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To clarify: I actually think that the article's main complaint (a large loan loss rate) may be ACCEPTABLE if it is made clear up-front. Zidisha is not a place

by mcherm 13y ago

To clarify: I actually think that the article's main complaint (a large loan loss rate) may be ACCEPTABLE if it is made clear up-front. Zidisha is not a place for lenders to make huge profits. It is a place for lenders to support others making a difference for themselves. If the loan default rate can be lowered enough that it is covered by lending rates, then it could ALSO be a place where the lenders' money can support others over-and-over through repeated loans (and even be withdrawn by the lender at some point) -- and that would be GREAT. But it is not necessary: what is necessary is clear and honest communication.

jkurnia 13y ago
I would agree with these statements: Zidisha is a platform for philanthropy. We're optimized for giving disadvantaged entrepreneurs in the world's poorest places the chance to improve their lives, not for storing financial assets. I think we make that distinction abundantly clear to prospective lenders. See for example our first FAQ for lenders, "Is Zidisha a safe place to store my savings?" (https://www.zidisha.org/microfinance/faq.html https://www.zidisha.org/microfinance/faq.html), or the first paragraph of our Trust and Security page (https://www.zidisha.org/index.php?p=123 https://www.zidisha.org/index.php?p=123). That said, repayment rates at Zidisha are increasing steadily as we continuously improve our lending model in response to experience. The 18% writeoff rate includes mostly loans that were issued over a year ago (which have had time to mature). Our credit risk control mechanisms have improved dramatically since that time, such that I think it's reasonable to expect that the value of lending funds can be maintained over time without erosion for the loans that are being issued today. That said, Zidisha is still not a safe place to store funds one cannot afford to lose, and we do not market it as such.
- modernmicro 13y ago
  "Our credit risk control mechanisms have improved dramatically since that time, such that I think it's reasonable to expect that the value of lending funds can be maintained over time without erosion for the loans that are being issued today." To achieve that at the max interest rate you allow (~10% APR), you would need a 2.4% loan loss rate. That's an order of magnitude below where Zidisha is now. That would be an incredible achievement and I would gladly cover it as a huge story! Is Zidisha on track to deliver a 2.4% loan loss rate?

by mcherm 13y ago

jkurnia 13y ago

I would agree with these statements: Zidisha is a platform for philanthropy. We're optimized for giving disadvantaged entrepreneurs in the world's poorest places the chance to improve their lives, not for storing financial assets. I think we make that distinction abundantly clear to prospective lenders. See for example our first FAQ for lenders, "Is Zidisha a safe place to store my savings?" (https://www.zidisha.org/microfinance/faq.html https://www.zidisha.org/microfinance/faq.html), or the first paragraph of our Trust and Security page (https://www.zidisha.org/index.php?p=123 https://www.zidisha.org/index.php?p=123). That said, repayment rates at Zidisha are increasing steadily as we continuously improve our lending model in response to experience. The 18% writeoff rate includes mostly loans that were issued over a year ago (which have had time to mature). Our credit risk control mechanisms have improved dramatically since that time, such that I think it's reasonable to expect that the value of lending funds can be maintained over time without erosion for the loans that are being issued today. That said, Zidisha is still not a safe place to store funds one cannot afford to lose, and we do not market it as such.

modernmicro 13y ago
"Our credit risk control mechanisms have improved dramatically since that time, such that I think it's reasonable to expect that the value of lending funds can be maintained over time without erosion for the loans that are being issued today." To achieve that at the max interest rate you allow (~10% APR), you would need a 2.4% loan loss rate. That's an order of magnitude below where Zidisha is now. That would be an incredible achievement and I would gladly cover it as a huge story! Is Zidisha on track to deliver a 2.4% loan loss rate?