4 ms·

Show HN: Impact Investment Funds – Growth-Enabled P2P Lending Donation Funds

31 points by jkurnia 10y ago

jkurnia 10y ago
I'm Julia, the founder of Zidisha (YC W14 nonprofit). This is the first time in two years we've offered a loan fund that is designed to grow in value over time. I'd welcome feedback on the appeal of a compounding-value donation fund and on our implementation of it.
- qwrusz 10y ago
  Hi Julia, Congrats on the success so far! Wishing your team and the entrepreneurs you are helping even greater success to come. I don't know all that much about microlending, but I do know quite a bit about investment funds, so I clicked the link hoping to learn more and maybe help offer some feedback if relevant. After reading your blog post I still didn't fully understand it so I went to your main site to try to learn more. I read through the FAQs too, but still have a couple questions: For example: while exploring some of the projects on your site I came across Ms. Mwangi from Kenya asking for a loan to buy shoes and clothes for her clothing line. https://www.zidisha.org/loan/shoes-clothes-for-my-clothline-bokiewear https://www.zidisha.org/loan/shoes-clothes-for-my-clothline-... Ms. Mwangi is asking to borrow $509.00 The cost of the loan details show: -Service Fee: 5% of $509.00 = $25.47 -Lifetime membership fee: $50.95 -Optional Pay into Zidisha Members Loan Fund in return for a higher starting credit limit: $428.02 The costs total: $504.44 To me this looks like costs and fees totalling $504 in order for her to borrow $5? So my sincere apologies for any misunderstanding on my part. I realize microlending has unique risks and challenges compared to other types of lending. And of course a practical amount of money needs to got to Zidisha to help cover costs and expenses of the good work you guys are doing. But how can costs and fees be $504 for a $5 loan? Is that correct? The costs to loan value seem very high to say the least. If you see this, I'd really appreciate a bit of clarity and info on these details. Thanks
  - wjnc 10y ago
    After depositing the $428 she can borrow often and without interest in the future. Bankrolling Zidisha / the fund. And on this transaction only to her disadvantage. She's leveraging her shops supplies while she had the money! However she still pays a 5% fee (in this case, for a 3 month loan, 21.5% annual). Obviously the fee is interest as well. The lender gets no return, but a tax deductibility. It's a clever way of building a massive fund. My problem with most P2P (micro-)lending is that its risk management is often lacking and that interest rates do not adequately reflect risks. A zero percent nominal rate is bogus for a Nairobi shop owner. And 20+% fees excessive, especially when someone has to pay $400+ to get in.
  - jkurnia 10y ago
    Thanks for taking a look and for your feedback. The default starting loan for first-time borrowers without a track record is very small (around $10). If a first-time borrower opts to start with the small default amount, there is no Members Loan Fund deposit required. But if a first-time borrower is confident they can repay larger amounts, we offer the option of depositing the difference between the ~$10 default first-time loan amount and the desired starting credit limit into the Members Loan Fund upon joining Zidisha. The net amount received for the first loan is still $10, but after successful repayment of the first loan, the borrower may take out larger loans commensurate with the starting loan they have repaid. The Members Loan Fund deposit may be withdrawn at any time the borrower does not have an outstanding loan. It may also be used to pay off the remaining balance of an outstanding loan, if the borrower requests it. If the loan goes into arrears, it is used to reimburse lenders for the amount they had lent. The lifetime membership fee is currently zero, but at the time this borrower joined, it was 10% of the starting credit limit chosen by the applicant. (So someone choosing the default starting credit limit of $10 would pay a lifetime membership fee of $1.) The above costs are only paid once, at the time a borrower first joins Zidisha, and entitle the borrower to lifetime access to raise loans. You can learn more about why we developed a lending model that front-loads costs here: http://www.huffingtonpost.com/julia-kurnia/the-story-of-zidisha-dram_b_9580894.html http://www.huffingtonpost.com/julia-kurnia/the-story-of-zidi... The 5% service fee is a flat percentage of each loan amount, and is independent of the loan term. If Ms. Mwangi opts to hold the loan for two years, she would still pay only $25.47. We'll aim to make this clearer in the cost breakdown explanation. Thanks again!

