Services (microfinance)

MYC4 will cover for MISCOCI loans

wiseclerk 1 Comment

Acting on problems that came about when an insurance scheme, that was supposed to cover over 200 loans in Ivory Coast, failed (see previous coverage), MYC4.com announced it will reimburse all lenders on these loans, if the loans default.

Mads Kjaer, CEO of MYC4, announced:

We have in previous update informed that we will intervene and take on the obligation towards the Investors and cover defaults on loans. MYC4 will cover all defaults on MISCOCI covered loans. In actual numbers this could amount to a total cost of EUR 388,000. This will put financial strains on our company, yet we believe it’s the right thing to do.

Now, what does it mean that MYC4 covers MISCOCI included loans? As noted, 242 loans in Cote d’Ivoire were supposed to be covered by MISCOCI insurance. These 242 are very likely to default within the near future – some are already defaulted (cf. MYC4’s default policy) and therefore MYC4 will cover Investors’ loss on their principal.

This means covering the spread between what has already been paid back and Investor’s principal or in other words: MYC4 will step in to reimburse Investors whatever amount they still have not received of their original investment. Meaning the original bid value minus total received repayments over time. We are currently working how we technically can do this in the system and will revert back with an update in two weeks time.

Loans without MISCOCI:
With regards to the not MISCOCI-covered Cote d’Ivoire loans, we are aiming at a solution that will create the best possible chances for Investors to get some of their money back by ensuring that Notre Nation and Ivoire Credit will continue to collect repayments also after the technical default on the platform.

Lenders welcomed this decision in forum feedback.

Other MYC4 news:

  • MYC4 wins prize as “best financial e-commerce” by FDIH, the Danish Association of Internet and Distance Trade
  • The first bid by IFU and CSR was made on MYC4 in their aim to invest 2.2 million EUR on MYC4 (see earlier coverage)

List of P2P Lending Forums

wiseclerk 2 Comments

Peer to peer lending is innovative and new. New users usually have lots of questions when grasping the marketplace mechanisms. Beyond the FAQ of the p2p lending service, a great place to learn is usually a forum, where users (mostly lenders) exchange experiences and post and answer questions.

There are “official” forums provided by the lending services and independent ones. One of the first ones, the official Prosper forum, became one of the most notorious ones. After Prosper “moderated” negative and critical posts it later deleted the initial forum in total. When a copied version of the forum’s archive was made available on seperate internet site Prosper tried to  shut the site down, but failed.

But this is an extreme example. I found that on nearly all other forums a very helpful and supportive attitude rules.

List of p2p lending forums

General

Focus on one p2p lending service

If I have missed any great p2p lending forum, please comment with the URL and I will add it to the above list. Thank you.

(Photo credit: wili_hybrid)

Kiva proposes that lenders share part of the currency risk

wiseclerk 5 Comments

In today’s conference call, Kiva explained plans to reduce currency risks for the local MFIs by having lenders absorb losses, if currency depreciation is higher then a threshold x% (with x% yet to be defined).

Currently currency risk for loans issued in local currency is fully taken by local MFIs of Kiva. In future MFIs can select for new loans, if they want to keep it that way, or if a new stop-loss rule shall apply.

The details are explained in this presentation:

Community Call Currency Risk V1
View more presentations from mrpremal.

Slide 14 shows how many of the loans would be affected, if the stop loss rule would have applied in 2008/ in the last 5 years.

One question in the Q&A of the conference call was, why currency risk came up just now after years of operation of Kiva and the answer was that the problem is now more pressing with the recent appreciation of the US dollar.

Another question was, if a possible solution would be that Kiva just would supply the hard currency as collateral to a local bank in the country which would then issue the loan in local currency. The answer was that this would be impractical, because in case the local currency appreciates then the bank would demand a raise in the collateral, which could not be handled as neither Kiva has the funds nor could the lenders on the loans affected be expected to make an additional payment for this.

It will be interesting to see, if some MFIs stick to the current mode and upload loans with no currency risk sharing to the platform.

On MYC4 lenders take currency risk in full but earn interest.

MYC4 providers react on high default rates

wiseclerk 2 Comments

Over the last months it became clear that MYC4.com loans default at a much higher percentage then expected. MYC4 management states several growth and quality problems that led to the situation. Better training of the local providers, partner ratings, spot audits and a license system are measures that shall improve the quality in loan selection and management in the future.

Currently one challenge is to deal with the failing loans issued in the past. The earlier problems with Ivory coast loans continue. About half of the issued loans were insured by the organisation MISCOCI against defaults. MISCOCI failed today and is reported to be bankrupt. MYC4 has announced a few minutes ago, that they will publish until March 20th, what this means for the lenders on the defaulted Ivory Coast loans (MISCOCI covered 242 loans with an outstanding balance of 388,644 Euro).

NotreNation, one of the providers in Ivory Coast, yesterday named poor selection of borrowers by inexperienced credit agents and the difficult economic situation in Ivory Coast as reasons for high default rates.

GrowthAfrica, a provider in Kenya with a high portfolio at risk rate (PAR) has announced yesterday that it will buy back 65 very poorly performing loans at 95 percent of the balance from the lenders. This step was taken as GrowthAfrica felt they share responsibility for the poorly performing loan portfolio. GrowthAfrica expects to buy back loans for more then 125,000 Euro in total.