Comment by modernmicro | Hacker News Reader

Comment by modernmicro | Hacker News Reader

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The microlending websites you mentioned have much higher repayment rates, so that there's a much smaller amount of portfolio actually at risk:

* Kiva: 98.95% repayment [1]

* United Prosperity: 97.8% repayment [2]

* Vittana: 95%+ [3]

* Kiva Zip: 88.8% [4]

* Zidisha: 74.19% [5]

I noticed that Zidisha doesn't publicize its low repayment rate (and the correspondingly high loss rate) very broadly - for example, on your frontpage. If you did, your forums probably wouldn't be filled with comments like these:

"The long-posted 98% repayment rate left me with a bitter taste. I feel both deceived and stupid." - mewesten

"I think you will not care at all when zidisha folds and you will not care at all at all the lenders loosing all their money. You will pat yourself on the back at all the money given to borrowers and what good work you did giving away other peoples money. Is it legal what you are doing? These are funds provided by members of the public it is not your money." - Russell

"If the model is to be sustainable, lenders must surely be made to feel that their interests are taken into account. They may choose to act as if they are in fact not lenders at all but givers - but that is not your advertised model, and would soon run into the sand in any case." - Wiredfox

"Your vision for Zidisha as a marketplace like ebay was a surprise for me to read in the forum. There is no clear explanation of this on Zidisha’s website. The impression I have had from the website is that Zidisha is just like Kiva and the others, except for the comments and low interest. It never occurred to me that no one was reviewing the business loan applications. I assumed Zidisha was somehow doing this." - Evelyn

These are your own lenders talking.

I think that if you explored some of the ideas I mentioned (e.g. featuring the repayment rate and loan loss rate on the frontpage, and adding a mission statement to the frontpage as well), you would see less angry lenders like the above.

[1] http://www.kiva.org/about/stats

[2] http://www.unitedprosperity.org/us/risk_factors

[3] http://blog.vittana.org/scale-plan

[4] https://zip.kiva.org/

[5] https://www.zidisha.org/index.php?p=43

"The microlending websites you mentioned have much higher repayment rates, so that there's a much smaller amount of portfolio actually at risk."

There is a big difference between the repayment rates for ended, and portfolio at risk for currently outstanding loans. In order to have a complete picture, lenders should know the performance of currently outstanding loans as well as ended ones. Zidisha is the only microlending website I know of that provides statistics on the performance of the currently outstanding loan portfolio.

Even our statistics for ended loans are not defined in the same way as other websites. For example, I understand that Kiva expresses its repayment rate as 100% minus the writeoff rate, including as repaid loans amounts not yet repaid, but not yet written off. (http://www.kivafriends.org/index.php?topic=5791.0)

More importantly, I understand that Kiva allows field partners to cover repayments not actually made by the borrowers and report these amounts as paid on the Kiva website. (http://blog.givewell.org/2009/10/13/kiva-repayment-data/) These amounts are repaid in that lenders do receive the funds back, and I am not accusing Kiva of dishonesty. But the fact remains that substantially less than 98.95% of Kiva loans are repaid by the borrowers themselves.

I have lived with many low-income households in developing countries, and in my experience, cash availability of households without formal jobs, insurance, savings or social safety nets is not only limited, but highly irregular. It is simply not realistic to provide people under these circumstances enough capital to change their lives, and expect its repayment to obey a predetermined schedule with 98.9 percent accuracy. That is why I am skeptical of such high published repayment rates.

Zidisha's published rates are lower, but they do accurately reflect the repayment performance of the borrowers themselves. Comparing them with the statistics of intermediated microlending websites is misleading, because they are not measuring the same thing.

I have not managed to find information on how Kiva Zip's repayment rate is defined, so cannot comment on it.

I noticed that you tend to respond to perceived criticism by attacking your fellow microlenders, rather than addressing the issues raised.

The thing is, you have a lot of angry lenders who feel misled by your marketing. After using your site and reviewing your marketing, I think they have good reason to be upset. Zidisha has a track record of downplaying its loan loss rates. I'm not the only who feels this way: your lenders are very upset about it.

You mentioned you had a long response explaining why my article was inaccurate. But your response mostly just said that you say Zidisha is risky in your FAQ, terms of use and other internal pages.

Why not put your repayment/loan loss rates and mission statement on your frontpage?

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