If you could get your donation back, would you?

I always read the Kiva blog with interest.  In it, Matt Flannery, the founder and CEO, gives a candid, blow-by-blow account of Kiva’s growth.  Kiva is an innovative organization that allows donors to lend money directly to clients of microfinance organizations in the developing world.  This means that donors have the chance to connect to an low-income individual who needs a loan, lend that person money, and then get the money back.

There is a lot of interest in the idea of using invested capital (meaning funds that eventually will get returned to the investor) to fight poverty.  Which is why I found Matt’s recent post on the Kiva blog so fascinating.  In this latest iteration, Kiva “lenders” (the donors) get their money back as it’s paid back, rather than as one lump sum at the end of the loan cycle.  The effect, as Matt writes, was that people quickly turned around and lent money back to other borrowers:

We had a lot of activity, in the first 10 days since the event, our users have lent about $2.5M on the site.  Before that, we had been lending about $3M every month, so this is a significant jump.  However, instead of new funds being injected into the system, this surge of lending is compromised mostly of dollars that are already in the system.  Instead of sitting in our account, they been liquidated…headed next into the hands of entrepreneurs on the site with the help of our Field Partner MFIs.

This is an incredibly interesting observation, as it speaks to the mentality of the “philanthropic investor” who has the option of getting their money back.  My suspicion has always been that people who have this option would, in general, choose to reinvest the money that comes back to them — that the return of their donation is really more about accountability than about actually getting their money back.

As the social investing world expands, it will be interesting to see how this further develops.  It’s perhaps the first real data set that will help us all to understand how people really think about their giving.

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