A single-parent family of three in New York, making $8000 per year, makes under half the income level of the Federal poverty line and qualifies for food stamps, TANF (direct cash benefits) and Medicaid. (Details at our guide to U.S. public assistance)

And yet, at $2,667 per person per year, this family is wealthier than 70% of the people in the world. (See the Global Rich List calculator as well as the Giving What We Can version, which may be using more up-to-date data.)

In the poorest parts of the world, fewer than half have access to a latrine or toilet; only 17% own a television; and 19-45% lack access to a reliable source of clean water. In the U.S., practically everyone has all three. (Details.) As we wrote yesterday, the two areas have completely different concepts of “hunger.” And finally, while anyone in the U.S. can ultimately be served in an emergency room, people across the world die or suffer from health conditions for which proven solutions exist.

Is microfinance a good bet for a donor? We feel the answer is complicated, and that the many extreme exaggerations of microfinance’s impact get in the way of making an informed decision.

This post summarizes the differences between the stories you’ve probably heard and the reality according to available evidence.

Myth #1: the way microfinance charities help is by giving people loans to expand businesses. Success stories like Andrea’s, Lucas’s and Sophia’s are representative.

Reality: there isn’t much reliable information on how people are using loans, but the evidence there is suggests that “microloans” are often used for consumption purposes: food, visits to the doctor, etc. This isn’t a bad thing - the poorest people in the world face considerable financial uncertainty, and loans can empower them to manage their own lives.

So, however, can savings, which some scholars feel are more beneficial for the poor than loans. Funding institutions to help people save may not have the same sex appeal as “lending your money to help people grow their businesses,” but it might do more good.

For more, see:

In a recent debate, David Hunter’s article on the nonprofit sector has taken heat for its assertion that “While nonprofits work incredibly hard, with passion and dedication, and often in incredibly difficult circumstances to solve society’s most intractable problems, there is virtually no credible evidence that most nonprofit organizations actually produce any social value.”

We agree with the claim for the sectors we’ve examined, which we believe are similar to the sectors Mr. Hunter has examined: particularly thorny areas such as charities working to improve education and international charities addressing extreme poverty overseas. These are problems on which experts have struggled for decades to make any progress, and while we don’t necessarily agree that most charities are failing to produce value, we agree that most charities cannot produce any credible evidence that they are. This is different from the claim that Sean Stannard-Stockton attributes to Mr. Hunter (”most nonprofits and the social sector as a whole is not currently producing social value”), but it still means that it’s very hard for a donor to give with confidence.

The information we have

David Roodman, whom we previously interviewed, has a very interesting post up about a specific microfinance vehicle, Kiva.org.

Our existing report argues that donations through this sort of vehicle are likely “fungible,” and therefore better thought of (for impact purposes) as general support of organizations rather than as support of specific projects or people. Mr. Roodman demonstrates this issue in a very concrete way:

Less [than] 5% of Kiva loans are disbursed after they are listed and funded on Kiva’s site. Just today, for example, Kiva listed a loan for Phong Mut in Cambodia and at this writing only $25 of the needed $800 has been raised. But you needn’t worry about whether Phong Mut will get the loan because it was disbursed last month. And if she defaults, you might not hear about it: the intermediating microlender MAXIMA may cover for her in order to keep its Kiva-listed repayment rate high.

Mr. Roodman goes on to argue that the way sites like Kiva are generally imagined to work would make little to no sense.