However, are the repayments by the entrepreneurs also required to pay the 5% service fee? This new pay it forward models seems mostly to be a way to keep all the money in the system and slowly make it yours via the 5% fee. I don't see what the benefit of this model is towards the lender. Or am I misunderstanding it?
The 5% fee does not take away from the loan funds, which are kept separate from operating costs and fees.
For comparison, most traditional microlending programs charge over 20% in fees and interest, and comparable unsecured small business loans in the markets we serve are much more expensive, or not available at all. Since the entrepreneurs are acquiring assets and operating capital they could not otherwise afford and which continue to generate profits after the loan is repaid, the value to them is normally far higher than the 5% cost of the loan.
Here is an aggregator of project updates posted by the entrepreneurs, which gives an idea of the impact of the loans: https://www.zidisha.org/project-updates
I would imagine:
- Amount of loans outstanding
- delinquency rate
- breakdown of country of origin of lenders. Are people really paying it forward?
Projects Funded: 274,507 Amount Lent: $18,723,792 Total Members: 411,728
The loans outstanding are about $1 million, and delinquency rate ranges between 15 and 25% depending on the cohort measured.
Lenders are about half in the US, 40% in Europe, and the rest elsewhere.
Are people really paying it forward? Early data suggest that repayment rates are higher than for loans, and this is expected given that borrowers are more directly involved in the allocation of repaid funds. For loans ended thus far the average optional extra amount paid has been around 20%, enough to offset expected defaults. We won't have statistically robust data on this for several months, as the larger loans take longer to repay.