Kiva Microloan Information — Unbelievable

Some time ago, we at Irregular Times made it a practice to donate a portion of the proceeds of our made-in-the-USA t-shrits to the microloan outfit called Kiva, which depicts itself as a charity giving people in the third world a hand up through small loans to start up independent businesses. Then we learned that Kiva loans were being issued at wildly usurious rates of 50% interest and fees or more — rates that lead to dependence and a downward cycle of re-borrowing for third world entrepreneurs, not a hand up. When “Micro-Finance Institutions” working with Kiva began to harass borrowers to collect on payment in Nicaragua, the country erupted in “No Pago” (I won’t pay) riots.

As soon as we made this discovery last August, we stopped making donations to fund microloans in the Kiva system and instead began directing our donations to for overseas development organizations like Village Enterprise Fund and Charity:Water that make microgrants with no interest or fee burden.

But what to do with funds already in the Kiva system as they returned from micro-borrowers in the third world to our Kiva account? We thought we had found a reasonable solution: ADEPHCA loans to poor Nicaraguan communities in the Kiva system that were explicitly declared by Kiva to NOT charge interest or fees. While making new donations to other organizations, we’d just keep cycling our money to ADEPHCA borrowers through those ostensibly no-fee, no interest loans, we decided last August.

That was a mistake.

As I’ve just discovered, on May 11 2011, people started asking Kiva whether its claim to not be charging interest or fees to ADEPHCA borrowers was accurate. On May 19 2011, a Kiva staffer indicated that the question would be looked at and resolved promptly. The specification “Interest & Fees are Charged: No” remained up on the ADEPHCA lender page.

On January 16 of this year, the question was raised again:

… in my view it’s extremely dangerous for Kiva’s credibility as a transparent lending platform that this absence of information about Kiva’s proxy for the interest rate borrowers pay should give rise to the entirely misleading assertion that no interest and fees are charged.

There has been some discussion about this here at KF, most recently in May last year I think. See here and here. Despite it having been acknowledged as a matter of some urgency to be corrected – here for example – this type of misleading information persists.

This was the list of Field Partners where “Interest & Fees are Charged: No”, in May 2010, as noted in RichardF’s post:

ADEPHCA
Center for Community Transformation Credit Cooperative (CCT)
Credit Mongol LLC
Gata Daku Multi-purpose Cooperative (GDMPC)
Kisumu Medical & Education Trust (K-MET)
Paglaum Multi-Purpose Cooperative (PMPC)
Patan Business and Professional Women

I just checked (an easy enough thing to do with a site:www.kiva.org Google search..) whether this has been put right since May last year. Sadly the errors persist. Considering just active or paused Kiva Field Partners, these are the FPs which today are stated to not be charging their borrowers interest or fees, and for which no information is provided about their portfolio yield.

http://www.kiva.org/partners/156 – Juhudi Kilimo
http://www.kiva.org/partners/60 – Asasah
http://www.kiva.org/partners/91 – Christian Rural Aid Network
http://www.kiva.org/partners/76 – ADEPHCA
http://www.kiva.org/partners/24 – K-Met Savings and Credit Cooperative Ltd
http://www.kiva.org/partners/165 – HOPE Congo S.A.
http://www.kiva.org/partners/180 – Transcapital Company Ltd

I can’t believe that Kiva doesn’t have portfolio yield information for these 7 partners, as a matter of initial or ongoing due diligence. Apart from anything else, Kiva must know what the portfolio yield is to ensure that the interest rates charged are not usurious – and of course Kiva lenders also need this information in order to make informed lending choices.

Only after a January 25 2011 site update did ADEPHCA’s Kiva page feature an acknowledgement that ADEPHCA does charge its borrowers interest and fees after all.

Fortunately, Irregular Times has not facilitated any further loans through Kiva and ADEPHCA this spring. Unfortunately, last year we did make a number of donations through Kiva to ADEPHCA. Our money may have inadvertently enabled usurious loans, an action for which I sincerely apologize. As money returns to our Kiva account from ADEPHCA, we are withdrawing it and in turn donating it to the micro-grant institution Village Enterprise Fund to help start small businesses in East Africa.

If you use Kiva, please use this incident as an example. I encourage you to forcefully ask Kiva to demonstrate the accuracy of its considerable claims before you donate further funds to the Kiva cause.