Kiva Frowns but we Smile when Microloans Default
For every sweatshop-free t-shirt we sell at Skreened, we set aside a dollar to donate to some form of economic development for the poor people living overseas. Initially, we participated in microloans under the Kiva system, thinking that the non-profit’s loans must be generously giving people a hand up to a better life. But then we found out that Kiva imposes back-breaking interest and fees on almost all of its borrowers, and that most Kiva borrowers do not typically emerge from microloans with a small stake of wealth from which they can build capital. Rather, they end up in a cycle of borrowing so dire that a self-questioning Kiva intern notes: “some clients I have spoken to can’t even remember how many loans cycles they have had, many having had upwards of 20 loans.”
The Kiva organization has been defensive about its situation. It’s saying that the microfinance industry has no choice but to charge more than 50% in annual interest and fees to poor people in poor countries, and on occasion to harass its borrowers to collect repayments — sparking “No Pago” riots among the desperately poor. Kiva says that logistics and remoteness raise the cost levels so high that Kiva and its partners and its partners’ partners just can’t operate a microloan enterprise without these huge interest-and-fee packages.
It may or may not be true that usury and stalking borrowers is necessary for the microfinance industry to survive. But our goal in giving at Irregular Times is not to sustain the microfinance industry. Our goal is to help people, and there are ways to help people — like micro-grants without any interest or fees — that don’t involve usurious loans. We won’t get money back from from micro-grant institutions, but that’s alright with us. In fact, it’s preferable — and so we’ve shifted our international giving to other less ethically-conflicted institutions like Village Enterprise.
The thing is, we still had some of that original money invested in Kiva microloans, and as we were paid back we ended up with some funds to reinvest. As a way of handling this system, we sent those funds back to new borrowers through Kiva’s only zero-interest, no fee lender, the Nicaraguan institution ADEPHCA. ADEPHCA invests in poor and remote Creole communities along Nicaragua’s coast and has consistently refused to convert itself into a repo agency when its borrowers couldn’t pay back their loans. When hard times came to the Nicaraguan coast and push came to shove, ADEPHCA collected back just $984 in repayments out of its last round of $27,056 in loans. Some funds from Irregular Times were included in this latter amount.
Kiva, aggrieved that ADEPHCA hasn’t collected monies from its poor clients, has refused to work with ADEPHCA any more, declaring that “Kiva’s partnership with ADEPHCA is now closed” and sending Irregular Times an e-mail message apologizing for ADEPHCA’s compassion and imploring us to give Kiva another chance: “We hope that you realize that this default is a true exception to the norm and that you will give lending to the working poor another chance on our site.”
I wish the default weren’t an exception to the norm at Kiva, which is why with the default of these last microloans and our Kiva balance down $0, our relationship with Kiva is finally at an end.
We’ll continue to devote money from our shirt sales to helping poor people overseas, working through gifts and grants rather than loans. If you know of a non-profit doing good work to develop poor people’s economic independence without dragging them into debt, please leave a comment here with a link to that organization. We’ll take a look — and we’ll keep letting you know where our money goes in our donations thread.