On my way home from New York City on Saturday evening, I picked up the business section of the New York Times and began reading a column- the headline of which peaked my interest. “You, Too, Can Be a Microlender” by Ron Lieber. I’ve spent a fair amount of time studying the microfinance “niche” as Lieber calls it. And I was thrilled that the Times would pay some attention to the subject. Unfortunately for this reader, however, I discovered that Mr. Lieber mis-wrote the headline…and most of the article. What was positioned as an piece about this increasing-in-popularity economic development tool ended up to be a fairly interesting article mainly discussing peer-to-peer online philanthropy.
In the spirit of the blogger that Lieber mentions in his column, I would like to take this opportunity to point out three major mistakes that he makes. My hope is to simply benefit the greater public and emphasize the importance of clear definition of terms and effective reporting.
Defining Microfinance and Peer-to-Peer Lending Sites
Photograph from Allianz.com
First, for the person who has never heard of microfinance, based on Lieber’s article, will understand it to work like this: “You take a relatively small amount of money and, through an online marketplace of sorts, give or lend it to a specific person or project whose story moves you.” In the onlne version, Lieber links to a Times definition of microfinance, but one does not have this luxury in the print version. What Lieber actually defines here is the peer-to-peer lending online tool that facilitates microfinance around the world.
So, to put it briefly, CGAP defines microfinance in the following way: “Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and microinsurance. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks.”
Most, if not all peer-to-peer sites associated with microfinance are focused primarily on microcredit or microloans. Donors or investors are able to give capital towards microloans or microfinance institutions around the world. Some repay, some don’t. So Mr. Lieber’s definition of peer-to-peer lending sites could be considered fairly close, but it does not paint the complete picture.
I hope that defining these terms helps to clear up some confusion. For more, please see the above video.
What is the Microfinance Niche?
Lieber’s second mistake comes in the very next paragraph. In defining this niche (which I am assuming is the “microfinancing” niche), he mentions Kiva and Microplace-both arguably appropriate. But then he includes DonorsChoose- an organization that links donors with school projects. Check it out. No where in the “How it works” section does it claim to be a microfinance service provider! In fact, I would be interested to hear what their staff would have to say about the linkage. Yes, you receive letters from the students at the schools you support-which is awesome, by the way- but this is not the same as banking for those in need.
In defining the “microfinance niche”, Lieber does not reference any of the thousands of microfinance organizations that provide the actual services around the world. This normally would be a substantial mistake, but Lieber’s confusion of terms provides justification for the absence of such pertinent information. And this leads me to the third mistake- the most grave, if not corrected.
The Media’s Responsibility to Report the Truth
In both the print and online version, Mr. Keith Taylor and the Modest Needs Foundation are featured as the main organization for the article. Taylor, founder of Modest Needs, is pictured on the website, on the front page of the Business section as well as the second page of the article. But guess what? This organization is a grant-making organization- not a microfinance institution. Much like DonorsChoose, Modest Needs receives donations and issues grants-not loans. This creates an illusion, yet again, that philanthropy at a peer-to-peer or online level is the same as microfinance.
This false connection actually does a disservice to both the organizations profiled and organizations that actually reside in the microfinance space. This kind of carelessness in writing contributes to a relaxed (and wrong!) approach to the non-profit sector. We would be hard pressed to find an article on online banking that actually only discusses generic online customer service. As time goes on, community development non-profits are held to a pretty significant (and increasing) standard of transparency and ethics. Seeing as these non-profits, like Modest Needs, are trying to help those who need it, I would think that it would be in our best interest as the media to support this standard in the way that we report.
Dear Mr. Lieber
Mr. Lieber, you’ve written some pretty solid articles on both social and financial issues. These have been well researched and crafted. But, unfortunately, you missed the target here in a very significant way. You mis-defined microfinance, the niche it represents, and incorrectly linked two pretty awesome organizations to a field in which they do not belong. Because of this, I would humbly request a retraction or at minimum, a follow up column on the subject, correcting the discussed mistakes.
By all means, write a profile of peer-to-peer/project websites. Tell us about the ways that individuals can become philanthropists out of the comfort of their own home. The world needs to know these things. But, from one journalist to another, if you’re going to attempt to discuss ways in which individuals can engage with organizations related to a specific service or industry, please be sure to do your research.