is the coolest thing in microfinance thanks to endorsements from Oprah and Bill Clinton, but does it really live up to the hype? I don’t think that it does.

The Kiva website claims to have disbursed $29 million USD through 42,645 loans. That seems like a lot, but how does it compare to the world’s most famous Microfinance Institution; Grameen Bank?

Grameen Bank’s website claims disbursed loans of $6.9 billion (Kiva’s is only 0.4% of this) and currently has 7.46 million borrowers.

Kiva’s main contribution to microfinance is to provide funding to microfinance institutions, albeit in a very creative way. It makes individual lenders feel great because the transaction is personified, much in the same way World Vision uses child sponsorship.

But the real problems of microfinance rarely have to do with funding but instead with harder to solve problems such as government policies, finding quality staff and sustainable lending practices. Loan funding is only a small part in improving the outreach of microfinance.

What I’m hoping for is that people won’t think they’ve done enough just by making a Kiva donation, and will instead keep pursuing other ways to make a difference.

When you think about it a Kiva loan is really a very, very small cost to the lender. For example, if you assume a risk free bank deposit interest rate of 5% on a 12 month loan, a loan of $100 is really only a cost $5 in forgone interest (well less, because you’d get taxed on that interest). This is a pretty miserly sum compared to a $100 donation to a tax deductible organisation (which Kiva is not) like Save the Children, if you also contributed your tax deduction it could be considerably more than $100.

Kiva isn’t a bad thing, it’s a very innovative program that’s done wonders to raise awareness of microfinance and global poverty in general. For that is should be congratulated. But what should be clear is the scale of its contribution to the global microfinance sector is minimal despite its high profile.