Friday, January 30, 2009

Harvard Business Review: P2P Lending is 'breakthrough idea' for 2009

Harvard Business Review has named P2P lending as one of the top 20 breakthrough ideas for 2009. John Sviokla, vice chairman and director of innovation and research at Diamond Management and Technology Consultants, predicts p2p lending will be one of the "most important financial-services innovations in the coming decade."

Here is an excerpt from the Harvard Business Review:

...peer-to-peer lending is cheaper than consumer credit. Lending Club’s rate for the best credit risks is 7.88%, whereas the bank rate for personal loans, on average, is over 13%. A credit-worthy borrower gets the money faster and for 5% less.

Why now? First, the internet and social networks enable peer-to-peer interaction on an unprecedented scale. Second, electronic mechanisms for assessing potential customers are emerging. Lending Club starts with traditional credit scoring and adds a proprietary assessment of customers’ reputations within their social networks. You may think of Facebook as fun and games, but important underwriting information is hidden in there for those who know how to look.

So what? A profound secondary effect of the down market will be an increase in the availability of peer-to-peer finance and its convergence with traditional lending. My bet is that mainstream investors and banks will cherry-pick the best investors in Lending Club and other systems – reducing risk by tapping their superior credit-assessment capabilities – and fund them to grant more and bigger loans. Moreover, within five years every major bank will probably have its own peer-to-peer lending network.

If innovative legislation were drafted to allow peer-to-peer risk coverage, similar transactions might begin to flourish in the insurance market. Precise knowledge of local conditions would allow individuals to band together in order to underwrite the cost of insuring properties in safe neighborhoods or to make insurance more widely available in higher-risk neighborhoods.

The current economic constraints will only accelerate the growth of these new entities. I predict that they will be among the most important financial-services innovations in the coming decade.

To borrow or lend through Lending Club click here.

Thursday, January 29, 2009

More on Swap-A-Debt: Sometimes lenders can't find cash either.

This week, on behalf of Prosper Lending Review, I contacted Edward DeFeudis, Chairman of Swap-A-Debt (OTCBB: SWPD) in hopes of scheduling an interview with Mr. Defeudis or Marco Geribaldi, the company’s President.

I can verify that Tom’s suspicion about Swap-A-Debt being some time off from a real launch is correct.

When I contacted the company’s office, I was met with a confused “Hello” followed immediately by “How did you get this number?” As it turns out, I’d reached the company’s chairman himself. I reminded Mr. DeFeudis that the officers of publicly traded companies are supposed to be public record as a matter of SEC regulation and I was very impressed that he answered his own phone. It wasn’t long before I began to suspect his might be the only phone in the operation. (Company president Marco Geribaldi’s phone rings only to a busy signal).

After explaining my purpose was to obtain an interview for Prosper Lending Review about the Swap-a-Debt Web site that we discovered and announced a few days ago, a very pleasant Mr. DeFeudis told me that “nobody knows about us, and we’d like to keep it that way for a little while.”

I pressed further asking about the recent launch and how many loans have been offered on the site thus far. Mr. DeFeudis informed me that the site “works” but that no loans have been offered at this time and that they’re not exactly open for business as they’re in the middle of a Web site redesign and working out some “legal things” which he didn’t seem to want to explain.

Clearly, Mr. Defeudis isn’t ready to promote Swap-A-Debt, even though we’re all excited to hear about it. I sent him my card and told him to call me when he’s ready for some publicity because all of our readers want to know the scoop.

In the meantime, my curiosity piqued, I’ve decided to read through the last couple of SEC fillings via EdgarOnline. Here I’ve learned some fascinating stuff.

Interesting excerpt from the balance sheet revision (October 31 un-audited to January 16, Audited)
BALANCE SHEET DATA: As of October 31, As of January 31,

Current assets $ 199,287 $ 384,360

Total assets $ 305,660 $ 494,398

Total liabilities $ 355,178 $ 1,661,583

Stockholders’ equity (deficit) $ (49,518) $ (1,167,185)

Under “liquidity and capital resources” the company’s report states:
Our auditor had determined that based on our financial condition there is substantial doubt as to whether we can continue to operate as a going concern.
The report also says: “In addition, we may not be able to raise additional funds on favorable terms, if at all.”

Swap-A-Debt Stocks are trading on the penny stocks board at an all-time low of $0.11, making this two-man operation worth an impressive $5Million. Not too shabby considering after opening nearly a year ago, they have yet to commence operation.

We’re waiting to see what Swap-a-Debt has to offer us when they are ready to launch for real this time.

For your reading enjoyment, here are my sources:

A very interesting article about Swap-A-Debt company President Marco Geribaldi’s eclectic and impressive work history, from advising members of the Presley family about Graceland operations to IBM and Helicopter companies.

The SEC’s Warning about Microcap Stocks:

Monday, January 26, 2009

Last week in review, and what to watch for this week.

1/21/09: Pertuity Direct Launches

1/22/09: Swap-A-Debt Launches
1/23/09: Liberia gets its first microfinance bank

1/23/09: Peer to peer loans make the Wall Street Journal

1/24/09: Some complain about Pertuity Direct using a “hard pull” on a borrower’s credit history.

What to watch for this week:
More information on Swap-a-Debt’s launch.
Exciting news from Microplace!

Friday, January 23, 2009

Paying for college the peer to peer way

With Fynanz exiting the US student loan market earlier this month there’s still room in the student loan market for a peer to peer player.

