Saturday, December 31, 2011

KIVA - helping people to help themselves

Model representing peasant woman

KIVA is a charity which uses tiny loans from ordinary people like me and you, to help people in developing countries realise their dreams of small business enterprises. They have business plans and they pay back the loans so we give to charity and get the money back over a fixed period. At the moment my loan is enabling a woman sheep-farmer in Peru to improve her livestock. For less money than I just spent on hair-slides, I've helped someone to help herself.

It is difficult to talk about a charity without sounding like spam mail, the sort that offers free gifts and huge prizes but after two years involved in KIVA, I would like to give this organisation some publicity and talk from my personal experience. It really does seem to be working. I have put loan money into the system three times via Paypal and had full repayment each time, when I have put it back into the system to help someone else.

So, what's the catch? I am very cynical about charities and I checked out as much detail as I could to see where the money was going. I have three issues about charities in general

1) Charities support social systems which should not exist, instead of challenging them. I already pay taxes, which go to the state security system, which SHOULD be providing for the disadvantaged in our own society and, through international loans, to less developed countries.

KIVA is offering support to individuals in less developed countries who have a practical plan to improve their own lives and, by knock-on effect, their communities. I am lending money to someone like me, which I don't see as being virtuous, just a practical way of contributing to the world community. The saying goes 'Give a man a fish, and he will eat once. Teach a man to fish and he'll eat for a lifetime' KIVA is supporting the fishermen, enabling them to buy rods and boats, to continue the analogy. These are all people who know how to fish already - or in the case of my gutsy sixty year old Peruvian lady, how to run a sheep farm. My taxes do not do support these people and I have no control over where my tax money goes. Also, the amount of money is hairslide money to me - business expansion for a Peruvian woman. And I get paid back!

2) Middle-men make profits from the charity and even with well-intentioned, principled organisers, 90% (or whatever figure) of most of the input goes on administration.

KIVA does have middle-men. They choose borrowers with workable business plans, they manage the loans and the repayments, the website information and updates. Yes, they get paid. If I get my money back, where does their money come from? The borrowers. There are high rates of interest to borrow my money, up to 17%. This is open information and has been challenged. KIVA's response is that this is an acceptable rate in the designated country, that banks would not give loans at all to these borrowers and that the repayment is negotiated according to what the borrower can manage, extended as necessary. The bottom line is that the borrower is happy, and, answering the initial concern, if you deduct the 17% from our loans, then the borrower is getting 83% of what we loan - that compares very well with other models of charity organisation.

3) Do they do what they say? I believe that education and supporting those who are independent CAN change the world, whereas helping the poor and starving - however important this is in humanitarian terms - will never change the world. Support those who can then support others is my principle for change. I want any extra money for charity, additional to taxes, to make a difference tomorrow not just today. I dropped out of one 'Sponsor a child' charity, where I thought I was paying towards a child's education in Nepal, because the feedback was so confused that I no longer believed I was supporting the named child whose photo I'd been given. I lost faith in that charity.

So far, with millions of borrowers, and personal contact by some of them, KIVA has delivered what it says it does. If I find otherwise, I will be the first to say so.

1) You need Paypal and you need to be willing to loan a minimum of 25$ so if you 'live' in another currency, you'll lose on the exchange rate and you can sometimes lose on the exchange rate even if you pay in dollars. I've been paid back in full each time but with some borrowers you are told there is a risk of not receiving full repayment. I've accepted a risky borrower and still been paid back.

2) You get informed of each repayment but it stays in a separate KIVA pot  in Paypal and only gets moved back into your main Paypal total if you request this. This is fine if you are 'collecting' the money until you are repaid in full and then putting it back into the system but it means you have to do something to access that money. I suspect it's a way of encouraging people to keep in the loop and loan the money each time.

3) You can give KIVA loans as presents, which means the recipient gets the fun of choosing a borrower and you put the loan money upfront. If the recipient doesn't get round to it after a year, KIVA chooses the borrower, so money isn't wasted. This is a great idea and I've tried it once, but I'm not sure how the repayment works, whether it goes to the giver or the recipient - in which case, what happens if he/she doesn't have Paypal?

If you are new to KIVA and want to try it out, there are a limited number of free loans to women borrowers available here There are borrowers of both sexes in KIVA but as women have far more difficulties getting loans and starting/developing businesses in the countries involved, there is a higher percentage of women in the KIVA programme.

If I've misrepresented KIVA, or if you want to add your own experiences, feel free to comment.

Homeless man

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