Making Loans Online to Foreigners Makes Sense: Jeff Stewart of Lenddo | Sustainable business custodian


So here’s the deal: you are a lender. You see millions of bright, hard-working people joining the middle classes in developing countries. They want credit, but they can’t get it. So you send them money over the Internet. You have never met them. They never met you and never will. And, on the other side of the world, they send the money back to you – with interest.

Does this sound crazy? This is completely crazy. Yet that’s exactly what online loan provider Lenddo does. Since 2011, it has registered around 10,000 loans and 500,000 members worldwide. Electronic lending is also coming to Mexico and Colombia, with plans for 35 more emerging markets to follow shortly.

Lenddo was born out of an obvious gap in the market, says the co-founder of the company’s serial entrepreneur Jeff Stewart, who was recently named one of the top leaders on the Purpose Economy 100 list. along with his business partner Richard Eldridge, New York-based Stewart runs a handful of internet companies around the world.

“Our employees kept coming to us and asking for loans, which didn’t make sense to us,” he recalls. Despite stable jobs, strong skills and rising wages, most local banks ignored them as either too small or too risky. “I couldn’t think of a better band to lend to,” says Stewart. “So we thought, ‘Why can’t we solve this problem with software? ”

His early research led him to “stumble” on the work of Nobel Prize winner and microfinance pioneer Muhammad Yunus. He was immediately struck by the high repayment rates (less than 5% of Yunus Grameen Bank loans end in defaults), as well as the social lending approach upon which microfinance relies. “Essentially, you involve the community in the demand generation, the subscription process and the reimbursement process,” says Stewart.

Stewart became convinced that the same model could work just as well online. With microfinance, individuals are encouraged to form loan groups with friends and neighbors. Each then serves as security for the other. Lenddo works the same way, only groups derive from your connections online rather than in person. Using a set of ultra-smart algorithms, it can analyze your social media data to determine your creditworthiness – in essence, mimicking the work of a microfinance loan officer who arrives in your village with an assessment form and pen.

Lenddo loans typically average $ 450, with a monthly interest rate of 2-4%. They target middle-income people rather than the poorest. To get one, someone within your online social network has to act as your arbiter. If that person is deemed solid and gives you a good recommendation, your chances of getting a loan increase. Getting a loan increases the likelihood that your friends will get one too. And so Lenddo’s client list is growing (at a staggering 10% per month, according to Stewart).

Also in the mix goes a lot of additional data that Lenddo collects from your social networks. What career profiles do your Facebook friends have? What products or restaurants do you (and your friends) tweet about? Such profiling reflects some of the basics of epidemiology and behavioral science, says Stewart: “If you hang out with people who make a lot of money and pay their bills, then statistically you are more likely to do so. . ”

Of course, you need the right algorithms to do it right. Stewart is confident on this point. Lenddo has a “team of doctors” on the case (the list includes a math Olympian from India). More importantly, two years of reimbursement receipts give Lenddo the kind of database it needs to refine its software. “In the tests we’ve done, our estimate of disposable income is often more accurate than their detailed personal analyzes and assumptions,” says Stewart.

The power of profiling at this scale is incredible. But it’s also a little scary. Forget NASA spying: Lenddo can openly examine every nook and cranny of your online life. Stewart insists the company has strict privacy guarantees in place and that all of its customers are fully aware of how things work.

For now, at least, most borrowers in Lenddo seem only too happy to trade their personal details for credit. Stewart cites the experience of Omidyar Network, one of Lenddo’s early funders. The investor asked a successful loan seeker if he was comfortable with Lenddo seeing the emails he sent to his girlfriend. “Look, they’re loaning me money,” was the response. “They can come to my house and meet her if they wish.” Borrowers are highly unlikely to be so casual about their privacy if credit were more readily available – a point Stewart is quick to concede.

Questions could also be asked about the risk of social blackball. What prevents a perfectly bankable person from being refused a loan because a Facebook friend has a criminal record, for example? Stewart is quick to respond: people will have contacts that “aren’t virgin” in their social networks; that’s to be expected, he said. But also, if they’re bright and vibrant, you’d expect them to have friends, say, from the college tech club. “It’s how you are connected to the whole community that matters,” says Stewart.

Today’s global megatrends are certainly heading in the right direction for Lenddo, who was recently named a “tech pioneer” by the World Economic Forum. The “global middle class” is expected to reach five billion people by 2030; smartphones are ready to take off in developing countries; while Facebook and others show little sign of slowing down. Plus, at Stewart, Lenddo has a leader with insane levels of ambition: “We don’t see why this can’t be one of the most important companies, like ever.”

Correction: This article was modified on March 19 to reflect that since 2011 Lenddo has granted 10,000 loans and 500,000 members worldwide and not 500,000 loans in the Philippines.


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