Lending Club requires a swift three-year repayment, and the interest is higher than some commercially-available student loans. Some students may want to turn to Greennote as a funding option. has a fixed interest rate of 6.8% and doesn’t require citizenship or a co-signer. (Prospective investors, take note.) Greennote is backed by Menlo Ventures and is based in Redwood City, CA. They launched in June 2008.

Another alternative for students is a mico-grant program found at Students establish a profile and companies and individuals can provide a sponsorship of any amount towards his or her needs. Funders can contribute as little as $1.00. This is not an investment program, but a micro-grant program of essentially free money for college students. I’ve sent an e-mail off to the managing partners to see how many sponsorships have been funded so far as they reach the one-year mark of operation and I will update here when I hear back from them.

Pertuity Direct removes beta label; launches officially

After a couple weeks of live beta operations, Pertuity Direct today officially announced the launch of its "next generation social finance platform." On the Pertuity Direct Blog CEO Kim Muhota explains why this is the right time to launch a social lending platform. Earlier this week, Jessica Ward authored a review of Pertuity Direct for Prosper Lending Review.

Here is the official press release:

Pertuity Direct Launches Next Generation Social Finance Platform

Company Brings Together the Advantages of Capital Markets, Social Networking and Traditional Banking

Vienna, VA, January 22, 2009 – Pertuity Direct, an online consumer financial services company built on the foundation of mutually responsible banking, today announced the launch of its next generation social finance platform. Pertuity Direct’s platform enables borrowers and lenders to come together in a social lending network to obtain smarter financial solutions and better rates. Through the National Retail Fund, members have the potential to earn competitive returns via a regulated investment fund.

By eliminating the traditional bank as the middleman, consumers can now get better interest rates than they would typically experience with banks or credit card companies. “Our model is unique in that it combines the benefits of social lending with the strong underpinning of credit risk management, and privacy” stated Kim Muhota, CEO of Pertuity Direct. “For borrowers, Pertuity Direct does not require any public posting of personal credit information, and for lenders, there’s no bidding, researching or guessing involved. We make the process quick, safe and optimal for both parties.”

Investments are made through the National Retail Fund, a social lending mutual fund that combines lenders’ capital to fund a diversified group of approved and credit worthy borrowers. The money is lent to a large group of borrowers through the fund, and as such creates safety of automatic diversification of investment. Unlike with other social lending models, lender money is not tied up for long periods of time, nor is liquidity tied to individual loan repayment. The National Retail Fund provides liquidity through quarterly share repurchases. Currently, two funds are available via the National Retail Fund: National Retail Fund II and National Retail Fund III. Further details on both funds can be obtained in the prospectus.

“By investing in the National Retail Fund, a lender’s money goes to work immediately at account opening, and funds are deployed to available borrower loans without delay,” said Andrew Rogers, Chairman of the Board and Treasurer of the National Retail Fund and President, Gemini Fund Services, LLC. “With this approach, lender money does not sit idle until suitable borrowers are found and the bidding process concludes. This model makes the social lending process easy and efficient for the investor, and beneficial to the high credit quality borrower.”

As part of the social finance platform, the company offers a ‘Pertuity Bucks’ rewards program to lower or eliminate borrowers’ principal loan balances. Borrowers are given the opportunity to tell their story when they apply for a loan and update their profiles as their situation evolves.

Lenders have the option to browse these stories and can award Pertuity Bucks to borrowers who they find most compelling – for example, those borrowers who return to the website and update their profiles to share successes, such as starting a small business or earning a coveted degree.

Pertuity Direct is founded by executives with extensive experience in banking and financial services, including decades of experience from leading financial services firms such as Capital One, PNC, and E*TRADE FINANCIAL. Pertuity Direct is the culmination of Kim Muhota’s vision to simplify financial services for the main street consumer.

P2P lending from family and friends through Virgin Money

Virgin Money out of Waltham, Massachusetts has been in business since 2001--first as Circle Lending, then as Virgin Money in 2007 when Sir Richard Branson (owner, Virgin Records) bought a majority stake in the company. Asheesh Advani, CEO of Virgin Money USA, started his company when he saw a need for the proper management of informal loans between friends and family. And his booming company provides the tools for just that.

Virgin claims to be "pioneers in the social finance sector," and for good reason. Their personal loans have a default rate of 5 percent when most personal loans, without the oversight of a company like Virgin Money, have a default rate of almost three times that (14 percent). In an economy where people with cash to invest are eyeing the stock market with suspicion, where better to invest than in a family member or friend you know and trust, right? Investors are seeing returns of up to 10 percent in the p2p market.

A Friendly Debt?
According to Virgin Money the benefits swing both ways. "Imagine: Aunt Sarah as your mortgage lender!" their site says, promoting the notion of a feel-good relationship between borrower and lender. And from a borrower's perspective, why not send interest payments to your friends and family instead of the bank? If all goes well, this situation is ideal. But the idea of a loan between friends gone bad isn't ignored by Virgin Money. They don't deny the historical tendency for relationships to sour when money is involved. In fact, they claim that with their oversight and financial tools, problems can be avoided in the future, thus sparing borrower and lender from sticky situations and spoiled relationships.

