When we reported on Kiva.org’s decision to open up its micro-lending platform to U.S. entrepreneurs, Kiva CEO Premal Shah told us he was concerned about backlash in the community. Shah acknowledged that the decision to open lending to U.S. recipients may draw criticism because it goes against the idea on which Kiva was founded—lending to help development in third world countries where credit options are limited.
It looks like Shah’s prediction was correct. There is now a lending team on Kiva’s community platform titled “Unhappy Kiva Lenders.” The members, which total 375 lenders from around the world, are angry that Kiva is extending loans to U.S. entrepreneurs. The team’s page states that “including borrowers from the USA has undermined the very core of what made [Kiva] so unique and special; small, impactful contributions to entrepreneurs in impoverished situations in developing countries.”
The financial crisis has made a lasting impact on small businesses around the world and here at home in the United States. With the credit crunch creating a virtual standstill of lending, small businesses in the U.S. are facing an uphill battle to find funds, especially if their financial history isn’t stellar. Kiva.org, one of the web’s most interesting innovators in the micro-lending space, is hoping to come to the aid of U.S. entrepreneurs and small businesses by launching a pilot expansion that would allow individuals anywhere to make small loans to low-income U.S. entrepreneurs through Kiva’s platform.
Kiva is a peer-to-peer lending site that facilitates micropayment loans between citizen lenders and extremely low-income entrepreneurs in developing countries. Through Kiva’s platform, anyone can loan $25 or more to support an entrepreneur and the specific progress of the loan can be tracked from initial funding to repayment. Upon receiving repayment, lenders can withdraw their funds from Kiva or lend again to another entrepreneur, thereby continuing the lending cycle.
Last night we released the finalist names for the Crunchies Awards. Vote here for who you think should win. We’ve set up a site that is pretty self-explanatory, with all of the names of each finalist for every category, along with links to their Websites and Crunchbase profiles where you can learn more about each one before voting. The Crunchies represents the best the Web had to offer in 2008, and you get to help choose who will win. Below is a voter’s guide for two of the major categories to get you started.
Best Overall is the big prize. Amazon Web Services makes it as a finalist this year because of the sheer number of startups that are built on top of its cloud computing infrastructure. Facebook won last year, but makes a return as a nominee due to popular demand. Facebook continued to gain massive mainstream adoption in 2008 (with 140 million members now) and launched some major initiatives to extend its social computing platform beyond its site, most notably Facebook Connect (which by itself is a finalist for Best Technology Innovation, going up against Google Friend Connect). But does Facebook deserve to win again?
The financial crisis in world markets over the past few weeks has been a real eye-opener, but even those of us who have seen our stock portfolios decline by 30 percent or more don’t have much to complain about. It could be worse. It could be a lot worse. A third of the world’s population lives in poverty, and 20 percent lives in extreme poverty, meaning they are always hungry.
What can you do? How about making a microloan of a $20, $50, or $100 to an entrepreneur in a poor country? Today is Blog Action Day, with blogs around the world making a concerted effort to raise awareness about global poverty and ways to fight it. What we’ve decided to do is to start a TechCrunch lending team at Kiva.org. Anyone can join.
Despite sub-prime loan worries rocking the economy, peer-to-peer loans are gaining some traction. You’d think loans between individuals would be much riskier than loans from a bank, but it turns out that individuals can be more risk averse than banks when it comes to lending out money. If you look at Prosper, the leader in P2P lending with more than $100 million in loans out so far, only 7 percent of its loans in October were sub-prime, despite their higher interest rates.
Prosper is about to get a lot more competition. After more than a year of waiting, UK-based Zopa got the go-ahead from regulators to launch its U.S. Website last week. Zopa, which doesn’t allow sub-prime loans at all, has a 0.1% default rate, whereas Prosper has a 3 percent default rate.
And Lending Club, which started as a Facebook-only application, just got clearance today to operate nationwide. (It had been awaiting approval from half a dozen states, including big ones like California, Michigan, Illinois, and Pennsylvania). Lending Club launched six months ago on Facebook, and opened up its own Website three months ago. In that time, its members have issued 489 loans worth $3.5 million. Of that amount, only $16,000 worth are between 16 and 30 days late on payments (see stats here). It also does not allow sub-prime loans.
Lending Club’s loan portfolio is too small and its loans have been out too short a time to really know what its average default rate will be. But if it can match its larger competitors, it should do fine. Social lending is here to stay.
Peer to peer lending service Lending Club will close a $10.26 million series A round of financing from Norwest Venture Partners and Canaan Partners tomorrow. This comes a few months after the company’s $2 million angel round. Coinciding with the investment, Jeff Crowe and Dan Ciporin (former ceo of shopping.com) are joining Lending Club’s board of directors.
Similar to other P2P lending sites (Prosper, Zopa, Kiva), LendingClub matches borrowers and lenders. However, LendingClub doesn’t work through their own website, but solely through Facebook on the application they launched at the F8 platform launch conference. Borrows and lenders a linked up using their “LendingMatch” system, which recommends loans based on credit and their social relationships to each other. The idea being that trusted relationships make lending more likely and defaults less likely. The application currently has over 13,000 installs.
Unlike Prosper, interest rates aren’t determined through bidding, but calculated based on the borrowers credit score, debt to income ratio, and amount of the loan. There are no hidden fees, and the interest rate is fixed for three years. In July the service surpassed $500K in loans. They recently claimed a little more than 4 out of 5 loans get funded and haven’t reported any defaults or late payments.
It’s still the early days for this industry, and as TC commenters point out, it’s very much a case of Caveat Emptor.
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