Ignore the pictures of the people you are purportedly lending to, their projects, and even their country. That is pure marketing.
If you read the small-print http://www.kiva.org/about/how/even-more you will see that you aren't lending to these people at all, but actually making zero-interest, low-risk, short-term loans to micro-finance institutions. (That said, I do have a couple of hundred dollars in Kiva myself.)
It's similar to switching electricity suppliers (stay with me!) - you don't get a new cable straight from the electricity company which carries only "their" electricity, you stick with the same cable and the same electricity but more of your supplier's electricity gets bought.
Actually, it's your assertion that is not quite true.
It certainly used to be the case that "We give Field Partners the option to cover [...] entrepreneur defaults." [1] And there was indeed evidence at the time that Field Partners were doing just that. [2]
Although they have removed this explicit wording, it isn't clear that doing this is no longer allowed, and there is some evidence that the practice is continuing: Only 7 out of 128 pilot or active Field Partners report a default rate of more than 1%; indeed, around three-quarters of them report a default rate of 0.00%. [3] Frankly, these statistics are unbelievable unless we accept that most Field Partners still cover entrepreneur defaults.
So if the end-borrower defaults, you might lose money. But rather more likely is that the Field Partner will cover the loss themselves as an operating cost, not report any of this to Kiva, and you will be none-the-wiser.
[1] http://web.archive.org/web/20091117123031/http://www.kiva.or...
[2] http://blog.givewell.org/2009/10/13/kiva-repayment-data/
They have microfinance partners, people approach these partners and the partners approach Kiva. Sometimes you'll see "pre-funded" loans where the person has approved the partner, the partner funded them and then Kiva is used to reimburse the partner.
You are lending to the people but through a proxy. If you put $25 in the microfinance partner redistributes $25 to the person, it just might not be the $25 you put in. Like a bank, the $100 you put in isn't the $100 you take out but the money is still yours.
You're not entirely accurate when you write "sometimes". According to the process on the Kiva website http://www.kiva.org/about/how/even-more all loans are pre-disbursed, and in 5 minutes clicking around earlier, I couldn't find a single one which wasn't.
With pre-disbursed loans, as you say, Kiva is used to reimburse the partner, not the person behind the picture on the website (because those people already have their money.) So I stand behind what I said: Kiva users are making zero-interest, low-risk, short-term loans to micro-finance institutions.
The difference between $100 in the bank and $100 in Kiva is that Kiva pretends to put a face on the person this $100 is being lent back out to. They even give an illusion of choice, they appear to let you pick and choose who gets funded! Meanwhile my bank doesn't pretend to tell me who "my" $100 is lent back out to, and they certainly don't pretend to let me choose whose mortgage application gets funded, and whose doesn't.
Great idea though, never lost a $1 through kiva lending.