Master to the Lender
From all appearances, Virgin Money provides every tool to make a loan between friends clean, tidy, and professional with terms, interest rates, documents, etc. But what about the notion that a borrower is ultimately master to his lender? It may not be an overt mastery, but an underlying one, nonetheless, and not a characteristic you'd find in many close relationships. Perhaps this distasteful notion could be part of the success of Virgin Money; perhaps it aides in the urgency to pay off a loan sooner and without default. However, money experts such as Dave Ramsey (The Dave Ramsey Show and Lampo Group, Inc.) strongly and loudly discourage lending money to friends and family specifically because borrowers who have been turned away from banks have already been deemed too risky an investment. And he should know. In a financial crisis, Ramsey himself defaulted on a loan for which a cosigner was stuck paying. He goes on to say, "If you truly want to help someone, give money." On the other hand, financial expert, Suze Orman, does not seem as opposed to the idea and provides some tips on her website for making personal loans effective, some of which parallel the tools used by Virgin Money.

There are many things to consider when borrowing or lending money in the budding social financial sector. Companies like Virgin Money address these considerations in a novel way, seeking to take the sting out of borrowing from relatives. Check out their website for more information on their vast array of products.


This post was authored by frequent contributor and freelance writer Liz Elden.

Thursday, January 22, 2009

Where in the world is microfinance?

This is a summary/analysis of where US microfinance reaches. I'm profiling the organizations included below (in no particular order). I hope you find this as enlightening as I did. If you're aware of other organizations, let me know about them and I'll add them in.

  • - Offers microloans and services to 1.1 million working poor in 28 developing nations.
  • - Unitus, an international nonprofit organization, works to reduce global poverty by increasing access to life-changing microfinance services.
  • - Global Partnerships currently works with 21 organizations in Latin America.
  • - FINCA International provides financial services to the world's lowest-income entrepreneurs in 21 countries so they can create jobs, build assets and improve their standard of living.
  • - Owned by eBay since 2006, MicroPlace's mission is to help alleviate global poverty by enabling everyday people to make investments in the world's working poor.
  • - Since 1985, Enterprise has equipped over 200,000 families all over the developing world to support themselves through their own entrepreneurial efforts.
  • WholePlanet Foundation – A division of Whole Foods, provides microloans to microenterprises in ten countries. Unlike Kiva and others, it does not appear that lenders are able to choose the program or individual they would like to contribute to. Total authorized grants to partners as of October 2008 are nearly Eight Million Dollars US.
  • – Kiva’s slogan is “loans that change lives” and is one of the leaders in the microlending community. The Kiva Web site allows loan funders to choose individual borrowers to fund, and Kiva estimates that by 2010 they will have facilitated $100 Million in microloans.
  • WOKAI – Wokai, meaning “I go” in Chinese is an Oakland, CA startup and has provided just 43 loans in china, but is poised for growth—and has obtained substantial media in areas where its chapter membership is growing such as Seattle and San Francisco. Wokai reaches out to the Chinese-American community for help funding loans that recycle three times (to three different entrepreneurs) and is afterwards used for long-term lending by the lending partner in China.
  • ACCION – Accion International is a long-term and global player in the microfinance world. They are active in 24 countries and the USA, and according to their Web site they have made $17.4 Billion in microloans. Their historical repayment rate is a stunning 97%.

Swap a Debt user reviews - false?

Swap a Debt's site has been live only a few hours and is not yet fully functional, but it is filled with testimonials. Unfortunately the endorsements read like ad copy and it is very unlikely these are real users. If not real users, these endorsements have the potential to damage the credibility of the site - the last thing a financial site wants to lose. Here are some of the user comments:

"We got married, bought a house, and had two kids in just a couple of years. It seemed as though we were spiraling downward as our bills increased and our credit scores decreased. Thanks to Swap a Debt, we were able to fix our credit and restructure our debt. We finally see some light at the end of the tunnel. Thank you Swap a Debt!"

I am the owner of a small successful restaurant. I thought that since my business was going well, the bank would give me a loan to expand without a problem. Boy, was I wrong! Thanks to Swap a Debt, I got the money I needed and feel good about my success."

"After the baby came, I made a decision - I needed to start my own landscaping company to live up to my expectations as a father. I was tired of working for someone else. Going to the bank was a nightmare, and it seemed as if I would never get the start-up money I needed to secure my family's future. A friend told me about Swap a Debt, and it was so easy and fast. Thank you Swap a Debt."

"When I discovered that my insurance company was not going to cover my delivery expenses, I panicked. I didn't know which way to turn, and then a friend suggested going to Thanks to your company I got the money I needed to pay the hospital bills and had enough left over to finish the baby room. Thank you Swap a Debt!"

"I was tired of paying high interest rates on my credit cards. I have excellent credit and knew there had to be a way to lower my payments. I tried several times to have my credit cards lower their interest rates, but that was impossible. They would only end up trying to sell me something instead! When I found Swap a Debt, I was thrilled. I got a loan quickly and paid off my credit cards and closed the accounts. If more people did this, maybe it would change the way they do business. Thank you Swap a Debt!'

"We racked up some big credit card debt traveling to Asia to finalize our adoptions. While we consider ourselves blessed everyday for our kids, that debt was hanging over us like a dark cloud. We stumbled across Swap a Debt on Google, and shortly after received a loan at half of the credit card interest rate! We paid off the credit card and turned that dark cloud into a rainbow. Thanks Swap a Debt!"

"When we got engaged, we started to plan for our wedding and our future. We looked at our finances as our first "team" project. We quickly realized that paying such high interest rates on our credit cards was eating away at our savings. We were determined to save for a home, and thanks to Swap a Debt we are well on our way. Thanks Swap a Debt!"

