The microlender Kiva's slogan is: "loans that change lives." I became a Kiva lender earlier this year and so far, the experience has been very positive. I still feel good about it, despite recent controversy over exactly how the Kiva model really operates.
Coverage in the New York Times, on Walletpop, and on other sites indicates that when people lend on Kiva, they're often "backfilling" loans that have already been made to entrepreneurs by microfinance institutions.
So when I clicked to loan money to a specific small business owner, I was under the impression that my money was going directly to her. Instead, my money was very likely added to an aggregate sum sent by Kiva to microfinance organizations in the field, which in turn have made or will make the loans to the entrepreneurs.
The difference is subtle, to be sure, but it could make all the difference when people are deciding whether or not to make a loan. To its credit, Kiva is striving to be more transparent about its model and now provides a more detailed explanation here. In all, Kiva has loaned more than $100 million in its first four years of existence. It feels good to be part of a movement that is helping so many people create a better future for themselves, and I'll be staying with Kiva.
From a marketing perspective, to keep the cash flowing in, Kiva must do everything in its power to build and maintain trust through its communications and its activities. Especially in today's tough economic times, the competition among charities is too fierce to risk alienating potential contributors. Transparency is a necessity, not a nicety.