Monday, July 6, 2009

Backlash Against Kiva

Last month Kiva began offering loans to entrepreneurs in the United States. I expected an outcry based on opposition to "payday lending," but so far that hasn't been a problem. However:

A group of about 400 Kiva lenders — originally called "Pissed Off Kiva Lenders," but now crusading as "Unhappy Kiva Lenders" — has signed on to a scathing critique on the Kiva site.

"The U.S. is the wealthiest and most resource-full nation in world history," Tom Behan of Seattle, leader of the insurrection, wrote on Kiva's site. "To think that we are asking lenders from around the world to even consider lending in the U.S. is a shameful, disgraceful decision by Kiva management, CEO Matt Flannery in particular."

Behan and others say Kiva has changed its mission. The U.S. borrowers on the site enjoy a higher standard of living than borrowers in the developing world. U.S. borrowers are low-income while many of their developing-world counterparts are no income. The critics worry that loans going to U.S. borrowers will divert money that otherwise would be loaned to the poor in developing countries such as Vietnam, India and Kenya.

Kiva's management is listening:

They are taking a poll on that shows respondents, by a 5-to-4 ratio, approve of Kiva loans in the United States. And on July 15, they'll hold a worldwide conference call where interested parties can call in and voice their concerns over U.S. lending.
From Mike Cassidy at the San Jose Mercury News. TechCrunch has additional coverage. My own impression with Kiva is that there will be little to no crowding out from loans to US entrepreneurs. As it is Kiva is having trouble keeping up with growing demand and I see little reason for this to change. Even as the debacle in credit markets has curtailed lending in other sectors, Kiva has continued to increase its business, although there are some signs that lending is finally slowing. At the end of the day, I think lending to fellow Americans will increase the lending base for Kiva and will increase, rather than limit, loans for other entrepreneurs.


  1. I am not to sure that Kiva is that unique in the US to warrant to much attention. Microlending has existed for several years in the US, with 13 companies listed in wikipedia's perseon-to-person lending article.

    Kiva would do well to look at the example of in the US and avoid running afoul of the SEC.

  2. Unlike Prosper and other P2P lending Kiva does not offer any ROI to lenders nor do they qualify for a tax deduction, so the SEC is not involved.

    You're probably right that Kiva's recent change may end up having little effect in the long run. I believe it was something Matt Flannery has wanted to do for a long time, so it was driven by his vision for the organization. He's proven to be quite farsighted so I won't disagree with how he wants to manage.