Finance

Lenddo’s Borrowers in Mexico and The Philippines Get Credit Via Facebook

Jeff Stewart believes he can figure out if you will repay your debts by studying who you know and what they say about you. For him, it’s better than a credit score. Stewart is CEO and co-founder of Lenddo, which gives small loans to borrowers in developing countries based on information it gleans from their accounts on Facebook and other social networks.

Lenddo CEO and co-founder Jeff Stewart.

Lenddo CEO and co-founder Jeff Stewart.

Stewart was running two earlier companies when he and his New York-based partners noticed something odd: their hardworking and educated employees in other parts of the world were often unable to secure loans. Why, he wondered, would local lenders ignore such eligible, middle-class consumers in emerging economies? Finding out proved an irresistible challenge. Stewart and his colleagues became obsessed with the lending industry, and their research led them to the pioneering microfinance work of Nobel Peace Prize winner Muhammad Yunus, whose Grameen Bank impacted millions of lives with loans based on a system of community referral and peer enforcement.

“We spent about a year interviewing microfinance professionals to really understand what is it about the social dynamics of microfinance that causes everyone to repay,” says Stewart. “It turns out that your friends know your character, and when you involve the community in the underwriting process … they make really good decisions about who should have access to financial services.” This matters most in economies with few existing mechanisms and systems. “There are markets where there’s not a lot of transaction information you can tap into,” Stewart explains. “We found that who you associate with is a huge predictor of repayment, of your financial health. With a good team of data scientists and customers’ consent to share that information, we can administer credit and get people access to capital.”

Their idea for Lenddo was to translate a common public health hypothesis—that you make important health decisions based on the behavior of your friends—to make financial health predictions. If your friends take up smoking, you’re more likely to do so too, and if your friends gain weight, likewise.

Lenddo helped Luivin Ortiz of Columbia secure an educational loan.

Lenddo helped Luivin Ortiz of Colombia secure a loan for his studies.

Launched in 2011, the company’s micro loans are now helping middle-class people in the Phillipines, Mexico, and Colombia pay for college, healthcare, home repairs after natural disasters, and even smartphones. Unlike traditional microfinancing operations that serve the poorest populations, Lenddo gets access to a huge customer base with enormous borrowing–and repayment—capacity by focusing on middle-class borrowers. Its typical customers are educated participants in the global economy: call-center workers, architects, accountants, and knowledge workers who are comfortable using computers and engage regularly with social networks.

“As good as microfinance is for the bottom of the pyramid, when you bring it to the middle class and you move it online, all the costs disappear,” Stewart says.  The global explosion in mobile devices use means Lenddo customers can easily engage large social networks to prove their identity and trustworthiness. And data-collecting smartphones reduce the administrative costs of making loans to people in remote communities. “Five years from now, people aren’t going to say, ‘Hey, where’s my bank branch?’” Stewart predicts. “They’re going to say, ‘I want all my financial services delivered through the phone, and I want it to be social.’” Stewart adds that while Lenddo’s technology is applicable domestically, the company is exclusively focused on emerging markets, with no plans to enter the U.S. market.

When Stewart and and his co-founder Richard Eldridge first explained Lenddo’s business to seasoned financial professionals, they got some surprising feedback. “Yes, this is how lending has worked for hundreds of years,” they said. Even J.P. Morgan once said that “the character of the man” trumped loan-to-asset and loan-to-income ratios for estimating creditworthiness. Today, banks rely more on financial calculations and transaction analyses, but Lenddo is bringing back character-based lending by taking a strong Facebook network as the 21st century version of a sterling reputation. And while platforms like Klout measure subjective influence, which can be useful in marketing, Stewart believes Lenddo’s reputation measurement offers a quantitative solution to a specific problem.

Lenddo does more than look at social data, however. It aims to build relationships and understand borrowers’ goals, and provides information to help customers make good decisions. “The best customers are ones who have thought through the process,” Stewart says. “How are they going to repay? Is this really life-improving? Is this an investment in themselves and the family? Or is it just consumption?”

Stewart says a typical Lenddo loan is equivalent to a borrower’s month’s income—about $450 on average. Mexico is the company’s fastest-growing market, primarily for education loans. Lenddo also helped many Filipino families rebuild their homes after last year’s devastating typhoon, and it aims to help customers  replace high-interest debt with new low-cost loans.