"As a small business owner, I would sometimes find myself short on cash while waiting for my accounts to pay. I was yearning for a quick, simple economic answer to my short-term financing needs. I dreaded going into the bank and jumping through hoops to try to get a loan. Then I found Swap a Debt. I jumped on the computer when I wasn't busy, filled out the easy online forms, and I was done. Thanks Swap a Debt for making something simple; simple again!"

New p2p lending company Swap-A-Debt launches

A couple weeks ago we discovered a new p2p lending company seeking regulatory approval from the SEC. Apparently Swap-A-Debt received approval. Without a press release or formal announcement, the site is now live.

The quiet launch may be intentional - the community link does not work and there is a noticeable lack of legal documents and agreements which typically accompany financial sites. There are six borrower listings but all appear to be test listings. I attempted to register as a lender but did not receive a confirmation email. I was also unable to find a customer service phone number or way to contact the company through the site.

Here is their pitch to borrowers:

If you need a personal loan, a wedding loan, a small business loan, a debt consolidation loan or a school loan, Swap-A-Debt is your answer. Our Lender network makes the process very painless and very simple, while offering rates that are far lower than bank rates.

And the pitch to lenders:

On one hand, your bank pays you 2% interest on Your money; on the other hand, the same bank lends YOUR money to others at 8% to 18% interest rate. It seems a bit unfair. Don't you think? Swap-A-Debt makes the lending process simple and gives you the power to make well-informed decisions about whom to lend, so you can act as your own virtual bank! Use any Compound Interest Calculator, and you will see that in a 5-year period you can get 600% more on your money when you join Swap-a-Debt's Lender network.

The site touts five main features:
  • Lend and Borrow Money on a peer-to-peer basis - this p2p lending action appears to be much like Prosper's auction style format. I was unable to find any mention of fees. Borrower's credit profile information is visible to all visitors unlike Prosper which only shows this information to registered lenders.
  • Credit Rating - According to Swap-A-Debt, their credit rating system is "one of the quickest, most advanced, easy-to-use credit access systems in the industry." You can access information credit report information from all three major credit bureaus.
  • Credit Doctor - This service is advertised to be able to settle collections and judgments for pennies on the dollar, remove inaccurate items from your credit report, increase your credit score and improve your credit. This service is "guaranteed" to improve your credit. The fee arrangement for the credit doctor service can be found here.
  • Send Money - This service appears to be similar to PayPal.
  • Payday Loan - This service may be outside of the p2p lending arrangement.
Although Swap-A-Debt is now live, it appears much of the functionality will probably be rolled out in the next few days and weeks. It certainly has a "beta" feel.

Swap-A-Debt's filings with the SEC occurred on the same day this month and within days of each other last month. If Swap-A-Debt received regulatory approval perhaps Prosper is not far behind.

Swap-A-Debt is a publicly traded company and trades under SWPD.PK. Marco Garibaldi is the CEO and Edward DeFeudis is the President.

Swap-A-Debt becomes the third p2p lending site to register operations with the SEC ahead of Prosper. Lending Club is the largest and most prominent. Pertuity Direct launched earlier this month.

Tuesday, January 20, 2009

Pertuity Direct Review

Pittsburgh, PA., Pertuity Direct has launched operations with the blessing of the Securities Exchange Commission (SEC). This startup, founded on a value of “mutually responsible banking” offers many ways to differentiate itself from the many players in the p2p lending market.

I’ve long followed microcredit but domestic peer to peer lending is fairly new to me. As someone who, shamefully, still hasn’t moved to online bill paying yet (it’s my new year’s resolution, honest), I’ve been just a smidgen nervous about this fascinating new format to borrow and lend in.

Pertuity Direct eases a neophyte’s fears by offering essentially a “peer to peer” mutual fund, rather than commitment to one single loan holder. For those of you p2p purists, this option is also available.

Pertuity Direct screens borrowers well, requiring a minimum 660 FICO score, but showing that most borrowers have at least a score of 720. Interest rates for borrowers range from 8.9% to 17.9%. Fees for lenders are estimated to be about 3.17%.

For borrowers there are additional advantages, including lower interest rates than many other peer-to-peer sites and no auction process to determine the interest rates. For borrowers this means that loans are funded within 2-3 business days after applying. Fees are relatively low, including a 1-2% closing fee, a $15 late payment fee and a $15 (average) fee for late payments. Borrowers can also benefit from 1% discount for Electronic Funds Transfer payments. Another interesting feature is “Pertuity Bucks” which are given to lenders to award as they see fit to responsible borrowers. These can only be awarded to borrowers in good standing, but are applied to the loan to pay down the balance. (When was the last time any creditor rewarded you for paying your bills on time?)

There are some nice perks to being a lender on Pertuity Direct as well. Pertuity allows for monthly or quarterly automatic deposits into your account from your bank account. They also allow you to withdraw your funds early (before one year) at a fee of two percent.

Pertuity Direct is managed by a team armed with credentials that would impress anyone in the business. CEO Kim Mushota spent 11 years with PNC, and Lisa Lough, the VP of Marketing came by way of E*Trade. The Senior VP of Finance, tom McNally comes from Capitol One.

My greatest complaint is that Pertuity Direct does not yet appear to be “” compliant; meaning I can’t view my Pertuity Direct investments inside my financial overview. (Why can’t everyone just get along and play nice?)


Monday, January 19, 2009

P2P lending: 2008 in review

The P2P lending marketplace changed significantly in 2008. Of course, we said the same thing in our 2007 P2P lending review. There are also likely to be even more significant changes in 2009.

