Since the new release, MyC4.com has encoutered repeated accounting problems, sometimes with wrong interest calculations, sometimes requiring correction of user account balances.
MyC4's staff has been quick to respond to the problems and usually is fixing them fast. But I believe the issue here is, that p2p lending through a foreign internet startup requires a great amount of trust. And while lenders are used to bugs in new internet application, they do expect a high standard when it comes to accounting. After all no user of online banking would accept that he has to check the interest calculations made by the bank.
The MyC4 team did a good job developing the platform so far and earned at lot of trust; but if the problems persists this might be an obstacle to further growth.
I have lend money in over 170 loans on MyC4.com. My average interest rate is 13.8%. There are no defaults yet (not only in my portfolio, but overall). But lately there are several loans that are late (usually up to one month).
In the account balance late loans are recorded as repayments with zero value:
Latest borrower who went late is Sarah Akany, who runs a computer training and internet center in Uganda. I don't really worry, since she went late once before and caught up again.
The provider (CMC) posted the following notice to lenders on the blog:
Dear investors,
We have contacted the client and she has promised to clear the late payment. We shall continue tracking the client and ensure payment. Thanks.
Today MyC4 presents itself in an all new shiny layout. On MyC4 lenders can give loans to small businesses in Africa. Unlike at Kiva, lenders at MyC4 earn interest. So far 1.8 million Euros (approx. 1.2 million US$) have been invested in loans and there are no defaults yet – only several late payments. With the new release …
… three key elements have been prioritized on the new website; usability, design and communication. We have made it easier to understand what MyC4 is all about, how to join, how to upload money, how to find a Business, which fits your criteria and lastly how you invest and re-invest.
According to MyC4 the changes in today's release are:
The look of MyC4.com has been updated
Improved navigation making it easier to find your way around via a top menu and a left hand menu with sub-levels
“Opportunity” changed to “Business” – to access the overview of Businesses, click on “INVEST” in the top menu
MyCredits is now changed to EURO (€)
The Investor now carries the Currency Risk
Withholding tax
I also noticed that MyC4 is no longer marked as "beta". The handling of currency risk is a major change. The announcement email says:
At MyC4 we want to offer a sustainable and easy to understand solution for the African Businesses. The currency Risk has until now been carried by the African Business, but this has uncertainty for their loan conditions.
To ensure that MyC4 and the African Businesses are sustainable in the long run a new model for the Currency Risk has been developed. We now transfer the Currency Risk to the Investor, which has to be covered by the size of the interest rate you demand.
As a consequence please be aware that going forward there is a Currency Risk on your new investment when investing in some African countries. MyC4 cannot advise on the daily currency development, but based on the last 3 years currency fluctuation we suggest as a guideline that your add the following percentages to your normal wanted interest rate to cover for the potential Currency Risk;
Uganda 6% Kenya 2% Côte d’Ivoire 0%
This means that if you where planning to Bid on a Business in Kenya with an interest of 8% in mind you now add the 2% – so you Bid 10%, but will properly get 8% depending on the currency fluctuation over the period of the loan.
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.
MyC4 has successfully funded 1000 loans to entrepreneurs in Africa since launch in May 2007. So far none of the loans has defaulted and average interest rate for lenders is 11.7%. Tim Vang, one of the co-founders of the Danish startup told P2P-Banking.com that the MyC4 will release a new version in May with a new design and better interface. MyC4 also plans to provide loans in additional countries (currently Uganda, Kenya and Cote d'Ivoire).
MyC4's annual report 2007 is available on the Internet (English and Danish). While the company realised a loss of 2.8 million DKK (approx. 0.6 million US$) in 2007, it aims for break even in 2009.
A very interesting study that mainly concentrates on donations covers aspects of social lending too. Among the 24 online philantrophy markets examined are Kiva and MyC4. The study gives great advice what users (donors and lenders) expect from the market (the service) as functionality.
Kiva’s entire business model was, from the start, faced with seemingly insurmountable logistical issues. From verifying the legitimacy of entrepreneurs’ claims straight through to delivering repayments to investors. In addition the challenges of distance, cost, and time were considerable. By partnering with carefully-selected microfinance institutions (MFI) already working in a particular area, however, Kiva has been able to overcome all of these hurdles. … And each MFI’s reputation as an accountable, socially responsible organisation must be unimpeachable with Kiva or another highly regarded organisation such as the US Peace Corps. Partnering with MFIs also overcomes the communication issues encountered working with small businesspeople in developing countries. Whereas very few small business owners in developing countries have Internet access or English language skills, all of the MFIs must have these in order to work with Kiva. This compromise enables individual stories from entrepreneurs, relayed by MFIs, to reach investors both before a loan is disbursed and after its effects are felt. Though loan repayments have been generally taken as a ‘proxy for success’ in the MFI industry, it is these personal stories, says Kiva’s Ben Elberger, which are most important to most of its donors: ‘The lenders are more interested in the qualitative results than the quantitative…They are more interested in learning what happened to the entrepreneur than they are in getting their money back.’ Thus, the information provided by Kiva’s partners in each of their business’s journals is very rarely financially detailed; rather, it tells the story of how the loan will (or has) impacted on the day to day life of the business owner.
What does the future hold for Kiva? One of its primary goals has become strengthening their partner MFIs, helping them reach a more sustainable financial position so that fluctuations in funds received from Kiva will not impact their overall ability to lend. It is also developing an internal reporting system, but identifying common indicators for MFI and businesses has been extremely difficult, and it is unsure that such a framework is even possible. The biggest variable for the future, it says, is to what degree the public’s moral attention to sustainability and development will last.
MyC4 is given as example for the useful integration of Web 2.0 technologies to create an interactive market.
While a long read (over 50 pages without appendix) I believe it to be interesting for all p2p lending services especially the product development and marketing managers.
