No, not talking about fruits or birds here. Nexx.co.nz develops a p2p lending service in New Zealand. Nexx now succeeded in raising 600,000 NZ$ (approx 330.000 US$). Quite an achievement in the surrounding conditions of the credit crunch.
Nexx, an on-line social lending business being developed by four young entrepreneurs at business growth centre The ICEHOUSE, has raised $600,000 in funding from a group of angel investors including the ICE Angels, Venture Accelerator from Nelson and Sparkbox.
Nexx co-founder Ben Milsom says the funding will pay for development and promotion of the business which is currently awaiting regulatory approval. Milsom and his partners Glenn Riddell, James Wallace and Mark Catley expect to be able to launch their operation in early 2009.
The Nexx team started in 2007 and won the University of Auckland Business School’s Spark Entrepreneurship Challenge in September 2007. The prize was 20,000 NZ$ in seed funding and a nine-month tenancy in the Icehouse business incubator. Ben Milsom, writes about the pre-launch process of Nexx at the Startup-Blog.
Nexx is developed based on an open-source ERP and accounting package Adempiere.
Californian non-profit United Prosperity developed a new twist to social lending – it is a peer to peer guarantee website. Instead of lending money directly and thus needing to transfer it internationally the “social guarantor” provides a cash collateral. This enables the small entrepreneur in the developing country to get a loan from a local bank, which he otherwise would be unable to obtain.
Bhalchander Vishwanath, founder and CEO of United Prosperity answered my questions on the new service.
P2P-Banking.com: What makes the guarantee model better then other lending models (e.g. Kiva or MyC4)?
Bhalchander Vishwanath:
Maximum impact: Due to United Prosperity’s innovative guarantee model which involves risk sharing with the bank, $1 in guarantee by the social guarantor could lead to $2 to $5 in loan to the borrower thus maximizing their dollar’s impact.
Local linkages: Our guarantee facilitates the creation of local linkages between domestic banks, MFIs and poor entrepreneurs. In the course of repaying the loan, both the entrepreneur and the MFIs develop credit histories that will enable them to access more funds at a later date with a lower guarantee percentage, or even without a guarantee. MFIs also get to form relationships with banks and offer other products like savings, insurance, money transfer etc. through the bank.
No foreign exchange risk: Since the loans from Bank to MFI and MFI to entrepreneur are in local currency, there is no foreign exchange risk involved. Most of the smaller MFIs do not have forex hedging capability and our model overcomes that.
Reduced interest: Our guarantee reduces the interest the bank will charge the MFI since the bank’s risk is lower. Some of the interest benefits get passed on to the borrower.
Scalability: There is enough money available in the developing countries. Our guarantee frees up those funds. It utilizes capital available effectively and in the long term it is a more scalable model.
Manages risk better: We get the additional benefit of monitoring of the loan by the bank which is not available with other person to person models.
P2P-Banking.com: How does “$1 in guarantee by the social guarantor could lead to $2 to $5 in loans” work? What determines the applicable ratio?
Bhalchander Vishwanath: The ratio is dependent on several factors. These include the MFI’s or borrower’s prior credit history with the bank or other banks, various banks internal guidelines, their focus on lending to Microfinance institutions and so on. For example for a given MFI we have seen two different banks asking for different guarantee percentages.
P2P-Banking.com: Does the Guarantor earn any interest?
Bhalchander Vishwanath: Guarantors do not earn any interest on their guarantees for two reasons:
It is legally complex.
We see ourselves as a ‘social business’. Nobel Laureate Mohammad Yunus states that a social business is ‘designed to be both self-sustaining and to maximize social returns’. We have only one objective: to combat global poverty. As a result, we do not provide any financial returns or interest to our social guarantors and hope to attract social guarantors who share our objective.
P2P-Banking.com: Does the Guarantor actually have to pay money into an account, or does this only occur if the borrower fails to pay back the loan?
Bhalchander Vishwanath: The guarantee we offer to banks is a cash secured guarantee. Thus the guarantor has to pay the money upfront. Once the loan is paid back, the money can be withdrawn. Continue reading →
Polish p2p lending service Kokos.pl recently added insurance options for borrowers. Kokos offers the insurances in cooperation with Cardif Polska S.A and Cardif Assurances Risques Divers S.A.. Insurable risks include death, disability to work and unemployment. There is a choice of 8 different insurance packages.
Non profit Wokai.org will allow contributers to donate to give microfinance loans to borrowers in China. Like Kiva and MyC4, Wokai partners with local MFIs which identify and screen potential microentrepreneur clients. Selected clients are then posted on the Wokai website through profiles that outline their business ventures and loan request. Contributers can select borrowers to fund and pay via Google Checkout, the money is then transferred to the MFI who disperse the capital to the microentrepreneurs. Field partners charge interest rates typically ranging from 8-20% to cover the high costs associated with providing loans, training, monitoring and support services to our borrowers. At the end of the loan-cycle the money is collected and re-issued by the MFI for new loans – so there is no payback to the contributers.
Wokai has not launched yet, but I could participate in a pre-launch test drive. The platform has more social networking features then other platforms allowing for discussions and users asking questions to the MFIs/borrowers.
Wokai began in the fall of 2006 when Wokai co-founders Courtney McColgan and Casey Wilson met while studying advanced Chinese at Tsinghua University. The idea of Wokai gradually transformed into a plan of action and, with the help of a team of supporters, evolved into a startup nonprofit.
Asked by Netbanker whether Loanio.com will face an SEC filing process and a quiet period like Prosper and Lending Club, Loanio CEO Michael Solomon answered:
“…from the perspective of (Prosper) going silent, it is actually great for us as I think we will quickly gain lots of lenders and hopefully we can wow them into sticking around. From a regulatory standpoint, we believe that at some point we will seek to introduce a secondary market platform, but we will focus the greater part of the next 12 month on building our platform and seeking out a national bank partner to cover the rest of the U.S. Our plans for a secondary market are too far ahead for me to contemplate at this time.”
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.
