German p2p lending service Lendico announced yesterday that an unnamed international hedge fund and 2 german banks will invest over 100 million Euro in loans on the Lendico marketplaces. The management sees that as a mark of confidence. Lendico is committed to increase activities in its growing core markets and plans to expand the product into SME loans. Continue reading
Today p2p lending service Lendico is launching in South Africa, the first non-European market for Lendico. The start-up is launching through Africa Internet Holdings (AIH) – an e-commerce development platform supported by Rocket Internet, Millicom International and MTN. AIH co-founder Jeremy Hodara said South Africa matches the 3 criteria Lendico looks for in new markets:
- The country needs good financial infrastructure, with all the necessary components in place
- There needs to be an expanding online population, with adequate Internet penetration
- There needs to be a demand for personal loans
(Sources: Lendico, BusinessTech.co.za)
Barclays Africa Group Limited (BAGL) has acquired a 49% stake in South African p2p lending service Rainfin. The investment amount is stated to be ‘tens of millions of rands’. Rainfin says it wants to use the money to grow the business and improve the product.
Rainfin launched in July 2012.
CEO Sean Emery on the investment of BAGL:
We have known for a while that we would need a partner to take RainFin to the next level, and chose BAGL after a loan search because it has a vision that aligns closely with ours. BAGL’s support will enable us to offer exciting new products in areas such as supply chain finance, enterprise development funding, fixed asset purchases and even mid-sized corporate debt. It will also clear the way for us to expand into new markets.
The BAGL investment in RainFin comes at a time when there is a lot of movement in the global peer-to-peer industry from the UK and US to China and India. In the US, peer-to-peer lenders such as Lending Club and Prosper are enjoying triple digit growth and venture capital firms like Sequoia Capital and Blackrock are investing in the industry.
Worldwide, we see banks, hedge funds, and institutional investors all exploring ways to collaborate with peer-to-peer lenders with City Group, Capital one, Bank of Montreal and Deuce Bank buying up loans originated through those platforms. With institutions moving into the market, peer-to-peer loans have truly come of age. BAGL will do the same to make our concept of peer-to-peer lending a mainstream finance option in South Africa.
Whether you’re a lender or borrower, rest assured that our main focus remains on bringing together creditworthy borrowers and smart lenders so that both parties can benefit. Our platform will remain as transparent as ever, and we will continue to put you first as we move forward into the future with our partners at BAGL.
We thank you for your early support of our business and of the early stages of peer to peer lending in South Africa. We look forward to moving into the future with you and with our new partners at BAGL.
Update: An earlier version of this article reported figures which were not up to date. Please see the comment by CEO Sean Emery for recent figures.
I have been following and using Zidisha for years. Today I am glad to be able to publish another interview with Julia Kurnia, Director and Founder of Zidisha Microfinance. An earlier interview conducted 2011 is here.
Zidisha celebrates its fourth birthday. What is the current status?
Four years ago, Zidisha launched as the first direct P2P lending platform to bridge the international wealth divide: We linked economically disadvantaged individuals in some of the world’s poorest places directly with individual lenders and allowed them to transact each other directly.
This went against conventional wisdom because it had always been assumed that this demographic could not use web-based services and needed local organizations to serve as a go-between. For example Kiva, which pioneered online fundraising for microfinance, contracts with intermediaries in each country to manage the loans and communicate with lenders on the borrowers’ behalf. Before Zidisha, nobody had attempted to connect people in developing countries to the international P2P lending market.
What we have learned in the past four years is that direct P2P lending across the international wealth divide is not only possible, but that the benefits are even greater than that of domestic P2P lending services. Banking services in developing countries are so inefficient that borrowers routinely pay interest rates of 50% or more, if they can access loans at all. With Zidisha, borrowers pay a transaction fee of 5% and can then choose to offer interest of 0% to 15% to lenders.
We’ve funded over 3,000 loans in the past four years, and so far their repayment rates are a bit better than those of small business loans in the United States. To date, 90% of the loans that are due to have been repaid have been repaid with interest, 5% are repaying late, 2% have been forgiven by lenders who opted out of repayments and 3% have been written off due to default or catastrophe suffered by the borrower.
Compared to p2p lending services Zidisha’s growth/loan figures are moderate. What reasons do you see for this difference?
The moderate pace of growth is mainly due to the fact that we are pioneering something that has never been tried before: a P2P lending community that connects people directly, without any intermediaries, across previously impregnable barriers of location, social group and culture. There is no precedent for this, no established best practice to follow. So we are scaling slowly, and continuously adjusting our lending model in response to experience.
