Monday, November 9, 2009
Today's New York Times reports that Kiva.org, a darling of the social enterprise/venture philanthropy movement, has been called to task for a lack of transparency regarding its social investment model. Kiva.org has built a big reputation in recent years by claiming the ability to link investors, primarily from the Global North, directly with entrepreneurial borrowers in poor countries. For example, a law professor in North Carolina could, with a few clicks of a mouse, invest in a crafts cooperative or women's sewing business in Kenya. But, according to the Times, "the direct, person-to-person connection Kiva offered was in fact an illusion." Kiva has been funneling money -- approximately $100 million to date -- to micro-finance institutions, which in turn have been lending the money to individuals and organizations in the developing world. The article quotes an American philanthropy expert as saying "If Kiva's users want to be connected to an individual borrower, Kiva doesn't do that, and so the big question is, do Kiva's users want to be connected to a micro-finance institution -- in which case, why to they need Kiva?" The article points out that specific information about Kiva's true business model is available on its web site for those willing to dig, and that Kiva now has begun to change the way it holds itself out to prospective donor/investors.
This minor flare-up should remind nonprofit law devotees of the Save the Children scandal during the 1990s when it turned out that money donated to support individual children was in fact funding more general development programs. It is also reminiscent of the trouble the Red Cross found itself in when it devoted some of the flood of post-9/11 donations to long-term programs rather than funneling the money directly to individuals affected by the terrorist attacks.