In 2006 the only real P2P lending story was Prosper. In 2007, Lending Club launched and Zopa expanded to the U.S. In 2008 the story is dominated by regulation - Lending Club obtained a green light by the SEC and most other companies shut their doors as they work towards SEC approval.

Here's a look at each individual company:

Lending Club




Other companies to capture our attention in 2008:

We started Prosper Lending Review in 2007. It has been fun and we have learned a lot. Our traffic has grown significantly. According to unique visitors, these are our most popular articles in 2008.

15 Most Popular Articles of 2008

A Prosper scam: The story of Jessica Wolcott - This also happens to be the most read story of 2007 as well.
PayPal competitor Revolution Money Exchange offers $25 sign-up bonus
How does Prosper compare to other investments?
Why does Revolution Money require my social security number?
Borrowing money to lend on Prosper: Wise or Foolish?
P2P lending review: Best of 2007
Prosper: A hands-on education in risk management
Eleven perspectives on P2P lending - this is my favorite article of the year
Fynanz to tackle peer to peer student loan niche
When to bid on Prosper loans
Why would a borrower use Prosper instead of a traditional bank?
P2P Lending Carnival #4
What effect would a recession have on the Prosper marketplace?
Revolution Money Exchange improves referral program
Peer to peer lending in Canada - CommunityLend

We look forward to 2009 and the many positive changes it will bring to the p2p lending marketplace. Happy New Year!

Prosper works through regulatory process; nears re-launch

Prosper updated their S1 with the SEC on Friday. In October Lending Club updated their S1 less than a week before they reopened. It is possible Prosper will open in days.

All the documents can be read here:
Swap-A-Debt, a new p2p lending company we discovered in December, also updated their paperwork - on the same day as Prosper. Their filings are here:

Sunday, January 18, 2009

Grameen America sees excellent return on investment and paves the way for immigrant family businesses

Americans are defaulting on their loans in record numbers. Credit cards, student loans and even mortgages. As a result, those with low credit scores or self-employment are finding it difficult, even impossible to get the credit needed to maintain their businesses. Enter Grameen America, a branch of Bangladesh-based Grameen Bank, which shared the 2006 Nobel Peace Prize with the father of microcredit, Professor Muhammad Yunus.

Grameen America is directed by CEO Steve Vogel and is serving loans in one of the poorest parts of New York City—Queens. Since opening a year ago Grameen America has lent $1.1 Million to 440 women in the borough of Queens. All are self employed and have little or nothing in terms of assets. All are also-self employed and many are immigrants. Remarkably, despite mainstream-America’s credit woes, Grameen is reporting a 99.5% loan repayment rate. These loans, averaging about $2,000 each have been issued with receipts and ledgers and without the benefit of credit checks have performed better than heavily documented mortgages and credit cards.

Grameen America holds all of its own loans, and requires weekly meetings with its borrowers. By contrast, according to an MSNBC article, in more than half of all US mortgage foreclosures, the lender and borrower had no communication in the prior twelve months.

There is a core trust between borrowers and lenders (and peer to peer between the borrowers) that the loans will be repaid. In fact, no loans can be issued until all borrowers in a group are current on their payments—which keeps the borrowers aware of each others’ payment status as well.

Grameen America plans to expand to other low-income communities in the United States. Its published goal is to build a culture of individual responsibility, savings and prudent use of credit for income-generating activities throughout the United States. Once a substantial base of about 10,000 borrowers and savers has been established, Grameen America plans to add loans for other purposes.


Jessica Ward authored this post. She is a freelance writer, microcredit enthusiast and frequent contributor to this blog.

Wednesday, January 14, 2009

Uncrunch America: Solve the credit crisis from the bottom up through social lending

Twenty-five year old entrepreneur Scott Krager has earned over 6,000 votes for his idea on to solve the credit crisis from the bottom up through social lending. In the first round of voting it placed 2nd in the social entrepreneur category.

On Friday, will co-host an event at the National Press Club in Washington, DC to announce the top 10 rated ideas and plans for supporting the formation of a national advocacy campaign behind each idea. Krager's social lending idea is currently in 18th Place and needs 3,779 more votes to be among the final 10 ideas.

We interviewed Krager to find out more about and his ideas to promote social lending.

What is your background and what inspired Uncrunch America?

I'm a small business owner myself. I know how valuable credit is to many small businesses. I've been following this space for the last few years. Kiva is what originally attracted me to the whole social lending niche, and then Prosper and Lending Club.

What is Uncrunch America and what do you hope to accomplish?

Uncrunch America is an organization that came out of a simple idea from Tobin Smith (leading equity and economic researcher, author and commentator) to 'uncrunch' the consumer credit markets for deserving, credit worthy Americans by promoting "social lending" networks and other web 2.0 financial education and management tools.

I fell in love with the idea and their website, and approached approached them with the proposal of promoting them by signing them up on's voting contest: Top 10 ideas for Change in America.

My goal was to build awareness around social lending, gain the support of the Obama administration, and convince the government to match funds. supporters believe this is the most efficient way to put government funds to work for the people, not financial institution profits.

Who is behind Uncrunch America?

Tobin Smith and his organization ChangeWave, along with Lending Club, Credit Karma, Geezeo and OnDeck Capital.

How did you bring all the supporters together behind Uncrunch America?

