It’s actually pretty rare that I call out a site for being totally deceptive for what it claims to be about but when I saw Kiva.org on Hacker News, I figured it was a good way to make some dime while helping out the world.
The premise of it is great – you lend someone money using the USD as principal leverage, they get money they need, they pay you back. Its even better when they point out that you’re helping out people who generally live in third world countries. Your $25 USD investment turns out to be several thousand dollars for their local economy. More on the point – you’re cutting out the middleman. If everyone complains that stuff is “sooooo cheap” in china, now you can lend the chinese money to buy cheap stuff and improve their lives. Seems great, right?
Well, people who are reading at home should realize something. It’s $25 to you. It’s what the guy needs to open a business because he needs several thousand in his local currency to do it. But this also means that he needs to repay several thousand of his local currency plus the interest rate and fees to pay back the loan. If their local economy is so bad in the first place, what’s the likelyhood of this being a good idea for them or even feasable?
The second problem is revealed in the model on the site – you don’t get back USD, you get back “kiva kredits” or somesuch. It’s not actually money. People are currently decrying paypal and microsoft for the evils of fiat currency, why would you rope someone having financial problems in the third world into it? It’s just silly. If you’re feeling like a nice person or trying to make up for the karmic debt of the holocaust, you can actually make the loan an donation. This absolves Kiva of actually having a real economy and your money is lent to someone at interest and just stops existing. It’s all the trappings of a payday loan but you can feel good doing it.
Another rub? There’s nothing that prevents this from becoming a payday loan. You can’t actually see the terms of the loan or contact the people accepting the loan to know if they’re paying 1.33% or 133% on the money. Most of these people are happy pictures of families who need money, but the fine print on some of them is that you’re lending money to money lending institutions in a for-profit format. Think about that for a moment, we’re passing regulatory fees and loan principals and such onto another institution to tack on their own fees and such to stick it to these corn farmers in post-apartheid Africa. There was a movie about it called “Tears of the Sun”. Bruce Willis died for such stupidity.
Finally the worst of the worst? The last line at the bottom of every page: “Kiva does not guarantee repayment nor do we offer a financial return on your loan.” (emphasis mine). Not only are they going to fuck people in Africa but you don’t even get a piece of it.