31 points by jkurnia 10y ago

I'm Julia, the founder of Zidisha (YC W14 nonprofit). This is the first time in two years we've offered a loan fund that is designed to grow in value over time. I'd welcome feedback on the appeal of a compounding-value donation fund and on our implementation of it.

qwrusz 10y ago
Hi Julia, Congrats on the success so far! Wishing your team and the entrepreneurs you are helping even greater success to come. I don't know all that much about microlending, but I do know quite a bit about investment funds, so I clicked the link hoping to learn more and maybe help offer some feedback if relevant. After reading your blog post I still didn't fully understand it so I went to your main site to try to learn more. I read through the FAQs too, but still have a couple questions: For example: while exploring some of the projects on your site I came across Ms. Mwangi from Kenya asking for a loan to buy shoes and clothes for her clothing line. https://www.zidisha.org/loan/shoes-clothes-for-my-clothline-bokiewear https://www.zidisha.org/loan/shoes-clothes-for-my-clothline-... Ms. Mwangi is asking to borrow $509.00 The cost of the loan details show: -Service Fee: 5% of $509.00 = $25.47 -Lifetime membership fee: $50.95 -Optional Pay into Zidisha Members Loan Fund in return for a higher starting credit limit: $428.02 The costs total: $504.44 To me this looks like costs and fees totalling $504 in order for her to borrow $5? So my sincere apologies for any misunderstanding on my part. I realize microlending has unique risks and challenges compared to other types of lending. And of course a practical amount of money needs to got to Zidisha to help cover costs and expenses of the good work you guys are doing. But how can costs and fees be $504 for a $5 loan? Is that correct? The costs to loan value seem very high to say the least. If you see this, I'd really appreciate a bit of clarity and info on these details. Thanks
- wjnc 10y ago
  After depositing the $428 she can borrow often and without interest in the future. Bankrolling Zidisha / the fund. And on this transaction only to her disadvantage. She's leveraging her shops supplies while she had the money! However she still pays a 5% fee (in this case, for a 3 month loan, 21.5% annual). Obviously the fee is interest as well. The lender gets no return, but a tax deductibility. It's a clever way of building a massive fund. My problem with most P2P (micro-)lending is that its risk management is often lacking and that interest rates do not adequately reflect risks. A zero percent nominal rate is bogus for a Nairobi shop owner. And 20+% fees excessive, especially when someone has to pay $400+ to get in.
- jkurnia 10y ago
  Thanks for taking a look and for your feedback. The default starting loan for first-time borrowers without a track record is very small (around $10). If a first-time borrower opts to start with the small default amount, there is no Members Loan Fund deposit required. But if a first-time borrower is confident they can repay larger amounts, we offer the option of depositing the difference between the ~$10 default first-time loan amount and the desired starting credit limit into the Members Loan Fund upon joining Zidisha. The net amount received for the first loan is still $10, but after successful repayment of the first loan, the borrower may take out larger loans commensurate with the starting loan they have repaid. The Members Loan Fund deposit may be withdrawn at any time the borrower does not have an outstanding loan. It may also be used to pay off the remaining balance of an outstanding loan, if the borrower requests it. If the loan goes into arrears, it is used to reimburse lenders for the amount they had lent. The lifetime membership fee is currently zero, but at the time this borrower joined, it was 10% of the starting credit limit chosen by the applicant. (So someone choosing the default starting credit limit of $10 would pay a lifetime membership fee of $1.) The above costs are only paid once, at the time a borrower first joins Zidisha, and entitle the borrower to lifetime access to raise loans. You can learn more about why we developed a lending model that front-loads costs here: http://www.huffingtonpost.com/julia-kurnia/the-story-of-zidisha-dram_b_9580894.html http://www.huffingtonpost.com/julia-kurnia/the-story-of-zidi... The 5% service fee is a flat percentage of each loan amount, and is independent of the loan term. If Ms. Mwangi opts to hold the loan for two years, she would still pay only $25.47. We'll aim to make this clearer in the cost breakdown explanation. Thanks again!