I didn't personally. I signed up for and submitted and promoted the idea. The founding companies have since reached out to their customers and followers to build support for the idea as well.

What has the reception been like so far for Uncrunch America?

So far, it has gotten amazing traction and I think it's because of how timely this idea is to the current credit crisis. First it made it to the second spot in the first round of voting with a few hundred votes. Now, it is in the 21st position (out of 90) in the second round of voting with 4 days left. I really thing it has a great chance of making it to the top 10.

What are Uncrunch America's biggest challenges?

The immediate challenge is to make it to the top 10 on Whether they accomplish this or not, I think their next challenge is to gain traction and get the message out there. Uncrunch will be promoted by all its partners, similar to the (RED) campaign, so it is critical that they get more supporters, and the message does not get lost in the noise.

What future plans does Uncrunch America have?

Unrcunch America will be launching a campaign to get their idea out there. In the process, they will be recruiting more members to help in this endeavor. I think it is a great initiative and hope they succeed.

Is there anything else you would like to add?

Vote, vote, vote. With only 3 days left to vote, I hope your readers click here and submit their vote for this idea. Making to the top 10 will be a great push for social lending in the US, and a great way to get attention from the incoming administration.

Tuesday, January 13, 2009

Video: The story of a Kiva loan

A Kiva fellow made the following video which follows the path of a $25 loan from London, England to Preak Tamao village, Cambodia. It is a bit long (11 minutes) but gets at the heart and soul of Kiva - people making loans which have a positive impact on the lives of others throughout the world. It also helps revolve the concern many have about donating to non-profit organizations - where exactly is my money going.

A Fistful Of Dollars: The Story of a Loan from Kieran Ball on Vimeo.

I want to thank Brett from Personal Loan Portfolio for giving me a Kiva gift certificate last month. I used it to donate $25 to Ghalam Nabie Share Ahmad who owns a restaurant in Kabul, Afghanistan. Having personally seen the poverty in Afghanistan (and eaten in some of these roadside restaurants) I feel a personal connection to my donation. Here is the recipient of my loan:

Ghalam Nabie is the son of Share Ahmad, and lives in Kabul, Afghanistan. Ghalam, 54, lives near the Afghan Hotel and is married with five children. He has a small restaurant in the city and has good experience in this field and would like to expand his business to support his family. He is requesting an individual loan of 50,000 Afghans ($1050) for a term of 18 months to enlarge his business and to buy a new desk and table and other necessary things for his shop in order to further his business with more success. Ghalam is very happy to be involved in this loan process and is especially grateful for the help of the AFSG and Kiva. He thanks all lenders around the world.

December was a record month for Kiva. In fact, at times, I had trouble finding a borrower to lend to. According to Kiva's December newsletter, $3,827,400 was loaned to entrepreneurs and $2,156,125 worth of gift certificates were purchased.

If you are on Kiva or would like to join, we invite you to connect with us in the Peer Lenders Team. I plan on increasing my coverage of Kiva on this blog in 2009.

Monday, January 5, 2009

ZimpleMoney launches social financial platform

ZimpleMoney launched a couple weeks ago as a platform which democratizes financial activities by giving people tools to select, buy and provide self-directed financial services. CEO Steven Rabago explains what that means and provides valuable insight into ZimpleMoney through the following interview.

What is your background and what inspired ZimpleMoney?

I worked in the commercial banking industry during and after college then started a consulting company advising CEO and business owners on how to raise debt and equity financing. The consulting practice evolved into doing board and C-level strategic planning, financial consulting and management turn around work. There came a point in time where I was tired of fixing other peoples business issues and wanted to start or buy my own business. So in 2001 I funded a start-up location-services company called Telogis and led it until 2007. I sold a portion of my interest in the first quarter of 2008. Telogis provides web-based fleet management software and a geospatial software map engine for software developers. I am on the board and retain a significant interest.

As I was transitioning out of Telogis I established some criteria for my next venture. I wanted a business...
  • whose customers where ultimately a consumer;
  • that enabled people to do good - not just be more efficient;
  • where the team shared my values about having fun and working smart;
  • with a sustainable business model;
  • with cash flow to self fund the great ideas of its employees and partners and encourage their entrepreneurial spirit;
  • delivered a product to market quickly;
  • designed as a platform that enabled rapid deployment, re-branded and where others saw niche opportunity

What inspired ZimpleMoney?

I had a, “if he can do it, I certainly can” moment. Late in 2007 I read that Richard Branson had just purchased a Waltham MA based company called Circle Lending. If Sir Richard could do it, why I certainly could! With my background in finance and banking, the business model was very attractive to me. It also fit all my business requirements.

What is ZimpleMoney?

ZimpleMoney is a web-based product enabling people and organizations to manage and administer financial agreements. Samples of these agreements include loans, leases, rentals, tithing, trusts and settlements. ZimpleMoney focused on “naturally occurring” social networks like family, friends, churches, schools, organizations, non-profits, charities, trusts and foundations. ZimpleMoney sends bills, receives and distributes payments, post payments to ledgers, sends late notices, sends alert messages throughout the process, provides tax records and storage for file and document management and sharing.

Who is behind ZimpleMoney?

Scott McGarrigle and I are behind ZimpleMoney. We have been funding the business for the past year and will be adding a rounds of Friend & Family, Angel and VC investors in 2009. Scott and I have known each other for the past 8 years through Vistage. He and I began talking about the application in November of 2007, built specifications in early 2008 and started coding in late April.