How difficult is it to enter a new country to allow more borrowers to use Zidisha?
That varies a great deal, depending on the ease with which we can integrate with local money transfer services in each country. In Kenya, we use the M-PESA mobile banking service to send the loans directly to our members’ cell phones, and that is really an ideal solution.
We do not have brick-and-mortar offices or employees in borrowers’ countries; all of our application review and payment transfer services are provided remotely over the internet. Volunteers – both international interns and local community members – frequently visit borrowers and offer information sessions, but they do not manage loan transactions in the way traditional loan officers would. So once we are able to open a cost-effective electronic payment channel, that is really all we need to enter a new country.
Is the currency risk an important factor in Zidisha’s operations?
At Zidisha, lenders assume currency risk: they can lose money if the borrower’s currency depreciates against theirs over the course of the loan. One would expect that this would cause lending volume and interest rates to rise and fall in response to exchange rate fluctuations, but this had not happened for the most part. I think the reason is that lenders consider participation in Zidisha to be a philanthropic activity. They pay more attention to the social impact of the loans than the financial returns.
Today Rainfin launched the first p2p lending service in South Africa, which to my knowledge is the first national p2p lending service operating in an African country. Based on a sophisticated technology founders Sean Emery and Hannes van der Merwe launched the service after more than a year of implementation. Borrowers can apply for loan amounts between 1,000 and 75,000 ZAR (approx. 125 to 9,250 US$). Rainfin expects to reject as much as 80% of the applications. Rainfin charges 3% in transaction fees (2% to borrowers plus 1% to lenders). Rainfin uses an auction systems with the borrower setting the maximum interest rate he is willing to pay. Current listing are for nominal interest of about 15%. Continue reading
This is the second part of an interview with Julia Kurnia, Director and Founder of Zidisha Microfinance.
Does the Euro crisis in any way impact Zidisha’s business?
The Euro is the home currency of many of our lenders. To the extent that the Euro crisis causes it to depreciate against the US dollar (in which Zidisha account balances are denominated) and against the borrowers’ currencies in which loan values are fixed, it will increase financial returns when these funds are converted back to Euros.
That said, lending with Zidisha is intended to be a philanthropic activity, and most of our members seek to generate social benefits in a way that is financially sustainable. Zidisha loans typically allow economically disadvantaged households to expand their cash businesses to the point where incomes are increased by 150% to 200%. The additional cash is very often invested in the children’s education – both by providing sufficient living income so that teenagers do not need to drop out of school to support their families, and by covering the costs of continued schooling. The return to society from this kind of investment in education of the next generation of the rural poor in developing countries is impossible to quantify. This will continue to be true regardless of currency fluctuations.
A week ago Zidisha got a new design. What is new?
Our new design reflects feedback from the Zidisha community, and the growth of our organization. We opted for a clean, modern style and an uncluttered, simple layout that is in keeping with our values of directness and transparency. The new site is more effortless to navigate, easier to learn and read about Zidisha entrepreneurs, and simpler than ever to make a loan. We’ve also included more social media buttons so that visitors can conveniently share Zidisha with friends and family, and connect with us via Facebook and Twitter.
Zidisha is doing direct p2p lending. Do you think it is likely that there will be a substantial shift from indirect p2p lending (like Kiva does) to a direct model without MFIs in the future?
Yes, I think that is the future of online microlending. As Zidisha has proven that the concept is viable, I’m sure that we will inspire many similar initiatives. I expect to see other organizations – both new start-ups and established platforms – experiment with direct P2P lending across the international wealth divide. This will be a welcome development, generating positive social impact beyond the reach of our organization, valuable learning opportunities for P2P lending and microfinance practitioners, and useful variety for our clients. Continue reading
Today I am glad to be able to publish another interview with Julia Kurnia, Director and Founder of Zidisha Microfinance. As the interview text is a bit long for a blog post, I have split the interview in two parts.
Nearly 2 years have passed since our first interview. In that time Zidisha has grown considerably. Looking back, how satisfied are you with the achievements?
Two years ago, few believed that low-income individuals in developing countries could successfully participate in a genuine peer-to-peer lending community. The conventional wisdom was that people in remote, impoverished communities would not benefit from or repay loans unless the loans were administered in person by expensive local bureaucracies. As a result, the world’s poorest borrowers pay some of the world’s highest levels of interest and fees – between 35% and 40% is the global average for microfinance loans in developing countries.
