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A micro-loan banking app with virality built-in? I can see why VC's are interested.

Using your social network to evaluate credit worthiness is something I've never heard of before. Is this common in the developing world?

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Pretty common yes. Informal lending systems that are used in a lot of developing countries (most people don't have access to traditional financial services like banks and credit cards) are largely based on social networks and social capital - you are less likely to default on a loan if it's your friends who loaned you the money.

I wouldnt say common but there are several startups in mexico doing that, one is called kueski

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