Nathaniel,
I appreciate your thoughts and I agree (mostly) with what you've said. However, you note that:
"Most of the good we do in the world will not be knowable, direct or tangible. The sooner we embrace it and use our whole selves and our whole lives to contribute rather than vainly seeking the fleeting moment of compassionate triumph, the more we will help good organizations and good efforts succeed without contriving to mislead (or at least not inform) donors."
I'm sorry but that sounds a lot like blaiming the vitim here. Don't get me wrong, I'm not saying that Kiva doesn't do good works or that this is not a valuable service. I think it is. What I'm talking about is the fact that I can (and do) give cash to any of a million charities out there, most of which also do great work. In fact, I get asked to do so about twice a week -- sometimes it seems like twice a day. There's no shortage of worthy causes.
Here, participation was billed not just as an act of giving cash but a chance to participate in the process. That is, this was to be a chance to not just hand over a cash, this was to have an opportunity to be a part of the system, to choose the very individuals that we felt so strongly about that we wanted them to be selected for funding. Now, we learn that we really are just cash providers and nothing more.
As pointed out by the times article, "If Kiva's users want to be connected to an individual borrower, Kiva doesn't do that, and so the big question is, do Kiva's users want to be connected to a microfinance institution - in which case, why do they need Kiva?" Individual lenders can support microfinance institutions directly through, for example, Microplace, or make donations to support nonprofit groups like the Grameen Foundation and Acción that support microfinance.
More importantly, Kiva has fallen into the trap of believing that its mission is so important that, like action heroes in the movies, they don't have to follow the rules that apply to everyone else.
I also don't buy into the argument that things had to be this way for efficiencies sake. This misses the potential of other benefits from an "inefficient" P2P system. People could get connected to certain lendees and want to offer more direct aid and support to a particular group or even village. Your article, like many others, believes that the only benefit to a P2P system is the "warm fuzzy feeling" in the donor/lender. That completely discounts the long-term effects of connecting with other individuals that could lead to service trips and other outreach.