MyC4.com has a great concept with an ambitious goal: ‘Let’s end poverty by 2015’. Lenders can invest in African businesses of small entrepreneurs. MyC4 gained a lot of positive media coverage and received awards.
The realization of this concept is an enormous task, facing many hurdles. Since MyC4 is transparent and lenders earn interest problems do impact the user experience. Current user discussions deal with issues like defaults, currency risks, transaction costs, pending time, information accuracy and communication.
While I am sure that Kiva has to overcome similar problems, the difference is that on Kiva these issues are more dealt with in the background and the average user is not or less aware of them.
Like Kiva, MyC4 partners with local microfinance institutions (called ‘providers’ on MyC4 – see overview of provider results) that screen loan applicants. These partners are trying hard to validate the business of the applicant as good as possible, but conditions and environment complicate the task.
Furthermore the partners are on a learning curve – a process that MyC4 supports. Data accuracy of the loan details listed by the provider sometimes is questionable – this was one of the causes MyC4 cancelled some Ivory Coast loans earlier.
Example: an active listing that raises questions
Alima Thiam, retail shopkeeper in Senegal, seeks a 13,873 Euro loan.
: About : Married and a mother of 2 children, Alima has been trading items for 8 years. Her business grew so fast that in April 2007, she was able to open her first store. Her business is still growing at a fast pace and she needs additional working capital to increase her inventory of goods and add new items.
Objective of the opportunity: With a loan of €13873, Alima seeks to increase her stock provided that it would guarantee more interesting sales. She wants to buy her goods early to avoid paying higher prices, hence keeping her costs down. She will use the increased margin to introduce new items.
The information provided in the listing raises the following plausibility questions:
The relation of the loan amount to the yearly income seems very high
The listed collateral – an Audi 80 – is given with a value of 9,711 Euro. This seems a very high value for a very old car model. (independent of issues whether the collateral could really be secured in case of default)
The location pictured does not look like it is in proportion to the amount of goods that could be bought for the loan value.
What reasons could have caused possible inaccuracy of information in this loan listing?
Githa Kurdahl, doing an internship with Ivoire Credit has described her findings regarding inaccurate descriptions in an excellent post on Oct. 21st. In summary she pointed out the following causes:
mistakes due to manual calculations
mistakes in translation
lack of business records
exaggerated projections
optimistic borrowers
mismatch between European and African business context.
The Industrialisation Fund for Developing Countries (IFU) and CSR Capital have decided to invest a total of DKK 15 million (approx. EUR 2.2 million) in Africa through MYC4. The Danish Development Minister Ulla Tørnæs supports the decision.
“This is an extremely important milestone for MYC4. That IFU and CSR Capital now invest through MYC4 is an endorsement of our initiative as a serious tool in the fight to eradicate poverty in Africa through the marketplace myc4.com,” says CEO of MYC4 Mads Kjær and continues:
“We hope this will inspire financial institutions, pension funds and companies to invest in Africa through MYC4. We are already well under way, but to make a significant difference for the development in Africa, this kind of investors play an important role.â€
Political support Danish Development Minister Ulla Tørnæs warmly welcomes IFU’s initiative to invest in Africa through MYC4.
“Danida has been the facilitator for MYC4. Through the Public Private Partnerships, Danida has supported the development of MYC4. I am glad to see the interest and support for the new marketplace. It shows the economic potential for investments in Africa,” says Tørnæs.
DKK 10 million from IFU, 5 from CSR Capital IFU is an independent fund under the Danish Foreign Ministry. IFU’s purpose is to promote economic development in developing countries in partnership with the Danish industry, and now the fund invests DKK ten million in Africa through MYC4.
“With the investment IFU wants to contribute to poverty reduction and business development of small and medium enterprises in Africa,” says Investment Manager Kasper Svarrer from IFU.
In addition, the private investment firm CSR Capital invests DKK five million through MYC4. CSR Capital focuses specifically on social and environmentally sustainable investments:
“Good investments and development can and must go hand in hand in order to create the basis for sustainable economic, environmental and social growth and welfare in any society”, says CEO of CSR Capital Sven Riskær.
MyC4 will cancel 105 open and pending loans to borrowers in Ivory Coast (Cote d’Ivoire). This is scheduled to take place next week. Money from the bids will be returned to the lenders. Some lenders are unsatisfied with the situation as the bids in these loans tied up their money for up to 6 weeks without interest.
Notre Nation and Ivoire Credit have decided to cancel all open loans currently pending on the MyC4 platform. This is being done for two reasons. First, both Ivoire Credit and Notre Nation are undergoing significant reorganization and operational changes, to plan for improvements and scaling of operations. This is putting significant pressure on both organizations and we expect that there might be delay in some payments going forward. Second, there has been a relatively long period since many of these Businesses were uploaded, and the current expected loan disbursement dates. To ensure that the borrowers’ situations have not change would require a new due diligence of each, which current resources don’t allow, given the long list of loans. Therefore and to protect Investors MYC4 has agreed to return all funds to Investors. This will be done within the next week. If you have money tied up in a Bid to any of these Providers your money will be transferred back into your Account immediately, when the cancellation is done of your specific loan. MYC4 is planning to cancel 105 loans.
MYC4 resume uploading of Businesses from Notre Nation and Ivoire Credit within the coming months, and they will continue to diligently manage the existing portfolio in the interim. If you have more questions please use the Blogs of Notre Nation and Ivoire Credit. We are sorry that your money has been inactive for 4-5 weeks and we apologize.
MyC4.com will start to offer loans in Rwanda next week. This is the fourth country MyC4 is lending at, after Uganda, Kenya and Cote d’Ivoire. Mads Kjaer, CEO of MyC4, is quoted that Ghana, Tanzania, Senegal and South Africa will follow. In 2009 he aims to serve borrowers in 20 countries in Africa. (Source)
In a danish television video (15 min, danish language), which was broadcastes yesterday, MyC4 is presented as a good alternative for investing and gains a recommendation of MyBanker.dk, a website comparing banks.
MyC4 has just published a quarterly magazine to accompany it's website. The first issue of Change has 20 pages, looks stylish and has lots of information (e.g. Senegal will be the next market, where loans are available to borrowers starting in June). Here is what MyC4 says about it's magazine:
We have just released the very first issue of CHANGE – the magazine that comes all way around MyC4: Vision, business model, partners, supporters, etc.
