I have been a long time donor to Kiva.org, a peer microfinance lending site that has been around for several years. When I first heard about it I thought it was an interesting idea and donated some money to fund a few different third-world start up businesses.

Kiva works by hooking up generous folks with microfinance lenders by promoting the individual beneficiaries on their Web site. You get the feeling that your donation is going straight into the pockets of these worthy folks. And you can watch your donation be repaid in painfully small increments as the business owner (usually women) succeeds.

The only trouble is this isn’t quite accurate. The charity does support the individuals pictured on their site, but the timeline for how the funds are actually distributed aren’t correct. The microfinance institutions fund most loans before they are posted on Kiva’s site, so in a sense you are participating in a scheme of sorts.

I got started down this path with a story in the New York Times by Stephanie Strom (sadly, no relation) about posts by David Roodman, a research fellow at the Center for Global Development. Roodman blew the whistle on Kiva about a month ago on his blog, and many others in this space have chimed in. You can view them here.

Since then, the folks at Kiva have done an excellent job at fixing some of the misperceptions about their processes and releasing even more information to understand what they are doing. I believe they are sincere in their efforts and have acted with honor and well-meaning to address Roodman’s complaints.

But I am still somewhat confused, and the more that I have dug deeper into microfinance charities, the less I really know.

Kiva, at your command, will take the money that is repaid and keep it in their ecosystem, allowing you to re-lend your initial stake in $25 increments to new projects. You can also donate the funds to the organization if you are tired of choosing worthy recipients. I have made 8 loans in the past several years, some of them repaid in full, some still owing money. While it is frustrating to know that the inspirational stories aren’t really where my money is going, on the whole I am happy with the outcomes and glad that my minimal funds can make a difference in a few people’s lives.

I am also impressed with the whole Kiva quantitative ecosystem as well. There is a link to KivaPedia, a list of all their lenders and links to their Web sites, and KivaData, an independent Web site by Jon Earles which analyzes Kiva lending data. Neither of these efforts would be possible without Kiva providing data and programming interfaces to access it.

But the more that I thought about what Kiva was doing, the more questions I began to ask:

How about a “Kiva Gold” membership that allowed those of us who have been with the organization through a few loan cycles to bypass all the poster stories and go right to a lender that is delivering quality non-defaulting loans at lower interest rates and running with a low overhead? Wouldn’t it be better if I could direct my funds towards this lender? My thought on this is that if I already have a relationship with a lender thru Kiva and they have repaid my loan (or loans), then why not support them directly? Well, you can’t. Most lenders aren’t set up to take donations, especially in US currency or from US credit cards. They also have no real way to track what you give and what you get back. That is why Kiva is critical.

Plus, there isn’t any easy way to find them using the Kiva search screens, or any of the data analysis sources, at least that I know of. There are other microlending sites such as Wokai.org that show you the interest rates of their lenders (they can do this because they have just two lenders at the moment) and show how it compares with local loan sharks for their potential customers. Some of the interest rates charged by Kiva’s approved lenders are close to 20% a year, which sounds high to those of us in the first world with 5% mortgages but is typical for this audience. Wokai.org only allows three periods to recycle your funds before they take it from you and put into working capital, which I am not sure I like either.

Another choice is Microplace.org, which gives you an actual investment return on your donation, but that isn’t important to me, plus their finances are hidden behind eBay (their owners) so not much in the transparency realm there either. And then there are the big microfinance guns such as Accionusa.org or GrameenFoundation.org — both of which have huge overheads and salaries as a percentage of their programs, which doesn’t thrill me either.

How about better metrics and data for the whole microfinance lending community? There are a few efforts here. For mainstream charities, Guidestar.org allows you to view their most recent IRS 990 reports, where you can exactly how much overhead they have and who gets paid what. There is also a site called MFITransparency, which is beginning to calculate lending and delinquency rates. And Mixmarket.org, which has so much data on lenders that even my operations research trained brain gets overwhelmed. One of the truisms of all this Web 2.0 mashup stuff is that the more data you make accessible, the more people want to analyze things.

I have come full circle on Kiva as a result of all this Internet research — meaning that I still like their model, their low overheads, and their high(er) transparency. If Kiva could add a way to search their lenders by interest rate or just bypass the individual stories, that would help.