Though there are quite a few other microlending websites that allow individuals to fund loans in developing countries, all of them rely on local microfinance organizations to communicate with lenders, create loan applications and collect repayments. In these intermediated microlending platforms, the communication is all one way, so that the borrower is often completely unaware of the lenders who funded his or her loan. And the intermediaries pass on their high overhead costs to borrowers, so that even when loans are financed at zero interest by charitable lenders, borrowers end up paying well over 30% in fees and interest. Such high rates reduce borrowers’ profits, sometimes to the point of making them poorer than they were before they received the loan.
Unlike the postings on other microlending platforms, the loan applications and comments posted on Zidisha’s loan pages are written by the borrowers themselves. This opens the way for dialogue between lenders and borrowers, so that lenders can receive answers to their inquiries about the loan and business directly from the entrepreneur they are funding. At the same time, the direct peer-to-peer connection reduces the administrative cost of loans by automating and outsourcing to borrowers and lenders themselves many of the record-keeping and credit-screening functions traditionally performed manually by local microfinance institutions. As a result, the average Zidisha borrower pays about 8% in annual interest and fees, including interest paid out to lenders. Over the past two years we’ve facilitated over 100,000 US$ in microloans for low-income individuals in four countries. Zidisha borrowers have maintained a repayment rate of 99.5% for ended loans – disproving the notion that the working poor in developing countries cannot be trusted to repay loans without the support of expensive local organizations.
How is the borrower feedback? Are there any suggestions for points to improve?
Last month we completed the first survey of all Zidisha members worldwide. In contrast to lenders, who gave a variety of reasons for choosing to join Zidisha, borrowers were unanimous in citing our low interest rates as the principal benefit of borrowing with Zidisha. Other benefits cited by borrowers included: no forced savings or collateral requirements, flexible credit conditions and repayment schedules, and the fact that Zidisha lenders place trust in their integrity and rewards responsible conduct rather than relying on legal protections alone to ensure repayment. 100% of borrower survey respondents said that they are actively recommending Zidisha to others – and indeed, we have never needed to advertise our platform in order to attract new borrowers.
When asked for suggestions for ways we can improve our service, a majority of respondents proposed the ability to raise larger loans. Zidisha currently limits maximum loan sizes based on amounts applicants have successfully repaid in the past, in order to ensure that they have the ability to repay the loans comfortably. However, some borrowers clearly feel that this loan size limitation policy constrains the growth of their businesses unnecessarily. Continue reading
CARE International UK runs the p2p microfinance platform Lendwithcare.org. For a minimum investment of 15 GBP anybody can help funding a loan to entrepreneurs in Africa or Asia.
Lendwithcare has partnered with local MFIs in Benin, Togo, Philippines, Cambodia and Indonesia that disburse the loan to the borrower. Lenders do not receive interest. Aside from the default risk (Lendwithcare claims less than 2% bad debt) lenders also bear the currency exchange rate risk. Lenders do fill their account via Paypal or credit card, withdrawels are through Paypal.
Though the concept closely resembles Kiva’s, it is interesting to see the approach used by a long-time established aid and development organisation. The site shows the experience CARE has with marketing and fundraising. It looks much more flashy (at least compared to the old Kiva page).
Lendwithcare was launched in April 2010. Since then 243 loans were funded. At the moment there are about 32 loan request by entrepreneurs listed.
Two weeks ago Inuka.org launched into public beta. Inuka’s initial focus will begin in East Africa, where it has partnered with several microfinance Institutions that will be responsible for sourcing loans, uploading them on Inuka’s online portal, performing credit reviews on potential borrowers and collecting repayments. Inuka has selected two microfinance partners in East Africa after a detailed on-site due diligence process.
Lenders do not earn interest on loans financed. Asked what differentiates Inuka from other p2p microfinance services like Kiva, Babyloan or MYC4, founder Kanini Mutooni told P2P-Banking.com:
– We only lend to female entrepreneurs in sub-saharan Africa which means were very much focused on a niche sector rather than just lending to anyone
– Our loans are interest free which means that there is more of a philanthropic social element in lending as opposed to MYC4…
When I looked today, there were 11 loan request from Kenya online.
After revolutionizing payments in East Africa with it’s M-Pesa service, Safaricom has now introduced M-Kesho. Want a loan? No need to go to a bank. All the 9.8 million M-Pesa users need to show to be eligible for a loan is 6 month history of M-Pesa transactions. Loan amounts go up to equivalents of about 50 US$.