#microloan

Beth, age 8, explaining why she decided to give away all of her money.

For over a year, she’s been saving money from chores, birthdays, and holidays. She recently realized she had over $100 and could not think of anything she really wanted to buy herself. So, through my accounts, she made four $25 microloans via Kiva.org (all to women needing business loans, if you’re curious) and also donated farm animals through World Vision.  I am super proud of her. I was never that generous as a kid. Or as an adult, for that matter.

So, it’s worth asking: do microloans work, or did my daughter just throw away her money?  

In 2014, Hugh Sinclair had a harsh and widely-reported teardown of Kiva and decided “Kiva is a scam, and if we are to contribute to the welfare of the poor and restore any faith in the integrity of the U.S. financial sector, such players should be regulated immediately.”  Kiva responded with a teardown of Sinclair’s teardown, noting, “We know that poverty is multidimensional, that microcredit is just one tool, and that it is far from being perfected.” 

Kiva is hardly the only microfinance crowdfunder.  When NPR tackled the question “Can microloans lift women out of poverty?” in 2016, they concluded, “if microloans haven't proved themselves the poor's salvation, neither should the industry be scorned as useless.”  Simone Schaner, an economist at Dartmouth University, was quoted with probably the most salient point of all: "Microfinance is a victim of an unfortunate tendency in development, which is that everybody wants to find a silver bullet to solve poverty. And the fact is that poverty is this massive, incredibly difficult problem. There is no silver bullet."

If you’re at all curious about Kiva and microfinance, I recommend that you read the links above and understand the goals, limits, risks, and benefits involved. The whole business is not as clear-cut as Kiva’s marketing would suggest.  It’s not like sponsoring a child through World Vision (which we also do) where there’s a more direct connection (though that is not always what it seems). But it’s also not scammy and useless, as Sinclair would lead you to believe.  My own decade-plus experience with the international nonprofit world leads me to believe that Schaner’s point is the most accurate: microfinance is a tool, and can be useful, but it’s no silver bullet. 

My daughter is already planning on saving up for her next donation. There is no end of need in the world, so in the interests of broadening her horizons, we agreed that we’d look at other charities too.  For example, Modest Needs crowdfunds money for Americans facing temporary financial needs. And there are several local charities -- homeless shelters, food pantries, veteran’s groups, etc. -- that are worthwhile.  Bottom line: trust but verify; investigate with open eyes, mind, and heart; do good when you can.

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