Effective charity is, sometimes, a problem. On the one hand, compassion for others is part of the highest law for Christians, and a great virtue in nearly all religions. On the other, we want our charity to actually help people, and not support the destructive conditions or behavior that made them poor.
Our charity can also be a way for us to impose our will on someone. I once heard of someone who had bought cattle for a poor group in Africa; his intent was to help them start a ranching business that would provide them with sustainable food sources. This didn’t work too well, because the people receiving the cattle tended to butcher them almost immediately. The person had a very good idea about solving this group’s problem, but it was more his idea than theirs, and when they didn’t seem to agree with him, he stopped helping them.
So it was very, very interesting to read (via Marginal Revolution) about Kiva, a loan clearinghouse for developing nations.
In world terms, Americans are filthy rich. Income that’s below the poverty line here is more than some whole African villages make. So, say the Kiva people, if we’re so rich, let’s use our riches and become capitalists for small businesses in developing nations. They list businesses that are applying for loans, along with the amount, and you give some or all of the amount of the loan to Kiva, who then issues the loan once the full amount has been donated. As the business repays the loan, that money is repaid to you, and you can receive regular updates on how the business is doing. (Some of this information is available on their active loan page.)
This is definitely charity, and not an investment. There is a vetting process for the loan, and repayment rates appear to be high, but businesses can fail in Uganda as easily as here (more easily, in fact). Plus, you don’t get interest on the loan. (The borrowers sometimes do pay interest, which goes to cover Kiva’s expenses.)
Kiva seems to deftly solve a lot of the problems with traditional charity. The borrower has to apply for the loan, and come up with his/her own business case, so the risk of imposing one’s will on the recipient is low. Since the borrower has to pay the loan back, the borrower is not made dependent on chariable giving. By building up local business, the measure improves the local economy, which should eliminate the causes of poverty instead of just treating the symptoms.
Right now, they’re out of businesses to sponsor due to high interest in the site. But please keep an eye on them, and think about sponsoring a business once one becomes available.