Ever since Oprah decided to endorse it on her show, Kiva.org has become a huge hit.  With some curiosity (not sponsored), I decided to check out the site and see what they're really all about. 

What is Kiva.org? 

They basically act as a medium for people to give non-profit loans to entrepreneurs in developing countries.  Don't be fooled though, Kiva gives your donations to "middle men" called field partners which give micro loans to the entrepreneurs with interest (some are ridiculously high, like 54%).

How Does it Work? 

The site layout looks a little like prosper.com, where you see a list of borrowers.  The borrower includes a description of their business and a bit about their personal situation (single mom etc).

After you pick an entrepreneur/business that looks promising, donations/loans are made via credit card (PayPal).  Upon placing the donation, the business will email you updates on a periodic basis.  When your loan gets paid back, you have the option of withdrawing the money or re-loaning it.

How Does Kiva Make Money? 

Seeing that Kiva doesn't charge a cent to their lenders, I expect that Kiva.org stays in business through kickbacks from their field partners.


I like the idea that you're helping a third world family/entrepreneur to sustain themselves.  I would participate in this program solely in the fact that it would make a big difference in their lives.

If the borrower defaults on their loan, not all is lost as you can claim the default as a capital loss.


Contributions are not tax deductible as you are giving a loan not a donation.  Also, some field partners charge exhorborant interest rates to their borrowers.

What do look out for?

Personally, I'm going to be very aware of the field partner that the business is listed under.  If the field partner charges an above average interest rate, then I may look elsewhere. 

In their field partner page, they list the field partner by risk rating, delinquency rate etc.  The one field that they're missing is the interest rate charged to their borrowers.  To find this information, you'll need to click on the field partner link and scroll down.  To me, this piece of information is vital in determining where my money will go, kinda like registered charities and their MER's.   


Seems that Kiva.org has got something here.  The biggest appeal to me is that I can lend money directly to a business which will make a huge difference in someones life.

My biggest gripe about Kiva are the high interest rates that field partners charge to the borrowers.  Another issue is that in their field partner listings, they don't include their interest charge as part of the specs.

Back to You 

What do you guys think, should I use some of the "links for charity" money to donate to Kiva.org? 

What are your thoughts on Kiva.org?  Do you have any experience lending money through them?


  1. Alissa on November 26, 2007 at 7:30 am

    Great site although the cautious side of me says what is stopping these Nigerian/etc types from asking for fake loans and running off with the money?

  2. The Financial Blogger on November 26, 2007 at 9:42 am

    So if I understand correctly; you can lend money to an organization (Kiva) for free and they will transfer this money (for free ? lol!) to people that will make 50% yield on loans given to third country developer (which probably have a likelihood of delinquency of 50% as this market is very risky).

    On top of that, you can’t even benefit from the tax deduction related to charity donation. It doesn’t sound like a plan for me! It more sounds like a big scam where 3rd country loan provider and Kiva is making a killing while you are taking the risk on your own. I guess there is something I don’t get ’cause presented like this, I have better chances to get my money back if I lend it to the first homeless I encounter in the street this morning…

  3. FrugalTrader on November 26, 2007 at 9:44 am

    It does sound kinda fishy. However, if they are legit loans, I like the idea of lending to someone who is trying to support themselves.

  4. The Financial Blogger on November 26, 2007 at 9:50 am

    I guess you can easily make a contribution to Centraide or another well-known non-profit org…

    Personally, I give to organization linked to children. The most important part is to give to a category of people you really want to help.

  5. Canadian Dollars on November 26, 2007 at 10:25 am

    Interesting. I was just reading about prosper.com over the weekend and (correct me if I’m wrong) but it’s only available for Americans I think.

    I agree with the comments posted. Kiva does seem somewhat sketchy.

  6. FrugalTrader on November 26, 2007 at 11:20 am

    CAD$, yes you are right, prosper is currently only for U.S residents.

  7. Telly on November 26, 2007 at 11:45 am

    I haven’t had the chance to fully research it yet but there is a similar (and seemingly better) program called the Grameen Foundation(http://www.grameenfoundation.org/) which is affiliated with Dr. Muhammad Yunus (2006 Nobel Peace Prize winner). I’ve recently picked up his book and hope to learn a little more about the idea of microfinance. I’m looking for a new organization to make monthly contributions to and this one seems very interesting.

    Donations are fully tax-deductible and they offer support systems to the people they help.

    And btw, there is a Canadian version of prosper.com coming online soon I believe.

  8. FourPillars on November 26, 2007 at 12:01 pm

    I tend to agree with FT – if you want to direct your money to a certain type of individual (ie entrepreneur) this might be a good way to do it (although as Telly points out there might be better ways).

