Kiva, Heifer International, the American Red Cross, and donor trust

Posted on October 15, 2009 at 1:40 pm

In the debate over Kiva’s misrepresentation of how their funding system works much of the discussion has focused around how honest aid agencies can and should be with donors. My argument has always been that we have to be honest and ethical about what we are doing and that it is the responsibility of aid agencies to educate donors on good aid practices. If you want to tie this to a fundraising campaign that creates a personal connection that’s fine, but you have to be honest about the extent of that connection. Informal feedback from donors these last few days says much the same thing.

Thoughts on Kiva’s information sharing practices

One of my followers on twitter who both gives to Kiva and tweeted my post deceptive advertising had this response to the controversy:

“I knew that’s how Kiva works. I also sponsor children via Children International and that monthly payment also goes into the big pot.” “I hope nobody stops lending via Kiva, but they might want to be more up front about their practice.”

Thoughts on Heifer International’s information sharing practices

As Heifer International has also been brought up in this debate, most notably on Sasha Dichter’s Blog, I contacted my brother for his thoughts. He’s a  regular donor to Heifer and a few years back for Christmas he made donations of animals in all of our names. I asked him if he understood at the time that his money went into a communal pot and might not have been used to buy those exact animals. His response was similar to the previous response.

“I have always been well aware of Heifer’s disclaimer.  I always figured that the money would go into to a pool to be best used by the NGO, as individual donors probably don’t have the scope or necessary knowledge to know where to best donate the funds.  However, by being able to pick out something like a flock of ducks, two lambs, and a pig, you get a more tangible feel for what your donation is purchasing.  I guess it helps you feel more connected.”

I asked him how he would feel if the entire donation went into administration costs as opposed to actually purchasing goods. He paused then said that he assumed a portion of it would have to be used for administration but that he would hope and expect the bulk of it would be used for the goods themselves.

Thoughts on American Red Cross information sharing practices

Both my brother and a commenter to my previous post had comments on American Red Cross as well. From my brother:

On the other hand when after 9/11 the Red Cross was collecting funds with the appearance of using them towards 9/11 victims and instead was putting into the general fund, that was bothersome.

The commenter on my blog discussed donor trust and the damage that was done to that trust when American Red Cross both over hyped Y2K and justified it as a way to get people prepared for any disaster, and the subsequent call for people to give blood after 911 even though hospitals were telling people not to come in. The commenter concludes:

“The problem that this presented to the ARC is that it seriously damaged their credibility with many people and alienated people who might have become donors, or even volunteers. In fact, many of the people in the “new pool” of blood donors were nothing more than useless numbers, because they never donated again; they felt taken advantage of and were no longer interested.

In other words, it’s not just in how we raise funds. No matter what the purpose – if we mislead people, once they realize, they feel used and cheated, and they feel that they have been disrespected – which is true. That is a pretty sure way to alienate people, which is exactly the reverse of what you want to happen.”

The use of half-truths

Sasha Ditcher argues in his blog that to get people to donate aid agencies have to use half-truths.* I argue that while these tactics may get short term gains, the damage it does to the organization and to the aid world as a whole is significant. It is this history of half truths and misinformation that has helped create many of the problems aid agencies encounter in the field today.

Aid agency distrust has led to donors by-passing aid agencies

The distrust that many donors feel towards aid agencies has resulted in random people showing up at disaster sites with handfuls of money or goods to give away because they no longer trust that aid agencies will do what they say they do. This has lead to in-fighting in villages as unscrupulous people take advantage of the well intentioned but poorly informed donor to redirect the donations to their friends, family, or political constituents. It has also led to aid dependency as people quit their jobs so they can be sure to be present when anyone comes around with handouts so they get their fair share.

Aid agency distrust has led to donors earmarking their funds

The general distrust that aid agencies will not spend their money the way they advertised they would has led to an increasing number of people earmarking their funds for specific activities. The Wallstreet Journal even gave this advice on their section on smart giving. Because earmarking requires aid agencies to spend the money according to donor wishes it has led to situations where aid agencies have to spend money on something that is not needed while not being able to pay for something that is critically needed.

Oversimplifying child sponsorship has led to abuse of the system

The simplified and emotional commercials for child sponsorship campaigns has led to the proliferation of small organizations initiating child sponsorship programs without the proper understanding of how to ensure it’s done well. This had led to very unfair distribution of aid as principals, parents and students learn to manipulate the system so that a single child will receive multiple sponsorships while other children receive none.

Oversimplifying aid delivery has led to problems with donated goods

Fund raising campaigns that focus only on the specific goods provided and do not explain the difficulties and complexities of aid distribution has led to the skyrocketing number of individuals and organizations taking up collections of goods to send overseas. If the people sending the goods do not have a clear understanding of what is and isn’t appropriate, and the logistics of getting goods where they need to go, the goods can clog ports and prevent key relief supplies from clearing customs after a disaster, lead to waste disposal problems for unusable goods, and hurt the local businessmen and manufacturers trying to sell similar goods.

By oversimplifying aid and not explaining clearly what is done and why it is done that way the aid world has created the impression that aid agencies cannot always be trusted and that aid work is so simple that anyone can do it.

Donors are not stupid

Donors are not stupid and can understand the complexities of aid if the aid world makes a real effort to educate them. According to a study from the the Center on Philanthropy at Indiana University:

“The results follow what is expected from past studies and intuition. Specifically, charitable giving increases as education increases.”

Not only are they well educated but they would also be far more likely to give if we gave them more information. According to Portraits of Donors, another study by the Center on Philanthropy at Indiana University, donors with a net worth of more than $1 million or an annual income of more than $200,000 were asked what would cause them to donate more. Here are some of the responses:

• • 31.1% – if they understood the goals of the nonprofits
  • 34.7% – if they had more access to research
  • 58.3% – if they were able to determine the impact of gifts.

So instead of hiding the complexity of aid and what is necessary for aid to be successful, charities may find they get more long-term, reliable donors through providing clear and real information about their work. Don’t underestimate what your donors will or will not understand, they know what it takes to run a business.

Entrepreneurs give 25 percent more to charity on average than other high net-worth households.  They give statistically significantly more to educational organizations and other organizations such as environmental or international groups. Portraits of Donors

It is important that aid agencies raise funds in honest and ethical ways

If you need to couple real information with the personal connection, then do it. My brother and the Kiva donor both understood that their money didn’t actually go to the specific project that drew their attention, but they liked the feeling that it created. So make that connection if that’s what’s needed, but ensure that you act ethically and provide real and accurate information about your work. Because in the end it is always the aid recipients that pay the price for our sins.

* Update – since publishing this post Sasha Ditcher has written a post explaining that my understanding of his argument was incorrect and elaborating more on his thoughts

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A mostly comprehensive guide to the Kiva and donor illusion debate – Philanthropy Action

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