5 ms·

Zidisha (YC W14) reduces interest rates for P2P lending to developing countries

49 points by jkurnia 13y ago

devinmontgomery 13y ago
Thumbs up for clarity. There's some inherent complexity to having different rates borrows pay vs what lenders receive, but having interest broken up by both flat rate and APR and posting the registration fee in the same place makes it easier to understand.
- jkurnia 13y ago
  Thanks devinmontgomery. One of our greatest challenges has been striking the right balance between making detailed information available to those who seek it, and keeping our website presentation simple and easy to understand for newcomers. Thus far, we've opted to display only one kind of interest rate (the simple flat rate upon which our website calculations are based), along with a modal box note that the equivalent APR is roughly twice this, and a prominent display of the actual dollar costs to the borrower.
aw3c2 13y ago
There is no link to your homepage on your blog, both the logo and the "Home" link only go through your blog!
- jkurnia 13y ago
  Hi aw3c2, thank you for pointing that out. Our standard Wordpress account does not seem to have an option to change those links, and we've focused our web development resources so far on improving our main website rather than our blog. As a temporary measure, I've added links to our website to the blog post itself.
  - aw3c2 13y ago
    No problem! As a workaround you could probably add a text widget to the sidebar with the link.
    - jkurnia 13y ago
      We'll look into that. Thanks again!
rdl 13y ago
Congratulations. Once I have a charity donation budget again I know where I'll be contributing (along with Watsi...)
- jkurnia 13y ago
  Thank you! Watsi was the first nonprofit at Y Combinator, and the way they have combined the best of Silicon Valley technology expertise with a charitable mission is an inspiration for all of us. Its founder, Chase, has also been incredibly generous in offering advice and help to the other YC nonprofits.
jkurnia 13y ago
I'm Julia, the founder of Zidisha. I'd be happy to respond to questions and comments here.
- deleted 13y ago
  [deleted]
elecengin 13y ago
How does Zidisha handle compliance with SEC regulations around issuing securities? I know that both LendingClub and Prosper had to go through a lengthy process to offer their notes with proper documentation and disclosures.
- jkurnia 13y ago
  Hi elecengin, Zidisha is registered as a 501(c)(3) nonprofit only, and does not have a securities license. For this reason, our terms of use do not offer lenders any guarantee they will be able to withdraw repaid loan funds. Legally, Zidisha lending accounts are not financial assets, and any payouts to lenders are treated as voluntary promotional payments offered at Zidisha's sole discretion. That is one more reason we try to keep the emphasis on philanthropic impact, rather than the financial aspect of the loans.
  - simon_ 13y ago
    That is quite a distinction!
  - kanamekun 13y ago
    If the SEC ever decides to shut you guys down for operating without a securities license, would lenders lose their ability to withdraw their own money (i.e. to make one of those "voluntary promotional payments offered at Zidisha's sole discretion")?
    - jkurnia 13y ago
      According to our attorney, they would not.
7Figures2Commas 13y ago
> We believe the reason is that, while allowing higher interest improved the financial attraction of lending with Zidisha, it simultaneously weakened its humanitarian appeal. As someone who donates money to 501(c)3s that are focused on the developing world and who also dabbles in P2P lending, I see a disconnect. There's nothing magical about a 10% APR figure. Maybe it feels better to some folks, but for me personally at least, if I'm looking for "humanitarian appeal", I would far prefer to donate money than lend. The blog states "higher interest rates do not seem to have resulted in higher levels of loan funding overall." This is an interesting statement. It could mean one of two things: Zidisha lenders are not actually interested in lending and are going to allocate capital regardless of risk, or the higher interest rates aren't high enough to attract capital to the theoretically riskiest borrowers. Without more data answering the question "Why?", it's premature to use this as justification for capping interest rates.
- jkurnia 13y ago
  Hi 7Figures2Commas, It is true that the conclusion that higher interest has not led to more lending is not based on rigorous data. It is rather based on the general observation that during the past year or so, loan funding volume has not noticeably increased at times when the highest interest rates offered at Zidisha increased. The generalization that Zidisha lenders are not primarily attracted by financial returns is likewise not based on data, but rather a subjective assessment resulting from many years of survey responses, comments posted on our website and conversations with lenders. (An important caveat is that many of our lenders do care about preserving the value of their lending funds over time, and often try to lend at interest rates that they believe will help them achieve this goal. But this is a very different motivation than profit maximization.) I agree with you that offering dramatically higher interest may well attract more capital, from lenders who are motivated by profit rather than philanthropy. This would not necessarily be a bad thing, but it is not our mission or core area of expertise. It will be interesting to see if a profit-based variation of Zidisha emerges, and whether it ultimately has a greater impact on the opportunities available to entrepreneurs in developing countries than our philanthropic platform.
  - 13y ago

