Kiva Is A Fraud???

While browsing through some blogs on Kiva, I found an interesting blog that proposed that Kiva was a criminal enterprise and a fraud. This blogger seems to think that while Kiva seems to be helping the poor, they bury their ridiculously high interest rates on the loan. The average rate on a loan is approximately 35% and Kiva has already made 17 million off of the interest on these loans. The blogger also said that Kiva is a criminal enterprise because of the potential violence it promotes through their loan sharks. To read more about what this blogger thought, you can visit the site: http://francoistremblay.wordpress.com/2009/11/21/kiva-is-a-fraud-a-criminal-enterprise-and-perhaps-more/

In response to this article, a staff member from Kiva responded saying that there is often a financial misunderstanding. The problem is that although these percentages seem high for interest rates on loans, people must understand that as a loan gets smaller, the transaction costs get larger because they cannot go below a certain minimum. The staff member said that essentially it is just as expensive to take care of a $100 loan as a $500 loan. Since most populations need the smaller loans, the average interest rate appears to be high. For more financial information you can visit the site: http://www.reddit.com/r/reddit.com/comments/a7p56/kiva_answers_anarchists_kiva_is_a_fraud_a/