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Social lending

A microlending website banks on online reputations to give easier credit access to underserved individuals.
By KC Calpo |

Besides saving up, most people get business capital by borrowing money from family and friends and applying for bank loans. But in these tough times, start-up entrepreneurs with little savings face these stumbling blocks: family and friends may not have enough cash to spare, and banks tend to favor borrowers with longer credit history.

One company has a unique financing solution for those caught in a nasty pinch. Lenddo, incorporated in January 2011, “aims to give people an easy way to build their reputation online via social media, and gain access to financial services.”

Founded by technology entrepreneur Jeffrey Stewart, outsourcing executive Richard Eldridge and finance executive Manolo Aquino, Lenddo builds on the social-media savvy of Filipinos and operates a social network that offers microfinance to individuals in a uniquely social-media environment.

Eldridge, a Welshman who has been in the Philippines since 2001, observed that while the spending power of the emerging middle class is increasing, they were “not being effectively served by the traditional financial institutions or banks. Many of my employees consistently requested salary loans and told me stories of ‘5-6’ and payday loan schemes in which they were trapped.”

Lenddo is different from the more popular microlending site Kiva.org in that it utilizes social networks and online reputations, in addition to a borrower’s current financial information, to determine credit-worthiness and give credit access to underserved markets.

To determine a borrower’s online reputation and thus his viability as borrower and lender, the website factors in his Lenddo Friends and Lenddo Score. Lenddo Friends are a select group of people the borrower trusts, knows very well, and can vouch for without hesitation. Ideally, they are family members and close friends of the borrower, and who are also Lenddo members.

Lenddo Scores, on the other hand, can be considered the equivalent of credit ratings: a high score shows compliance with all requirements, as well as financial stability. A good score not only helps the borrower himself, but also that of his Lenddo Friends.

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More importantly, a good score lowers the interest rate given to the borrower. A good score all hinges on how much trust there is within a borrower’s network, and how willing everyone is to help the others in the network. If a member of the network falters, then the individual scores of everyone else are affected.

When members are not able to comply with the monthly payment terms, Lenddo informs everyone in the network of this failure. However, Stewart says this happens rarely: “We believe that people are, by nature, responsible and trustworthy, and will repay personal loans if given funds from a responsible lender to help better their lives.”


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