In many ways, ZimpleMoney seems like a mix of Prosper, Lending Club, Kiva and Virgin Money. What are the similarities and what are the differences?

ZimpleMoney’s main difference is in its design and intention. We designed the software and business model to enhance engagement and communication within social finance communities. A community by our definition is two or more people engaged in a shared financial agreement. We also wanted to build a platform where the consumer could pick and choose services of traditional banks through the ZimpleMoney platform. We wanted the ZimpleMoney platform designed to manage multiple bank services plus your personal social finance activity through a single site.

ZimpleMoney looked at the various places people have formal, informal or tacit financial agreements. The most obvious is a loan – which is where our competitors focused their attention. When we looked around we saw loans, leases, rentals, tithing, trust, settlements and goal based deposits.

ZimpleMoney is offering certain portions of its software for free to registered users. None of competitors are offering free software.

We are similar to VirginMoney in that our direct customers know each other and have already come to an agreement prior to using our services. We are similar to Kiva in that our members can use the ZimpleMoney system to manage a micro-loan program of their own. Kiva seeks donations to fund itself where as ZimpleMoney is a self-sustaining business model.

We are not like Prosper and Lending Club in any way. Prosper and Lending Club established a lending marketplace where people offer their loan to buyers who bid to buy loans.

Where did you get the name for ZimpleMoney?

Do you like corny? We wanted a word to express fast and simple. Fast and Simple = “Fimple,” no that did not work…Zippy and Simple = “Zimple,” that works! Coincidently, it works really well with our product branding strategy as well ZimpleMoney, ZimpleCause, ZimpeTPA, ZimpleRents, ZimpleLease etc.

How does ZimpleMoney make money?

We have several sources of revenue: loan set-up fees, monthly recurring transaction fees, recurring enterprise license fees, advertising and related product sales.

Members have several service level options.
  • FREE – you do all the data entry, manage up to three loans on the network (the free product will be available in a few weeks)
  • Introductory offering - $39.99 per loan set-up and $7.99/loan/mo (regular price is $99.00 plus 9.99)
  • Enterprise/Business user - $100/mo plus $7.99/loan/mo
  • Non-profit users have a special pricing plan as well - $50.00 per month plus $7.99/loan/mo

ZimpleMoney service include: sending bills, sending payment reminders, receiving and distributing payments, posting account ledgers, sending late notices, status message alerts throughout the process, provides tax records and the ability to upload and share digital files, documents, photos, video’s etc. Members who are parties to the agreements have secure access to their account information anytime.

Your site has been live for a little less than a month. What has the reception been like so far and what have you learned from your users?

I am very pleased with the interest we have received so far. In fact it is a little overwhelming. Keep in mind we have not sent any press releases or announcements to the media. And it was not till last week that we saw any search engine indexing on the site.

Maybe the best way for me to answer your question is to tell you who is showing up. As of yesterday, we have had just under 1,000 people from 33 countries visit the site. Most of the “Contact Us” inquiries have expressed interest in using ZimpleMoney to manage a loan servicing or rental back office operation.

We are engaged in discussions in some unique vertical markets:
  • Two micro-lending companies in Southeast Asia
  • One non-profit that wants to manage its micro-lending programs in North and South America
  • A network of 8100 independent auto dealers
  • A company that manages equestrian centers
  • A company that wants a back office for an online student lending business
  • Web-based Real Estate Data Company that wants to co-market to its customers
  • A dental finance company
  • A veterinary group
  • Private real estate lenders
  • A church looking to manage tithing
  • Private real estate brokers managing rent to own properties
  • Private Charitable Trust looking for a product to manage “program related investments”
  • Web-based automobile finance company
  • Investment group who wants a place to share information (financial reports) and collaborate with respect to their common investments

Our users are telling us they want more of everything: advanced loan and rental options, rental application processing, loan documentation, bad debt collection services, loan secondary market options, deposit services, API’s etc. They want one place to manage all their financial services. It is clear we are on the right track yet still quite away from reaching that ultimate objective.

Lending Club has registered with the SEC to provide loan services. Other p2p lending companies have all closed (at least temporarily) in order to meet regulatory requirements. What is the regulatory situation for ZimpleMoney?

Back when I first looked at p-2-p financial services, I was concerned that all our peers, with the exception of VirginMoney, were violating either banking or securities laws. My objective was not to be a regulated enterprise. When we built the business model we looked to VirginMoney (fka CircleLending) as our guide.

ZimpleMoney intention is to provide software to both regulated and non-regulated users. We are not offering a “bid/ask marketplace” solution to our business and enterprise users unless they are prepared to invest in the cost of becoming a regulated business.

I think of ZimpleMoney more as a financial agreement administration service that offers social network tools to enhance engagement and communication between parties with common financial interests.

What are ZimpleMoney's biggest challenges?

Our biggest challenges are the same as most start-ups: hiring great people, staying focused, executing the plan and raising capital to grow our business.

What future plans does ZimpleMoney have?

ZimpleMoney will be releasing it free software within a few weeks. We have an aggressive technology road map that includes:
  • features to support more advanced loan agreements,
  • social network functions like in network messaging and live online voice communication,
  • advanced modules for property management, leasing, tithing, trust and settlement administration,
  • free allowance management product for families
  • dedicated deposit system,
  • API’s for strategic partners and licensees

I am focusing on key strategic relationships with larger commercial users managing existing and new loan portfolios; and raising money for ZimpleMoney.

Is there anything else you would like to add?

