a) what collateral do you accept and how do you value the collateral?
We don't accept any collateral, because 1) most of our borrowers are low-income individuals just entering the working population, and don't have any substantial assets, and 2) a collateral-based credit risk mitigation system would be too expensive relative to the size of the loans (the starting loan amount is $50 - $150).
b) do you consider country risk ? and how do you quantify individual's risk profile ? have you developed a credit risk model ?
Currently, once a borrower is admitted to Zidisha, lenders alone judge country and credit risk. However, we're currently working on a data-driven credit risk model to complement our other risk mitigation measures.
c) would you consider offloading credit risk by partially securitizing your loans?
Not in the near term, because our lending model is too new and changes too rapidly for credit risk to be easily quantifiable. In addition, we'd be concerned about moral hazard.
d) Countries where you operate in have a serious risk of document fraud. can you share stories of fraud mitigation ?
One of the major shifts in our lending approach has been a move away from document-based vetting. For example, we used to require local community leaders (religious officials, school principals etc.) to sign recommendation forms for loan applicants. We found that fraudulent applicants would forge these, even having false organizational stamps manufactured for this purpose. It was possible to mitigate this by telephoning the officials who signed the forms and asking them to verify their institutions' addresses or other hard-to-remember information, but it proved too difficult for our all-volunteer staff to cope with the erratic phone networks and linguistic barriers once we started processing thousands of applications.
We never did figure out a way to mitigate document fraud at scale. Instead, we developed other verification methods that were more difficult to falsify, and reduced the initial loan amount, until the costs of getting a fraudulent application through our vetting system outweighed the expected gains.
f) finally, what kind of lenders do you seek ? Are you looking for altruistic people or people seeking to spread their investment risk ?
We are looking for altruistic people, who want to help people in the world's poorest places without dependency-creating handouts or exorbitant interest rates. Zidisha at present is not viable as a purely commercial investment.
e) Also, do you realize that you have the opportunity to become the Equifax of third-world countries ?
Yes, that's an interesting possibility, though I've not yet heard of Zidisha being used in this way. Most people who can borrow with Zidisha do not seek credit elsewhere.