a living.”
      Whose fault is that? Not mine. And since when must corporations reap profits on people’s backs so their employees can make a “living”? Profit is AFTER wages. You’ve got your basic economics wrong.

      “therefore I disagree with your position. is having no clothes or food good? of course not it seems that we should all barter instead.”
      Yes, obviously the only choices are either a planned corporate economy or barter. You’re an idiot. Please learn basic economics before you try to argue basic economics.

  35. gfgfg February 5 2013 at 16:17

    Pimp game going on. Non profit and sympathy factors going for them. Should be hung.

    1. You put up the capital with little to no interest gain. You solely accept the risk of default (banking without that pesty fdic/something in return an assholes space boner)

    ^ Your a swell guy to that half starved person trying to better their family right?

    2. As you say enter the companies. They get to loanshark it and not so nice rates and they profit when or whether not the borrower defaults because it’s 100% your capital so zero risk and record keeping and labor is your only expense. Considering your set in the third world I imagine the labor comes cheap and easy enough too.

    3. The charitable front gets their end for expenses,advertising, airbrushed ribcages for more suckers.

    It’s a swell idea really but when you let the business in to take advantage of the charity all you are doing is helping these places own/harass these poor people.

    These places should have to report every nickel of expense to justify the loan you are giving and have the rate mandated to be exactly that. Shouldn’t exceed 5% and in the event of excess it should be required to be redistributed through the program.

    No clue how they get away with this. Hung and strung. Yes normal banking is dirty..this isn’t sold as normal banking though.. when you guise it as charity…oh thats shit nasty.

  36. Rob July 12 2013 at 14:06

    From a moral perspective it’s not a black and white issue. The reason the interest rates are as high as they are is the result of the riskiness of the loan. The prevailing market rate is much higher than what Kiva offers because, when adjusted for default, the local lender does not make the actual rate on the loan. Additionally the amounts being lent are small. So if a person lends $25 and asks for $.50 back in a month. This would be 2% that the borrower would need to repay in a month. When a micro lending organization reports this number, they annualize it. So the 2%, would be reported as 24% annualized. But to the borrower it’s a simple 2% loan, and does not feel like a 24% loan, which would require the lender to pay $6 back in interest.

    From this perspective – the fact that Kiva offers loans at a discounted rate when compared to the prevailing market price – it is clear that Kiva is being somewhat charitable. I think it’s a false statement to say Kiva is a criminal organization/ fraudulent organization. Maybe saying “Kiva is immoral” might be a valid thought, but from what you’ve said it seems that the statement “micro lending is immoral” or “lending at an interest rate in general is immoral” might be a more efficient way of articulating what you actually think. It would follow from either of those statements that you wouldn’t have a fond view of Kiva.

    Complaints about usury are rampant throughout history, and i’ll admit there is a certain degree of immorality. But the positive benefits of reasonable credit expansion, and developing a strong capital market are well documented. The position that “lending at anything above a 0% interest rate is wrong” is a fatuous and detrimental stance. Your policies would just reduce the available supply of credit and have a stultifying effect on local businesses, which to me is abhorrent. You are advocating making the poor poorer.

    The moral question is: whether it is more immoral to charge a high rate of interest (i’m assuming no violence in collection), or cause a reduction in credit that would result in various local businessmen going out of business. I would contend that the latter is much more immoral.

    I understand your point about Voluntaryism, but it has to be noted when discussing alternatives that under the current system a business owner is given the option of taking out a loan or refusing to do so. Under your system, this option is not available to him at all.

    Your opinion seems to stem from a noble desire to protect the vulnerable, which I appreciate. But your rejection of pragmatism for ideology is a tell-tale indication that you are quite separated from the underlying issue. I’m almost positive that you do not live in a state of squalor, and I suspect you probably have not visited any of the places where these loans are granted (although I admit this might be a stretch on my part).

    Either way, it’s an interesting topic and I enjoyed reading the thread.

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