49 points by jkurnia 13y ago

Thumbs up for clarity. There's some inherent complexity to having different rates borrows pay vs what lenders receive, but having interest broken up by both flat rate and APR and posting the registration fee in the same place makes it easier to understand.

jkurnia 13y ago
Thanks devinmontgomery. One of our greatest challenges has been striking the right balance between making detailed information available to those who seek it, and keeping our website presentation simple and easy to understand for newcomers. Thus far, we've opted to display only one kind of interest rate (the simple flat rate upon which our website calculations are based), along with a modal box note that the equivalent APR is roughly twice this, and a prominent display of the actual dollar costs to the borrower.

aw3c2 13y ago

There is no link to your homepage on your blog, both the logo and the "Home" link only go through your blog!

jkurnia 13y ago
Hi aw3c2, thank you for pointing that out. Our standard Wordpress account does not seem to have an option to change those links, and we've focused our web development resources so far on improving our main website rather than our blog. As a temporary measure, I've added links to our website to the blog post itself.
- aw3c2 13y ago
  No problem! As a workaround you could probably add a text widget to the sidebar with the link.
  - jkurnia 13y ago
    We'll look into that. Thanks again!

rdl 13y ago

Congratulations. Once I have a charity donation budget again I know where I'll be contributing (along with Watsi...)

jkurnia 13y ago
Thank you! Watsi was the first nonprofit at Y Combinator, and the way they have combined the best of Silicon Valley technology expertise with a charitable mission is an inspiration for all of us. Its founder, Chase, has also been incredibly generous in offering advice and help to the other YC nonprofits.

jkurnia 13y ago

I'm Julia, the founder of Zidisha. I'd be happy to respond to questions and comments here.

deleted 13y ago
[deleted]

elecengin 13y ago

How does Zidisha handle compliance with SEC regulations around issuing securities? I know that both LendingClub and Prosper had to go through a lengthy process to offer their notes with proper documentation and disclosures.

jkurnia 13y ago
Hi elecengin, Zidisha is registered as a 501(c)(3) nonprofit only, and does not have a securities license. For this reason, our terms of use do not offer lenders any guarantee they will be able to withdraw repaid loan funds. Legally, Zidisha lending accounts are not financial assets, and any payouts to lenders are treated as voluntary promotional payments offered at Zidisha's sole discretion. That is one more reason we try to keep the emphasis on philanthropic impact, rather than the financial aspect of the loans.
- simon_ 13y ago
  That is quite a distinction!
- kanamekun 13y ago
  If the SEC ever decides to shut you guys down for operating without a securities license, would lenders lose their ability to withdraw their own money (i.e. to make one of those "voluntary promotional payments offered at Zidisha's sole discretion")?
  - jkurnia 13y ago
    According to our attorney, they would not.

7Figures2Commas 13y ago

> We believe the reason is that, while allowing higher interest improved the financial attraction of lending with Zidisha, it simultaneously weakened its humanitarian appeal. As someone who donates money to 501(c)3s that are focused on the developing world and who also dabbles in P2P lending, I see a disconnect. There's nothing magical about a 10% APR figure. Maybe it feels better to some folks, but for me personally at least, if I'm looking for "humanitarian appeal", I would far prefer to donate money than lend. The blog states "higher interest rates do not seem to have resulted in higher levels of loan funding overall." This is an interesting statement. It could mean one of two things: Zidisha lenders are not actually interested in lending and are going to allocate capital regardless of risk, or the higher interest rates aren't high enough to attract capital to the theoretically riskiest borrowers. Without more data answering the question "Why?", it's premature to use this as justification for capping interest rates.

jkurnia 13y ago
Hi 7Figures2Commas, It is true that the conclusion that higher interest has not led to more lending is not based on rigorous data. It is rather based on the general observation that during the past year or so, loan funding volume has not noticeably increased at times when the highest interest rates offered at Zidisha increased. The generalization that Zidisha lenders are not primarily attracted by financial returns is likewise not based on data, but rather a subjective assessment resulting from many years of survey responses, comments posted on our website and conversations with lenders. (An important caveat is that many of our lenders do care about preserving the value of their lending funds over time, and often try to lend at interest rates that they believe will help them achieve this goal. But this is a very different motivation than profit maximization.) I agree with you that offering dramatically higher interest may well attract more capital, from lenders who are motivated by profit rather than philanthropy. This would not necessarily be a bad thing, but it is not our mission or core area of expertise. It will be interesting to see if a profit-based variation of Zidisha emerges, and whether it ultimately has a greater impact on the opportunities available to entrepreneurs in developing countries than our philanthropic platform.
- 13y ago