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Lenddo

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Lenddo is a startup company that allows the emerging middle class to use their online social connections to build their creditworthiness and access local financial services. Its vision is "to help create an economically empowered and thriving middle class in developing countries around the world." Using computer algorithms, it caters to the unbanked at the bottom of the pyramid via techniques also used in microfinance.[1][2] As of October 2013, Lenddo has over 350,000 members globally.[3]

History

Founded in 2011 by co-founders Jeffrey Stewart and Richard Eldridge, Lenddo is based in Hong Kong, and operates in three countries to date: The Philippines (since 2011), Colombia (since 2012), and Mexico(since 2013).[4][5][6]

Lenddo closed a Series A round of funding in venture capital in May 2012 from investors including Accel Partners, Blumberg Capital, Inovia Capital, and Omidyar Network.[7] In 2013, Lenddo received an additional $6 million funding from investors including Kickstart Ventures, Golden Gate Ventures, and Skype co-founder Toivo Annus, to fund its planned expansion across Southeast Asia.[3]

Strategy

One of the problems that Lenddo tries to solve is the difficulty of getting a credit score and a first loan, especially in emerging economies, where it is even more difficult. According to Golden Gate Ventures partner Vinnie Lauria, there are nearly 610 million individuals in Southeast Asia who banks are hesitant to lend to.[8] Lenddo lets a borrower completely bypass the need for a credit score by using its own scoring system, based on social data.[5] Furthermore, by taking the application process completely online,[9] the applicant no longer needs to visit a physical bank or loan shop, and the person can theoretically apply for a loan anytime of the day. In order to apply, one must first accumulate a minimum score (called "LenddoScore") of 300. The user is scored based on 3 main factors—their social network activity (the algorithm scans data from Facebook, LinkedIn, Twitter, Gmail, and Yahoo accounts),[10] a user's "Trusted Connections" (character references that will vouch for the borrower), and financial performance, if the person is a repeat borrower.[3]

Mother Jones published an article in September 2013 which discusses a concern that credit companies who use social media like Lenddo, LendUp, Moven, Neo[disambiguation needed], Kabbage, and Kreditech may "be discriminating against applicants who essentially appear socially undesirable." David Jacobs, of the Electronic Privacy Information Center, states that there is a "general risk caused by using personal information to clarify and sort people and determine who is a high-value consumer and who is not worth engaging with." Furthermore, he is worried about the possibility of "digital redlining," referring to the practice of banks refusing to issue loans in poor or minority neighborhoods, despite the fact that the eligibility of a person to get a loan is decided by algorithms.[11] In response, Jeff Stewart defended the use of social media to assess borrowers by stating that the ability to provide financial assistance to people who would otherwise not be served outweighs the possibility of inaccuracy in credit-making decisions.[11]

Awards

Lenddo was a winner of a FinTech Startup Award in 2011 and recognized as one of the top 15 global most innovative financial services companies in 2012 at Sibos.[12][13] The World Economic Forum recently recognized Lenddo as one of its Technology Pioneers for 2014.[14]

References

  1. ^ "Lenddo's Social Credit Score: How Who You Know Might Affect Your Next Loan".
  2. ^ "Lenders are turning to social media to assess borrowers". The Economist. February 9, 2013.
  3. ^ a b c "Lenddo gets $6 million funding, plans to expand in Southeast Asia".
  4. ^ "About Lenddo".
  5. ^ a b "Lenddo uses social networks to give loans and improve credit".
  6. ^ "Lenddo arrives in Mexico!".
  7. ^ "Lenddo Raises $8M To Use Online Reputation For Lending In Emerging Markets". May 15, 2012.
  8. ^ "Lenddo gets $6 million funding, plans to expand in Southeast Asia".
  9. ^ "Lenddo FAQ".
  10. ^ Hardeman, Bethy (June 14, 2012). "Lenddo's Social Credit Score: How Who You Know Might Affect Your Next Loan". Huffington Post.
  11. ^ a b "Your Deadbeat Facebook Friends Could Cost You a Loan".
  12. ^ "Sibos Issues, October 31, 2012" (PDF).
  13. ^ "Innotribe Announces Finalists for Startup Challenge at Sibos, Osaka".
  14. ^ "Technology Pioneers 2014".
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