One of my personal motivations was to empower non-profits, trusts, and charitable organizations by providing access to a low cost software product enabling them to provide social capital within their communities. There is a huge opportunity for charitable trusts to make “Program Related Investments” (PRI’s) to non-profit organizations. By example, the David and Lucile Packard Foundation are reported to have nearly $160 million dollars invested in PRI’s and have been doing so for many years.

ZimpleMoney system enables charitable foundations to team-up, communicate, engage, “co-lend” and “co-partner” in worthwhile causes. Foundations with smaller amounts of capital can join other foundations to make important investments within their community or where they share common objectives.

Here are some links if people are interested in learning more about PRI’s:,,id=137793,00.html

The bottom-line: I think the peer-to-peer social finance movement is a long term trend. The commercial and investment banking industry and the regulatory agencies worldwide have largely failed. High risk and high leverage coupled with the sale of that risk is a living example of the “greater fool theory.”

I still don’t think the banks quite get it, they want to “control” customers; ZimpleMoney is the customer’s partner. ZimpleMoney democratizes financial services by giving people tools to select, buy and provide self-directed financial services. Zimpley said, “ZimpleMoney enables choice.”

Saturday, January 3, 2009

Fynanz halts p2p lending; markets student loan platform to credit unions

"To seek out funds, some students have turned to peer-to-peer lending sites, such as GreenNote and Fynanz, which focus exclusively on making college loans. After creating an online profile, users can court a variety of financiers, including friends, family, and perfect strangers. According to Kantrowitz, however, peer-to-peer lending funds are limited. 'Right now, they're just a drop in the bucket," he says. "But the idea is really interesting. In a decade, who knows what it could become?'" - BusinessWeek, December 30, 2008

Less than one week after this glowing endorsement from BusinessWeek, Fynanz has officially halted peer to peer lending due to "market conditions." They have revamped their website and are now offering financial institutions "a turn-key, web based solution that allows [them] to penetrate the growing private student loan market."

Fynanz became the first p2p lending platform focused exclusively on student loans in March 2008. Our first interview of Fynanz's founder, Chirag Chaman, was almost exactly one year ago. Fynanz quietly stopped brokering loans after Prosper received a cease and desist from the SEC about one month ago. The regulatory environment for p2p lending has caused Prosper, Zopa, Fynanz and Loanio to permanently or temporarily close their doors. Lending Club closed for several months in early 2008 and is now fully operational and registered with the SEC.

In our original interview with Chaman he said, "In a startup, I don't think there is a biggest's only a challenge until you learn or come up with a creative way to overcome it, and 99% of the time you do." Chaman's approach to overcome the regulatory challenges appears to be to market their platform to credit unions.

Update (1/5): I received the following comments from Fynanz founder and president Chirag Chaman:

We're alive, well, and still servicing the existing loans that have been made by our current lenders. However, we have suspended accepting new borrowers and lenders. The primary reason for this is market conditions.

As interest rates declined to their current record lows, being variable rate loans, the loans sourced on the marketplace have became less palatable for our lenders. With fewer lenders bidding, it became challenging for Fynanz to fulfill loans in a timely fashion. With student loans its imperative to get the entire loan filled by a certain date — most of the time, the student really does not have the option to re-list as not meeting the payment deadline means not being able to register for classes. Since the situation was not turning around soon, we made a call to suspend any future P2P borrowing so as not to disappoint students who were in need of financing.

However, there is good news. In the coming months, we will provide students with education loan options for the upcoming academic season — and at attractive rates. We have opened up our platform to financial institutions that wish to establish a student loan program. Traditionally, private student loans have been offered by a select number of institutions given the expertise required to create and manage a program. A lot of them (mainly the large banks) have been affected by the credit crisis and curtailed their lending. But, there are many smaller banks and credit unions that are doing just fine and would like to make private student loans -- but do not have the infrastructure to do so. Now, by leveraging our platform and expertise, these banks and credit unions can offer student loans and we live up to our goal of bringing students attractive funding options.

Lending Club introduces new lending features

Lending Club has introduced four new features for lenders - the ability to reinvest monthly payments, more visibility to see notes already invested in when browsing to avoid accidentally lending to the same borrower twice, an invite friends feature to give new lenders $50, and a new 'charged-off' status.

Here is Lending Club's explanation of the new features:
  • Reinvesting Monthly Payments: until now, it took some efforts to keep your money invested. We have made it a lot easier by offering the ability to schedule a search that runs automatically when your cash balance equals or exceeds a given amount. This feature currently uses LendingMatch; we will be adding the ability to use the more granular credit criteria soon. To find this feature, log into your lender account and go to Invest > Reinvest

  • Notes Already Invested in: many of you have asked for this feature in the last few months: you will now be able to see which series of notes you have already invested in and avoid investing a second time. You can also exclude them altogether when browsing and searching for notes to invest in, by selecting a check box at the top of the search page.
  • Give your friends $50: you can now pass the word out to your friends and family and give them $50 to try Lending Club. Simply log into your lender account, click on the "Invite" tab, and fire up emails to your connections.

  • Charged off loans and notes: we have added a “charged off” status to your account, so that you can now differentiate defaults from charge-offs. While “default” occurs automatically when a loan is 120 days past due, a loan or note only gets charged off when Lending Club considers it unrecoverable after a review of the collections activities (which can happen before or after 120 days). These charge-offs will appear in your end of year statement so that you can report them as losses for tax purposes.
Open a new account with Lending Club here.