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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 fir

by 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 The Members Loan Fund deposit may be withdrawn at any time the borrower does not have an outstanding loan.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!

qwrusz 10y ago
Thank you for the reply. 1. Part of the reason I found the Members Loan Fund confusing was the terminology in the FAQ wasn’t clear it’s a deposit which could be withdrawn if the borrower no longer has an outstanding loan. 2. I understand depositing the difference of first loan into the MLF helps facilitate future larger loans at a higher credit limit. Though how it works seems to involve a borrower receiving a ~$10 loan, but then being asked to “repay” the lender a very different loan amount in some cases hundreds of dollars – over the course of only a few weeks...These entrepreneurs able to turn $10 into $100s in profits so quickly would be very impressive. Maybe repayments come from another source. 3. There may be more behind this part but it looks like when good borrowers pay back their loans in full and they eventually move on from Zidisha they would take their MLF deposit with them as they leave. At the same time there are the borrowers who take out loans and default on repayment and don’t come back; they end up creating a loss as their MLF deposit doesn’t cover the full loan value. Basically this sounds like a system exposed to some moral hazard and adverse selection but without a mechanism for good actors to help offset any losses from bad actors. ie people leaving Zidisha are either ~neutral to the fund or they created a loss, no one ever moves through leaving a net positive. It's comparable to insurance company model and doesn't sound sustainable if this is what's happening - and made more difficult if the biz model involves spending the principal and keeping the interest instead of spending interest and keeping the principal. With that said, I do want to mention I read the huffpo link. It’s awesome the way you guys are iterating based on observations and innovating as you build this - making it more efficient. It's really exciting to see this happening on this level in the non-profit space. I realize you have a challenging two sided market to grow that requires balancing info and experience for many people across many countries. It seems really complicated too how to handle the different messaging that lenders and borrowers need here respectively and then also keeping things consistent as one platform. And it's P2P lending which brings with it all kinds of hurdles and biases. And it's also non-profit work! Which nobody seems to get is real work and too many crazy people love to complain about (PS I hope you are not underpaying yourself for this role, I see way too many underpaid non-profit workers). Basically what you are building looks darn hard to do, and it's super impressive what's been built so far, a ton of respect from me. Best of luck.

by jkurnia 10y ago

qwrusz 10y ago

Thank you for the reply. 1. Part of the reason I found the Members Loan Fund confusing was the terminology in the FAQ wasn’t clear it’s a deposit which could be withdrawn if the borrower no longer has an outstanding loan. 2. I understand depositing the difference of first loan into the MLF helps facilitate future larger loans at a higher credit limit. Though how it works seems to involve a borrower receiving a ~$10 loan, but then being asked to “repay” the lender a very different loan amount in some cases hundreds of dollars – over the course of only a few weeks...These entrepreneurs able to turn $10 into $100s in profits so quickly would be very impressive. Maybe repayments come from another source. 3. There may be more behind this part but it looks like when good borrowers pay back their loans in full and they eventually move on from Zidisha they would take their MLF deposit with them as they leave. At the same time there are the borrowers who take out loans and default on repayment and don’t come back; they end up creating a loss as their MLF deposit doesn’t cover the full loan value. Basically this sounds like a system exposed to some moral hazard and adverse selection but without a mechanism for good actors to help offset any losses from bad actors. ie people leaving Zidisha are either ~neutral to the fund or they created a loss, no one ever moves through leaving a net positive. It's comparable to insurance company model and doesn't sound sustainable if this is what's happening - and made more difficult if the biz model involves spending the principal and keeping the interest instead of spending interest and keeping the principal. With that said, I do want to mention I read the huffpo link. It’s awesome the way you guys are iterating based on observations and innovating as you build this - making it more efficient. It's really exciting to see this happening on this level in the non-profit space. I realize you have a challenging two sided market to grow that requires balancing info and experience for many people across many countries. It seems really complicated too how to handle the different messaging that lenders and borrowers need here respectively and then also keeping things consistent as one platform. And it's P2P lending which brings with it all kinds of hurdles and biases. And it's also non-profit work! Which nobody seems to get is real work and too many crazy people love to complain about (PS I hope you are not underpaying yourself for this role, I see way too many underpaid non-profit workers). Basically what you are building looks darn hard to do, and it's super impressive what's been built so far, a ton of respect from me. Best of luck.