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Questioning Kiva: When Microloans Aren’t the Best Way to Help

Starting with New Year’s Day 2010, Irregular Times made a pledge to donate a dollar for overseas economic development every time someone purchased one of our sweatshop-free t-shirts made in the USA. We’d made the choice to stick with t-shirts made in the USA by American Apparel because American made shirts have the guarantee of health and safety standards, while American Apparel maintains a compensation standard above the American minimum. T-shirts made in poor countries far away, on the other hand, regularly exploit child labor and forced labor. Just try to get regular direct audit reports from any t-shirt company producing overseas. 99 times out of 100, you’ll get a big, fat, plastic-smile NO. That should tell you something.

We understand that an influx of money into poor countries is a good way to make countries less poor. We care about that. But we thought that surely there must be a better way to go about doing that than to participate in a system of exploitative labor that grinds workers into dust and perpetuates inequality. That’s why we’ve committed to sending a dollar for every shirt we sell to someone in a poor country for purposes of economic development.

Up until this week, our vehicle for this kind of economic redistribution was Kiva, a non-profit organization which takes our money in $25 increments, issues what it calls “low-interest loans” directly to entrepreneurs, then repays us so that we can issue yet another “microloan” to yet another third world entrepreneur.

Unfortunately, we’ve recently learned that with Kiva, “low interest” is a relative term made in reference to the insanely high rates of in-country loan sharks. Take our loan to Sylivia Tibabwerayo of Uganda, for instance. It took us a while to figure this out — because the interest and fees to Tibabwerayo are not specified on the main loan page for her, but are rather placed far, far down on a separate page — but can you guess how much in interest and fees Sylivia Tibabwerayo has to pay on the microloan we’ve issued through Kiva?

No, really, take a guess.

Here’s the answer: 58%. Sylivia Tibabwerayo has to pay 58% in interest and fees back, in addition to repaying the principal we’ve lent her. There’s a word for that. The word is usury.

Now, other people are starting to figure this out, and Kiva is getting mighty defensive. They’re saying that they have no choice but to charge 58% in interest and fees to poor people like Sylivia Tibabwerayo in Uganda (and similarly high interest-and-fee packages to recipients in other countries). They say that logistics and remoteness raise the cost levels so high that Kiva and its partners and its partners’ partners just can’t operate unless they charge these huge interest-and-fee packages.

This may be true. It may not be true. But from our point of view here at Irregular Times, we don’t have to participate in such a system. It is not our goal to make an income from our overseas donations program, so we don’t have to have a specified return on our investment. It’s fine with us, as a matter of fact, if we never see a return on our investment in dollar terms, but instead just see a portion of our donation go to an organization’s overhead and another portion go to actually helping someone in a poor country live a better life. That’s our goal, and we don’t have to see someone overseas charged a shamefully usurious rate in order for that goal to be achieved.

That’s why, starting right now, we’ll make our overseas donations as outright charitable donations, not as microloans through Kiva but as microgrants that accomplish our goal of helping to improve conditions in poor countries without sneaky, hidden-in-the-fine-print double-digit demands against the very people who can least afford to pay them back.

We’re looking at clean water sanitation projects, but our minds are open to a variety of projects. If you know of a good international charity that helps improve living conditions, let us know.

5 thoughts on “Questioning Kiva: When Microloans Aren’t the Best Way to Help”

  1. Tom says:

    In Arab countries there is no interest charged on loans (religious tenets deem that usury). Maybe you could find one of those to make micro-loans.

  2. Jim says:

    What do people know about the Village Enterprise Fund microgrant and training charity?

  3. JohannineLogos says:

    It is the field partners, not Kiva, that determines the interest rate. Moreover, the borrowers are under no compulsion to take out a loan in the first place.

    1. Jim Cook says:

      It is Kiva who decides whether to work with field partners that charge wildly usurious interest rates. And it is people who decide whether to work with Kiva.

      1. JohannineLogos says:

        Your ignoring the heart of the issue, Jim. I know it makes your “progressive” mind angry, but read this a few times and let it sink in:

        the borrowers are under no compulsion to take out a loan

        The implication is that people are making choices for themselves. Choices that they think will benefit them in some way. We have a term for the ability to make choices that we believe will benefit us. It is called “freedom”. A dirty word in the “progressive” mind, I know.

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