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I'd be interested to learn more about what you're proposing (if this is possible). I've thought for some time that this is one area where (as you say) there's

by mft_ 8y ago

I'd be interested to learn more about what you're proposing (if this is possible). I've thought for some time that this is one area where (as you say) there's a clear social need, and that the solution is for a non-profit lending organisation to offer the loans. As in, the lending company would, overall, aim to break even once the cost of operation, loan defaults, and profit from loans are taken into account. It probably goes without saying that the loans would have a higher interest rate than those seen with longer-term standard loans, but I'd imagine they'd be orders of magnitude lower than some of the awful, predatory rates --many over 1000% APR-- that we typically see with UK 'payday' loans.

toyg 8y ago
> It probably goes without saying that the loans would have a higher interest rate I remember in the '90s all the fuss about "microcredit" in developing countries. Maybe it's time to have something like that in "developed" countries too?
- emodendroket 8y ago
  Then again, maybe not "Microcredit has been a disaster for the poorest in South Africa" https://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster https://www.theguardian.com/global-development-professionals... "India's micro-finance suicide epidemic" https://www.bbc.com/news/world-south-asia-11997571 https://www.bbc.com/news/world-south-asia-11997571 "Micro-credit schemes of trouble: Housewives turn ‘beggars and prostitutes’ to cope" https://punchng.com/micro-credit-schemes-of-trouble-housewives-turn-beggars-and-prostitutes-to-cope/ https://punchng.com/micro-credit-schemes-of-trouble-housewiv...
  - toyg 8y ago
    I hate to go true scotsman, but I think the term microcredit in many of those scenarios has been diluted beyond recognition. The guy who dropped dead in your second source, had borrowed a fifth of the cost of building a house - that's not really microcredit by any real standard: it's not small and it's not really a productive investment. The rates and methods mentioned (weekly 10% repayments!) are usurious, and usury can be micro or macro but it's still usury, not credit. The original microcredit vision was low rates, in strong collective settings, as an investment to support productive endeavours: giving people enough money to start a business, or supporting them in emergencies so that their situation wouldn't dramatically change (fix a broken car so you can keep working etc etc). It shouldn't be a way to support consumption. It's hard not to inject moralism in the process, but there must be criteria.
    - emodendroket 8y ago
      Then it seems microcredit has not yet been tried. Anyway, even if we're specifically talking about micro-enterprise, there is a high rate of failure and then people having the loan as millstones around their necks, and there's questions about how good it really is to have a bunch of businesses of the sort that are financed by microcredit: https://governancexborders.com/2013/05/29/the-art-of-pointless-and-misleading-microcredit-impact-evaluations/ https://governancexborders.com/2013/05/29/the-art-of-pointle...
    - picsao 8y ago
      Todo such a thing in Africa with its family free loader culture without solving this problem first honestly seems like entrapment.
rahimnathwani 8y ago
"and that the solution is for a non-profit lending organisation to offer the loans" As I said above, the major issues are (i) effective underwriting, and (ii) efficient operations. The better you can distinguish good customers from bad (better data and better models), the less money you lose to people that don't pay back. The better your tools to serve customers, the more customers you can serve without needing to increase the size of your team. By reducing costs, you can charge less, get more customers etc. A non-profit would face exactly those same two challenges, just to break even. Not needing to make a profit would have a much much smaller impact on its ability to reduce prices, than the two factors I mention.
- dbspin 8y ago
  This exists. It's called a credit union. They're successful and widely used globally, and have 101 million members in the US alone. Source - https://en.wikipedia.org/wiki/Credit_union https://en.wikipedia.org/wiki/Credit_union
jhayward 8y ago
> the solution is for a non-profit lending organisation to offer the loans In the US we have Credit Unions, which are exactly this.

by mft_ 8y ago

toyg 8y ago

> It probably goes without saying that the loans would have a higher interest rate I remember in the '90s all the fuss about "microcredit" in developing countries. Maybe it's time to have something like that in "developed" countries too?

emodendroket 8y ago
Then again, maybe not "Microcredit has been a disaster for the poorest in South Africa" https://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster https://www.theguardian.com/global-development-professionals... "India's micro-finance suicide epidemic" https://www.bbc.com/news/world-south-asia-11997571 https://www.bbc.com/news/world-south-asia-11997571 "Micro-credit schemes of trouble: Housewives turn ‘beggars and prostitutes’ to cope" https://punchng.com/micro-credit-schemes-of-trouble-housewives-turn-beggars-and-prostitutes-to-cope/ https://punchng.com/micro-credit-schemes-of-trouble-housewiv...
- toyg 8y ago
  I hate to go true scotsman, but I think the term microcredit in many of those scenarios has been diluted beyond recognition. The guy who dropped dead in your second source, had borrowed a fifth of the cost of building a house - that's not really microcredit by any real standard: it's not small and it's not really a productive investment. The rates and methods mentioned (weekly 10% repayments!) are usurious, and usury can be micro or macro but it's still usury, not credit. The original microcredit vision was low rates, in strong collective settings, as an investment to support productive endeavours: giving people enough money to start a business, or supporting them in emergencies so that their situation wouldn't dramatically change (fix a broken car so you can keep working etc etc). It shouldn't be a way to support consumption. It's hard not to inject moralism in the process, but there must be criteria.
  - emodendroket 8y ago
    Then it seems microcredit has not yet been tried. Anyway, even if we're specifically talking about micro-enterprise, there is a high rate of failure and then people having the loan as millstones around their necks, and there's questions about how good it really is to have a bunch of businesses of the sort that are financed by microcredit: https://governancexborders.com/2013/05/29/the-art-of-pointless-and-misleading-microcredit-impact-evaluations/ https://governancexborders.com/2013/05/29/the-art-of-pointle...
  - picsao 8y ago
    Todo such a thing in Africa with its family free loader culture without solving this problem first honestly seems like entrapment.

rahimnathwani 8y ago

"and that the solution is for a non-profit lending organisation to offer the loans" As I said above, the major issues are (i) effective underwriting, and (ii) efficient operations. The better you can distinguish good customers from bad (better data and better models), the less money you lose to people that don't pay back. The better your tools to serve customers, the more customers you can serve without needing to increase the size of your team. By reducing costs, you can charge less, get more customers etc. A non-profit would face exactly those same two challenges, just to break even. Not needing to make a profit would have a much much smaller impact on its ability to reduce prices, than the two factors I mention.

dbspin 8y ago
This exists. It's called a credit union. They're successful and widely used globally, and have 101 million members in the US alone. Source - https://en.wikipedia.org/wiki/Credit_union https://en.wikipedia.org/wiki/Credit_union

jhayward 8y ago

> the solution is for a non-profit lending organisation to offer the loans In the US we have Credit Unions, which are exactly this.