Presently, Lenddo’s own regulated lending entities administer all its loans. Ultimately, Stewart hopes customers will be able to access Lenddo’s specialized financial services from a range of institutions and lenders. Of course, as companies like Lenddo succeed in removing bureaucracy from lending, removing banks could be next. Peer-to-peer social lending is an obvious next step. For now, Stewart says Lenddo aims to accomplish its goals “without peer-sourcing the capital.” But he sees radical change ahead: “Consumer finance is a huge piece of the global economy and we should expect lots of innovation.”

Tags: , , , , ,

  • Elizabeth Forbes

    Hello, Good day to everybody reading this,

    TESTIMONY OF HOW I GOT MY LOAN FROM A LEGIT AND TRUSTED LOAN COMPANY!

    My name is Elizabeth Forbes from United States. I want to thank Mr John Michaels who helped me to get a loan. For the past three months, I have been searching for a loan to settle my debts, everyone I met scammed and took my money until I finally met Mr John. He was able to give me a loan of $10,000 US Dollars. He can also help you. He has also helped some other colleagues of mine. If you need any financial help, kindly contact his company through email: aceloanservices@hotmail.com I believe he can help you. Contact him to get help just as he helped me. He doesn’t know that I am doing this by spreading his goodwill towards me but I feel I should share this with you all to free yourself from scammers, please beware of impersonators and contact the right loan company. below are his words of encouragement to those seeking for a legit and honest private loan lender.

    “Do you need a loan to pay off credits and debts? Do you need finance to set up your own business? Do you need loans to carry out large projects? Do you need college loan? Do you need funding for other various purpose? email: aceloanservices@hotmail.com

    Thank you for reading and good luck.

  • Brabra Hook

    I NEVER THINK I WILL SUCCEED IN GETTING A LOAN

    FROM THE INTERNET Good day, I am Mrs brabra hook

    ,an American who base in the United Kingdom, i am

    so confidence to say that one’s in my life time i

    can experience legitimacy in loan company on the

    Internet world, if i was directed by somebody else

    to this company, i wouldn’t have written them

    because i have been fooled several times by online

    loan firm on the Internet and i decided stay off

    applying for loan online until a time came when i

    was having financial problem due to the

    predicament i had in my place of work that leads

    to my sack off in my place of work and i have

    nobody to run to, my credit was very low, my rent

    was approaching it expiring dates and my kids have

    to been in school but due to my ex-sense spending

    before i got sack off from place of work i have

    nothing solve all this problem. I have no other

    option than to come online looking for online loan

    firm that will help me out of my financial problem

    and i came across a loan firm and i was scammed of

    $5000USD in my attempt of obtaining a loan from

    them and i almost committed suicide and i ask my

    self is this the end of my life because i am a

    dieing mother of three kids to take care of, where

    will i get money to finance their education and

    pay my bills? all this are the questions that kept

    running inside my mind and became frustrated in

    the process of doing that and a words of

    encouragement came into me instantly saying it is

    not over yet, keep trying and you will definitely

    got in touch with your helper very soon and i

    stood up and said i will give this a last try and

    if nothing happens that means there is no hope for

    me any longer. And i went online that very moment

    and i came across a post by one (Mrs JESSICAL

    CAREY) saying that she has never seen a real loan

    firm like SILVERQUICKFUNDING77@OUTLOOK.COM and

    instantly i consulted the loan firm by the email

    which she place on the post and in that same day i

    got response from the manager (SILVER QUICK) and

    She forward to me all the Rules and Regulations

    that is guiding the company which will enable me

    to obtain the loan from them and i ask him how

    long will it take me to finish the process of my

    loan because i am planning of getting into

    business after i lost my job and he said it will

    take us three to four days if i am fast in

    replying their message. I ask him, hope i am not

    going to send any money to them because i was told

    here in my country that i shouldn’t send money in

    getting a loan and She replied by saying that it

    surprise her when i said that because their is no

    loan firm online who will render service to a loan

    seeker without him/her paying anything upfront. It

    sound very hurt to his hearing and he took it as a

    pain and explained everything to me and when i

    have a rethink about it i discovered it was true

    and that was were those false loan firm took

    advantage in defrauding people of their had earn

    money and he gave me his words that i should go on

    with them and she will took me by surprise that

    they are truly for real and i went on and apply

    for a business loan of $200,000.00 USD for the

    duration of 10years and i paid all the charges

    that are needed to be paid and like she said she

    is going to surprise me, that was what she did, it

    was then i knew that there are still real loan

    company on the internet otherwise i wouldn’t have

    known. here is the consultation

    address:SILVERQUICKFUNDING77@OUTLOOK.COM if you

    want to consult them for more information here is

    Silver Consultants http://www.silverquickfunding.com

    Thanks