    All charities have expenses ie “overhead” – in this case you are donating the interest from the loan (and in some cases the loan itself) and the interest that the borrower pays is the “overhead”.

    Telly – where have you been? We’ve missed you!


  9. Mike on November 26, 2007 at 12:07 pm

    It sounds sketchy but given Oprah’s billion dollar empire I’m sure her legal team looked into it long and hard before allowing her to endorse it.

  10. FrugalTrader on November 26, 2007 at 12:16 pm

    Telly, do you know if the Grameen Foundation is tax deductible to Canadians?

  11. David Cox on November 26, 2007 at 12:39 pm

    I’ve been an active lender on Kiva, browse their forums on a weekly basis, and have also given several presentations on microloans. I believe that Kiva and Microplace (the ‘lend for profit’ counterpart of kiva created by Ebay) are the two best social entrepreneurship sites that individuals can currently be associated with as far as their direct impact on developing economies.

    Like the site!

    Keep up the good work!

  12. Telly on November 26, 2007 at 12:49 pm

    FT, I can’t recall what the rules are for charitable tax donations to US charities off hand. I think it might be that you need a certain amount of US based income to qualify but you might want to check into it. Does Kiva have a Canadian version?

    Mike, Oprah had a little stint with a “fradulent” author in the past so her legal team may not catch everything. ;)

    4P, it was US Thanksgiving so I had the week off and mostly stayed away from the computer. Back to work and surf now. ;)

  13. Cross the river on November 26, 2007 at 1:44 pm

    A lot of these organisations are out there and micro-credit has proven its worth.

    One must nevertheless put the loan in context when judging the interest rates. In many of those countries, it’s impossible to get a bank loan if you are poor and the neighbourhood money lender usually charges a few hundred % if not more. So as ridiculous a 54% rate may seem to us, it’s actually very good, if not the only way out in certain countries.

    A good description:

    Anyways, I’m happy you brought this topic up.

  14. Gates VP on November 26, 2007 at 2:28 pm

    You may recall my little rant sometime ago about donations?

    In that I listed Kiva as “my only good lead”, but now I hear that the field partners also charge interest? That’s total BS! I’m already absorbing the risk! I’m basically giving these field partners free money!

    You see, this is why I don’t like giving money, somebody along the way is always taking slices of that money (or big fat hunks in Kiva’s case). Knock them off of my “potential donors list”.

    Don’t get me wrong, I’m not some tight-ass jerkwad who won’t help his fellow man. On Friday I took one of our local panhandlers out for dinner. Sadly, only McDonald’s was available, but he got grilled chicken sandwiches and a salad. He’s been a regular around here and the government has been helping him out and setting him up with a place, but it’s not an instant process. So I don’t mind hooking him up with a meal and a few bus tickets, I don’t mind giving “stuff”. I just don’t want to give him cash, b/c we already have government programs for that, I’m already “giving him cash”, he’s just waiting for the approvals to go through.

    As to other places to lend, I just heard about this one last night: WorldVision gifts. Here, you can give ___ in the name of someone else. So donate $100 dollars and you buy someone a goat. $350 gets you an alpaca, $30 gets you soccer balls or mosquito nets or warm blanket or even rabbits (for 35). Heck they even have their own “Micro-loan setup”. It looks like our gift to the grandparents is going to be a couple of goats in their name, so I can let you know how it goes.

  15. Telly on November 26, 2007 at 2:45 pm

    Gates VP, unicef has a similar program which I’ve used. I think it’s great. I recently “donated” mosquito nets during their big malaria campaign. I was especially motivated after a recent trip to Africa when I had to take malaria meds which can’t be taken for any prolonged period of time. A buck for a net can go a long way. I also buy all my greeting cards from Unicef as well. Their catalogue is pretty nice, and if you’re going to send greeting cards anyway…

    And btw, very nice gesture to take your ‘neighbour’ to dinner.

  16. ThickenMyWallet on November 26, 2007 at 8:03 pm

    There seems to be a very wide discretion given to the field partner. From your description, there’s not a lot of over-sight on the field partner’s behavior other than Kiva ranking their field partners (and the ABCP issues highlight that ranking is subject to its own loopholes). Field Partners can always force their borrowers to give good rankings by threatening to with-hold money and how would Kiva ever know?

    Oprah has in the past supported what appears to be well meaning causes but, upon proper due diligence, not so squeaky clean as it made itself out to be. She has a good heart but its hard to do due diligence on something so far away.

    Since there is so much media attention to it lately, if it survives the next 3-6 months without anyone poking holes in it, I would add it as a link to charity but I would hold off.

