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Comment by vjvj | Hacker News Reader

Great to see organisations like Zidisha going through YC.

This is more evolutionary than revolutionary as far as microfinance is considered (for reasons below), and that's a good thing because there is no need to reinvent the wheel.

1) Repayment rates over 90% are not uncommon among existing microfinance lenders. Grameen Bank's rate is 97.6% - http://www.grameen-info.org/index.php?option=com_content&tas...)

2) Unlike mortgage providers who have a wealth of credit information for applicants, microfinance initiatives do not have this. Traditionally this has been solved by lending to groups and if any one person in the group defaults, the entire group is barred from future payments. This enables the MF lender to harness information held about individuals to screen non-creditworthy individuals.

It's a clever mechanism and I'd like to know more about how Zidisha uses facebook data to similar effect.

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Great points vjvj! I'll try to answer them below:

1) Traditional microfinance services you are referring to have intermediaries (ground forces) to help them with loan disbursement, background check, loan recovery etc.. Zidisha is the first service to take everything online and that's why the interest rate is substantially lower. But it comes with a risk of low repayment rates. Repayment rate number was ~ 80% range last year and has gone up to ~90% after lots of process improvement. You can read more about it here: http://venturebeat.com/2014/08/20/y-combinator-backed-zidish...

2) Above link should answer it partially and Julia's answer should help more.

Hope it helps!

I'd say the amount of interest charged by the average microfinance institution is a pretty good reason to want to reinvent the wheel, especially with impact studies often struggling to find compelling evidence of microlending having a net positive impact on clients. Borrowing from most Kiva institutions costs impoverished people with extremely unstable incomes far more than the credit cards us salaried middle class Westerners are advised not to binge on, and that's mostly because of genuinely high admin costs.

Zidisha's direct p2p is part of that picture, although at present lending at affordable rates without the overheads of any intermediary still results is default rates that are higher than the interest recovered. Another interesting feature of Zidisha is the willingness of some of its clients in sub-Saharan Africa to participate in discussions on the site and volunteer to help advise borrowers and follow up unpaid debts.

Ultimately, digital technology can make credit a lot more affordable in the developing world. For example Zoona (http://www.zoona.co.za/), which offers exceptionally low cost credit to tiny businesses in the developing world that are able to take payments via their app, is one of the most potentially disruptive innovations I've seen in payment tech.

Companies like Kabbage (in the US) and Lenddo (Philippines, Colombia) use social graph data pretty extensively to predict credit risk. At Zidisha thus far, we're only using Facebook data to verify online identities of the applicants.

Lenddo has an API that some P2P companies are using. it is much richer than just Facebook.

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