I've posted this link before and it explains the high interest rates. It's one of the things I like about Kiva it seems quite transparent and also does well on Charity Navigator receiving its highest rating.
http://www.kiva.or/help/interestRateComparison#AverageInterestRateBorrowerPaysToKivaFieldPartner
Average Interest Rate Borrower Pays To Kiva Field Partner: The self reported average rate charged by the Field Partner to the entrepreneur. Note that Kiva.org does not currently take a cut of the interest rate charged by Field Partners and instead relies on an optional lender fees/donations to help pay for running our website (small core staff, rent, servers, etc).
If the Field Partner interest rate seems high, consider the following:
Field Partner interest rates are a highly affordable alternative to the local money lender
Local money lenders - often the only option for poor entrepreneurs to get a loan - charge interest rates ranging from 60% to 800% annualized.
A poor entrepreneur can generate greater benefits from additional units of capital than can a highly capitalized business, because she or he begins with so little.
According to the World Bank, studies covering India, Kenya, and the Philippines found that the average annual return on investments by microbusinesses ranged from 117 to 847 percent.
The costs of making a micro-loan in the developing world are higher versus larger loans in the West.
Cost of screening - Field Partners must screen entrepreneurs who commonly have no credit history, no collateral, are frequently illiterate, and often live in remote areas. To responsibly assess the credit worthiness of each entrepreneur, the cost is higher than the West where most everyone has a credit score and screening / loan application can be done electronically.
Cost of in person collections - Field Partner staff typically travel to each entrepreneur on a monthly basis to make collections. Compared to the West, where mail and internet repayments are standard, the costs are higher.
Cost as a size of the loan - If the Field Partner's actual cost per loan is $25, the percentage cost is 0.25 percent for a $10,000 loan, but 25 percent for a $100 loan.
Field Partners must charge an interest rate that allows them to pursue their social impact agenda sustainably.
In order for Field Partners to reach more of the poor with relatively low interest loans (vs. local money lender), they need to cover their costs.
Given the higher costs of microloans discussed above, Field Partners must charge a sufficient interest rate.
Kiva aspires to provide transparency around the social impact and relative Field Partner interest rates in order to ensure to reward Field Partner that successfully create social value while lowering their costs to do so.
