MyC4

First repayments on the loans I funded at MyC4

wiseclerk

In early September I started funding peer-to-peer microloans to African entrepreneurs on MyC4. Yesterday the first repayments were credited to my account. Siraje Sselugo, a poultry farmer, that wanted to increase the number on chicken paid on time. I had loaned him 20 Euro for a 6 month term at 24% interest. Lydia Lwanga, who sells school stationary and wants to stock more products with the loan, repaid on time. My loan to her was 15 Euro for a 6 month term at 22% interest. All the other repayments were on time, too:

Smava account
(Screenshot of my account balance at MyC4).

MyC4 allows minimum bids of 10 Euro. So far my portfolio contains 37 small bids on funded loans.

Kiva repayment stats too high in past

wiseclerk

Matt Flannery of Kiva.org describes in a blog post which obstacles Kiva has to overcome to make accounting not a too time consuming task for the local fireld partners (MFIs). With some MFIs having over thousand loans and slow internet connection Kiva needed to find a solution that saved time.

About a year ago, we realized that many of our Field Partners were having trouble doing so.  The sheer number of page loads was making it prohibitively difficult for a Field Partner to register repayments on time, even when the actual borrower collections in the field were happening like clockwork.  Thus, we introduced "exception-based" repayments.  The idea, used widely in MFI accounting systems already, is to have regularly scheduled payment registered automatically in a system unless the loan officer marks an exception — an event signaling that something went wrong and the borrower did not pay the full amount.  Since borrowers typically repay 95% (or so) of the time, loan officers only need to register something 5% of the time. 

Kiva's first whack at exception based payments was very crude.  The feature was written by me in late '06 in between blog entries and trying to keep the site up.  Many of our Field Partners adopted the feature out of necessity and it saved them a lot of time.  However, it was very difficult to mark an exception, so most of them never did.  Thus, many of our Field Partners never mark exceptions and just repay all of their loans on time, even in the 5% case where the borrower defaults.  This creates misleadingly high repayment stats on the site and we are working to correct that. 

Kiva plans to have group loans. The post does not describe in detail, how group loans will work, but I am looking forward to examine this feature:

In addition to that, we are rolling out a number of features to further reduce the work required by our Field Partners and increase transparency.   Group Loans will go live on the site this week.  This will allow Field Partners to post up groups of up to 50 on the site as an individual loan application on the site.  Group-lending is common practice in microfinance, but was not well supported by Kiva until now. 

Also Kiva will change how currency exchange risks are handled:

we will be introducing local currency support for all of our Field Partners.  This will allow the disbursement and repayment amounts on the site more closely mirror the actual accounting books of each MFI.  This creates more transparency around financial flows.  It also paves the way for a future reality where our partners will not need to bear currency risk.   Hard currency lending has fallen out of favor in the microfinance world and we hope to soon be on the cutting edge of local currency lending.

Note that on MyC4.com for most loans the borrower has to take the currency exchange risk. Loans with small amounts are paid out in local currency, while large loans are paid out in Euro.

MyC4 introduces automatic bidding

wiseclerk

MyC4 introduced "automatic bidding", an automatic bidding assistant that will bid on any new loan listings that match parameters set by the lender. Similar to the Standing Orders feature of Prosper.com, but not with as many selection criteria.
Mads Kjaer, CEO of MyC4, said:

The Auto Bid request came from several of the businesses we have talked with and also several Builders who asked for a quick way of get going.

You could say that this feature is also the preparation for e.g. philantrophy funds or bi-lateral organisations who want to use My4 to reach micro entrepeneurs in Africa at NO COST = 100.000 credits is 100.000 credits invested …

MyC4 now also enables the use of Paypal to transfer money into the MyC4 account.

Myc4 automatic bidding

Comparing MyC4 to Prosper

wiseclerk

Researching the MyC4 concept (see previous post) there are some usability features that call for a comparision to Prosper.com:

  1. Auction: The model of Prosper seems much more straightforward to me then the auction model of MyC4. The possibility of bidding above the maximum interest rate as long as the weighted average interest is below it, gives it a major twist. Every lender on a loan ends up with a different interest rate while borrower nominal interest rate is the weighted average (mind-boggling, isn't it?). And the full transparency of all bids during bidding process is interesting.
  2. Usability, communication and transparency: The interface is designed for much interaction. Everywhere the user can post comments (to profiles, to blogs, to loans, to listings). And with a user added avatar on every comment, it is very personal. No anonymity since real names are used (not screen names). Anybody can view the loans other lenders are invested in. Users can add icons to their profile to show which motivation led them to MyC4 (be it profit, education, social lending, …) 
  3. Defaults. So far none, but naturally it is much to early to judge. Hopefully MyC4 will have defaults as low as Kiva and prove that third world borrowers are more reliable.

There will be continued coverage about my experiences at MyC4.