  17. brip blap on November 27, 2007 at 1:23 am

    Let’s back up on one thing – it’s not a donation if YOU get your money back, it’s a loan. Kiva is a fairly nice idea but basically you’re just underwriting high-interest loans. If you want to GIVE money, give it to a charity. This is not GIVING money to an entrepreneur – it is lending. I personally think it’s a fine idea if that’s how people want to tie up their money at minimal benefit to themselves and the person who receives the loan. Me, I prefer to GIVE to charity, where the organization just gets the money without having to repay it at 25% interest and I get the tax deduction.

    http://www.rcws.org is a good charity to help…

  18. James on November 27, 2007 at 2:00 pm

    With this setup it seems like the field partner is the charity as you are giving them an interest free loan for which they suffer very little if they default.

  19. Iain on November 28, 2007 at 12:07 am

    I am active Kiva lender and have had nothing but positive experiences with them. I would not hesitate to recommend the site and the good work that they are doing.

  20. SfumatoPants on December 4, 2007 at 6:02 pm

    From the Grameen Foundation website:

    I’ve heard that MFIs charge a high rate of interest for the loans. Is that so?

    Like other financial institutions, microfinance institutions (MFIs) charge interest for the loans they make to their clients. The interest covers the high cost of making very small loans and personally servicing each client every week. It also covers the cost of managing the “center meetings”; the peer support group process; and providing information on social services, personal development, health and other critical information that helps clients improve their lives and the future of their families. Their rates are also largely influenced by the rates MFIs themselves pay for borrowing the funds that they in turn lend to their clients. MFI interest rates can range from 18 to 60 percent, depending on the conditions in each MFI’s service area. Without microfinance programs, the most common alternative for very poor people is the local “money lenders,” who regularly charge between 120 and 300 percent.

    … so, having spent a lot of time in “the third world” myself, I can attest to this. We have to remember that our standards are not universal, and that one of the major reasons people live in poverty is because local systems have completely broken down. We have to look a little deeper, and not take it for granted that everyone everywhere operates according to our privileged standards.

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  23. Steve on August 8, 2008 at 3:37 pm

    The high interest rate alone makes it not worthwhile for me to donate. It’s no different from giving money away and letting it trickle down to the actual needy. It should be a flat rate like a service charge.

  24. Finding a Charity on August 8, 2008 at 9:51 pm

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  26. Fiona Khan on October 7, 2008 at 4:35 pm

    I think some of us are missing the point here. Kiva is not targeted towards people who are looking to make money (prosper.com) rather than reap the savings account interest rate, or looking for tax deductions..what would a tax deduction on $25 worth of donation be anyway? a negligible amount..

    If someone can raise a family simply by purchasing a camera, (as one of the entrepreneurs on the site did) and lending it out in her community, and we can help her do this, should we really be considering the tax implications of $25 for doing so?

    To the argument that VP GATES makes about the abundance of governmental organizations whose responsibility this is, I would just like to remind everyone that the developing world is “developing” in part because of a lack of effective institutions, limited law enforcement and corruption. In such countries, the NGO (non governmental organizations/aka. not for profit organizations) sector is looked upon to fill the gap. And frequently, it is because of their work that the gap narrows, and/or at the very least life becomes more bearable for some very poor people. (over 1 billion people live on less than $2/ day)

    That is no to say that NGO’s don’t have transparency problems. But there are transparency problems everywhere, as we have learned from the collapse of reputable banks in recent times. Does that mean we will stop using banks altogether?

    Yes, the MIF’s charge interest rates that seem exorbitant to us in the developed world. Thats because our access to capital and interest rates charged are governed by measurable factors ie credit history, level of collateral, income level. In developing countries, no such processes exist for poor people. So when the MIF’s get access to capital from traditional banks, the “high risk” nature of their business equals the MIF getting very high interest levels themselves. Which they have to repay. And ALL of these interest rates are lower than what the final consumer/entrepreneur would otherwise get, if he could ever manage to at all. The point, also, is that once these people have an established history, their credit riskiness will be re- examined, and interest rates for them should decrease accordingly.

    This is about alleviation of sytemic poverty- sustainably. Its about empowering people by allowing them to earn their own livelihood, and not depend on unsustainable charity.

    Its very nice to buy a local panhandler a meal, but wouldn’t it be nicer to give him the means to earn his own meals over the long term, if he is so inclined? The site is geared towards people with just that perspective. And I am so glad that we have a good proportion of people who are all for it!

    Kudos to them for the idea! Fantastic work!

  27. […] Read the rest of this great post here […]

  28. used tires on May 5, 2010 at 4:28 am

    I know it sounds great, but how do you truly know if the money is actually going to entrepreneurs in the third world? I’m not saying that Kiva is not legitimate, but that it would not be hard to create a scam version of this, where someone is making up all the stories. Or maybe not Kiva itself, but the “field partners” could be making up the stories.

    Till then,


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