David Roodman’s long post is a great explanation of how Kiva works. It’s also critical of the way Kiva markets.

Here’s the issue. Let’s say you make a $25 loan on kiva.org. You pick an entrepreneur, you make a loan. The web site makes it look like you have funded that particular entrepreneur. But that isn’t really how the microfinance organization works. For practical reasons, that entrepreneur has already been funded by one of Kiva’s partners on the ground. On one level, Kiva is open about this, providing dates of loans and so forth – though its marketing simplifies these details. The post is well worth reading if, like me, you’re a fan of Kiva or of microfinance generally.

There’s a bigger issue here between the stories that motivate donors and poverty in the developing world. Do donor stories help fight poverty – or do they put drag on the efficiency of the fight?

Kiva brings microcredit and microchips to child sponsorship. Like sponsorship charities, it is all about stories: it was inspired by them and it succeeds by telling them. As a result, it operates in a pincers between the giver’s desire for personal connection and the costs and constraints that imposes on business of serving poor people. In fact Kiva can be seen as an ingenious finessing of this old tension. Technology has brought down the cost of transmitting stories and images.

– via cgdev.org

Though the cost of bringing these stories and photos back to sponsors has come down, it is still significant. Can we afford the photos and stories of entrepreneurs? How can we not afford them?

Hat tip to @tactphil for sharing the post.