Why Jesse Willms Thinks Supporting Kiva Is Still The Ethical Thing To Do

Hi, this is Jack Stanton once again, filling in for my friend and co-worker Jesse Willms on his blog. He asked me to post an entry today about a discussion we had in his office last week.

Over a year ago, Jesse decided to start helping out the Kiva Foundation as it works to fight poverty by offering microloans to budding entrepreneurs in third-world countries when banks are unwilling to. This can help create an emerging middle class in the third world.

Jesse has been proud to support Kiva, but was disturbed by recent news articles that have put microfinancing in a bad light. He brought me into his office to discuss the situation and decide if we still wanted to support Kiva. Over the course of the next few hours, we went through all of the available information about the microfinancing controversy.

What we discovered was that certain people not associated with Kiva were taking advantage of the microfinancing trend. They were going into villages and offering small loans at huge interest rates without doing any background checks at all. Then, if people had trouble paying the money back, they would send in thugs to intimidate people, sometimes physically, into giving them as much money as they could.

People who had received loans often had to flee their villages in shame or have their extended family bankrupt themselves to pay the loans back. Loan sharks had invaded the microfinancing industry.

This has led to people – including the government of India – to suggest that microfinancing should be banned.

But what Jesse and I also noticed was that Kiva has never been accused of any of these types of wrongdoings. In fact, they screen their entrepreneurs to ensure they are not taking on too much debt, and that they can afford to pay back their loans with the profits from their businesses.  That’s why they have a 98 percent repayment rate – and would never resort to thuggery.

So, by the end of the day we decided that we wanted to continue to support Kiva. Just because some criminals have tried to use the concept of microfinancing to enrich themselves at the expense of others does not mean Kiva is not continuing to do good works.

That’s why the next day, Jesse donated another $3,000 to Kiva in order to help seven budding entrepreneurs. He will continue to donate money to Kiva and help as many people as possible break the shackles of institutionalized poverty.

It’s the ethical thing to do.