Friday, May 7, 2010

Kiva ... a fund mobilizing success for sure, but what socio-economic impact?

Dear Colleagues

According to the Kiva blog (URL since 2006, Kiva has supported 6,090 loans to entrepreneurs in Togo, West Africa, representing more than $4.9 million of loans.

As I understand the way Kiva works is that loans get repaid ... so that the amount of $4.9 million represents the amount loaned ... some, or maybe most, of which has been repaid. I do not know how much the loans outstanding have been at any one time.

Kiva has clearly demonstrated that it makes its donor clients feel good ... and there is nothing wrong with that. The challenge is to show to what extent loan recipients have been helped ... and how much the socio-economic situation in Togo has improved ... if at all.

I would like to know: (1) a lot more about the organizations who serve as intermediaries ... in this case, the two organizations: Women and Associations for Gain both Economic and Social (WAGES); and FECECAV; and, (2) some key socio-economic metrics about the communities where these organizations work.

My personal experience with microfinance in a variety of situations suggests that the value of microfinance is very much a function of the way in which the intermediary organizations work. If the intermediary organizations are functioning as a mentor and trainer as well as a source of microloans, then the value of the work may be amazing ... if they are not, then they are not very much different from the "money-lender" that is so much reviled in simple economic texts, and their added value is not particularly significant.

One of the current challenges for sustainable socio-economic development experts is to understand why so much financing for so long has produced so little progress ... and to do things now that are better than what has been done in the past. Microfinance has been hailed as a great success in development assistance, but this is being challenged by recent academic analysis. My experience has been that microfinance has been successful when other conditions were favorable ... and of little consequence when the socio-economic framework was dysfunctional.

The lesson for me has been that knowledge about the specific community and the specific microfinance unit are needed in order to get useful performance information ... and that it is rare for the broad enabling environment to be supportive enough for microfinance to make much impact beyond the individual client and family. This is not inconsequential ... but it merely suggests that substantial progress out of poverty needs multi-sector interventions, not simply that of microfinance.

For your convenience, this is text from the Kiva blog:
Kiva Country Profile: Togo
Togo is currently ranked 10th in number of Kiva loans administered.

Kiva has been lending in Togo since 2006 and the Kiva community has lent over $4.9 million dollars supporting 6,090 loans to entrepreneurs in this country. Our active Field Partners in Togo are Women and Associations for Gain both Economic and Social (WAGES) and FECECAV.

Map of Togo
Map from

Togo is a small country in Western Africa located between Benin and Ghana and is home to over 6 million people. French is the official language of Togo, but Éwé and Mina languages are also spoken here.
I like the Kiva initiative. The fact that it has been so successful in mobilizing financial support through the Internet is impressive ... and an encouragement. My hope is that in the future Kiva will be able to use the resources that it has accessed to make a major and measurable impact of socio-economic progress.

Peter Burgess

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