In some ways I think this may be an improvement on traditional charities working in the micro-enterprise area. Seeing as the money is provided as a loan, it is expected the individual or group pay it back over a specified time period, effectively holding them accountable and encouraging them to make productive use of the money. Also the micro-finance groups that interact with the clients generally provide training to help support those they've made a loan to.
Finally because you choose which groups/individuals/projects to lend money to you can decease the chance that the money is used in a manner you wouldn't approve of (ie clearing rain forest for crops). The loans are generally contributed to by a number of people, so if the loan is defaulted you've not lost a large amount.
The site appears to work well, I contributed to a couple of loans in May and they've started pay that back now. Once they've paid my loans back I'll re-loan the money to someone else, though I could withdraw it if I needed to. In the mean time I've made a couple more loans.
If people are interested drop a comment here, it could be fun to create a exChch/Heresy group, as the site supports the usual range of web 2.0 social features such as teams, journals, profile pages and all that jazz.
From the website:
We Let You Loan to the Working Poor
Kiva's mission is to connect people through lending for the sake of alleviating poverty.
Kiva is the world's first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs around the globe.
How it works:
How Kiva Works
Choose an Entrepreneur, Lend, Get Repaid
The below diagram shows briefly how money gets from you to an entrepreneur, and back.
1) Lenders like you browse profiles of entrepreneurs in need, and choose someone to lend to. When they lend, using PayPal or their credit cards, Kiva collects the funds and then passes them along to one of our microfinance partners worldwide.
2) Kiva's microfinance partners distribute the loan funds to the selected entrepreneur. Often, our partners also provide training and other assistance to maximize the entrepreneur's chances of success.
3) Over time, the entrepreneur repays their loan. Repayment and other updates are posted on Kiva and emailed to lenders who wish to receive them.
4) When lenders get their money back, they can re-lend to someone else in need, donate their funds to Kiva (to cover operational expenses), or withdraw their funds.