Paddington’s first microloan

One story I remember reading as a child was the episode of Paddington where everyone’s favourite anthropomorphised Peruvian bear makes his first deposit at the bank. When he goes to withdraw his five pounds, he is flabbergasted to learn that not only do his interest payments not amount to much (there’s a joke about bearer bonds in here somewhere) but that he doesn’t even get the same five pound note back that he put in—indeed his original note may even have been burnt, if it was an old one.

The recent fuss about micro-lending site Kiva not being all it appears to be reminds me of Paddington. A certain segment of the internet community is shocked, shocked, to find out that the loans they’ve been deciding whether to make or not have already been signed, sealed and delivered in the field. For people who were assuming that they had the power to decide who did and didn’t get a loan, this is undoubtedly a surprise.

The situation isn’t as bad as it has been made out to be: I’m assuming there is some sort of feedback effect between loans made and future loans funded. If Kiva lenders decide en masse to support only women, or goat-farmers, or people in Cambodia, then Kiva will request more such loans from their field partners and eventually more such loans will be made. Nor is it the case as far as I can see that Kiva is double-counting loans to a recipient. If you want to believe that the dollars received by a particular Cambodian goat-farmer are in some sense “your” dollars, then you can continue to do so.

Like Paddington, some charity donors seem to be confused about the fungibility of their donation. Charities may promise that your donation goes to the project of your choice, and maybe even that none of it is spent on administrative costs, but this is of course a half-truth. If your donation is added to the total on Project Y, this may mean that somebody elses (unrestricted) donation isn’t needed for Project Y, and that that donation can be used for administrative expenses. The net effect is no more benefit to Project Y, but a decrease in the deficit for administrative expenses.

This is as it should be. Administration is a vital link in the chain that drives the quite remarkable (though often unremarked-upon) process of turning figures in my bank account and clicks of my mouse into clean water and education and food for some of the poorest people in the world.


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