Mar 28, 2018
EDIT ON 20180330: Note that borrower can get back any MLF contribution as long as all loans have been paid back fully. While this still does not change basis of the issue I have described below for CRP calculation, the readers should be aware of this correction. Hence, rather than edit the original post, I am adding this note upfront.
I wanted to point out something about fees, that I learnt recently, and hear what other lenders think about it.
When a borrower makes a loan request, he/she can choose to make a non-refundable contribution to the Members Loan Fund (MLF). I have two questions about including such contribution when charging fees.
1. The newly instituted Credit Risk Payment (CRP) fee of 10% is computed on this amount too. The MLF contribution is non-refundable that the borrower can opt in for to get higher credit limit. The MLF is a fund that compensates lenders for loan defaults. The CRP is meant for this exact purpose - to compensate lenders for loan defaults. So the CRP is being computed on MLF contribution that the borrower never gets in the first place. I feel this is double dipping and wish the CRP would be computed only on the net loan amount, excluding any MLF contribution that the borrower opts for.
2. The original 5% Service Fee is charged to cover costs of transferring funds to the entrepreneur. Here too, the MLF is included when computing this fee. I believe the MLF contribution is not something the borrower gets at all as the amount probably goes straight to MLF. The lenders have already paid the 3.5% fee when lending the amount. So here again, I wonder if Service Fee should be computed only on the net loan amount, excluding any MLF contribution that the borrower opts for.
Would like to hear opinion of other lenders about this. I hope Julia/Zidisha would evaluate this suggestion as well. Thanks.
Fitri Fauziyah, Christian Golo, Julie, Mimin Munawaroh and Alicemary Ayivor like this.
Jan de Wit
Lopikerwaard, Utrecht, Netherlands
Mar 29, 2018
CRP is not intended to compensate lenders, but to finance new loans.
I wonder why the names of large lenders are no longer visible. For example Paul Buchheit and Craig Newmark. Have they turned their back on Zidisha?
Emmy Jemeli likes this.
Mar 29, 2018
They still do help to fund loans.
goyimei.info/loan/membel... (Paul Buchheit)
goyimei.info/loan/membel... (Craig Newmark)
Fitri Fauziyah likes this.
Thank you, Laurie!
Laurie likes this.
You're welcome, Jan! :-)
Please note the following clarifications:
The optional MLF deposit fee is refundable anytime the borrower does not owe anything on his/her Zidisha account. Please read: goyimei.info/forum-threa... (thread 1310, comment 4489)
It's my understanding that the 3.5% fee you referenced, which lenders sometimes are charged, is a credit-card processing fee charged by Stripe anytime a lender uses a credit card to help fund a loan, and it is not charged when PayPal is used. (Julia, please correct me if I'm wrong.)
It also is my understanding that what the 5% Service Fee is based on is the Principal Amount of the loan. (Please note that it is the only fee that is used for Zidisha's operating costs, of which money-transfer costs are only a portion, and the money-transfer costs, if I'm not mistaken, are mainly the ones between the Zidisha platform and the money-transfer partners in borrower countries - for example, MTN in Ghana and Zambia, M-Pesa in Kenya, etc., to send loan net disbursements and refunds to borrowers. Other operating costs include but are not limited to compensation for the Director and the CTO, advertising fees to find volunteers, domain-registration renewals, web-hosting fees, etc.)
I think that part of what may be confusing you and others sometimes is that instead of requiring fees to be paid up front, fees are deducted from the total amount of the Loan, and that the total amount of the Loan is the Principal Amount to be remitted, over time, in flexible installments. Please see the clear breakdown provided here: goyimei.info/forum-threa... (thread 1629, comment 6295). I think that doing it that way is intended as somewhat of a convenience for the borrower, that it's viewed as somewhat easier for the borrower than having to pay the fees up front, all at once (especially the high fees, such as the non-refundable Membership Registration Fee, the optional and refundable MLF Deposit Fee, and the new and non-refundable Credit-Risk Fee).
The Membership Registration Fee and the new Credit-Risk Fee now are being placed into the Members Loan Fund (formerly called the Loan-Loss Reserve Fund) instead of being used for platform operating costs (e.g., salaries or independent-contractor fees for anyone other than the Director and the CTO, web-hosting fees, advertising fees to find volunteers, etc., etc.). (The Membership Registration Fee used to be a small fee, and it used to go toward platform operating costs, along with the 5% Service Fee; however, now it's a larger fee and it goes into the MLF "insurance fund".)
As mentioned elsewhere, we all wish it were not necessary to charge for and place more money into the MLF; however, the Director has explained that the number of borrowers who have joined Zidisha now is outpacing the number of lenders joining and the lenders' ability to fund loans quickly (or sometimes at all). Additionally, I have noted elsewhere that not every borrower always sends remittances on a regular basis, so a larger amount of money in the MLF allows lenders to be able to have more money returned to their accounts to re-lend than otherwise would be the case, and that means that more new loans can get funded than otherwise would be the case. (This is especially true for lenders who opt to have the type of lending account that does not allow for withdrawing remittances from borrowers and instead allows for a tax deduction of loan contributions [in the United States, at least], because this type of lending account allows for unlimited reimbursements from the MLF; whereas, lenders with a withdrawable type of lending account have a reimbursement limit of $1,000 from the MLF. There is a way around that, though. Unlike borrowers who are not allowed to create more than one borrower account, lenders are allowed to create more than one lending account.)
If the Credit-Risk Fee were computed only on the Net Disbursement instead of on the Principal Amount of the Loan, then on borrowers' very early loans, that would be hardly any amount at all, and would defeat the purpose, which is to increase the amount available in the MLF for lenders to be able to continue helping to fund new loans. (I think it also may be to help ensure that funds are available when responsible borrowers request a refund of the MLF Deposit Fee, because that refund, while allowed, is only possible as long as there are enough funds in the MLF: goyimei.info/faq#faq-68 "...Please note that refunds are subject to the availability of funds, and are not guaranteed...")
I hope this and the information at the linked posts will clear up at least some of the apparent confusion.
Fitri Fauziyah, Christian Golo, Mimin Munawaroh and Joost like this.
Mar 30, 2018
thanks a lot for the details. Pl see the 'edit' that I added at the top of my post based on this.
Its certainly good to know that a borrower can get back MLF contribution. Although it still does not change my perception that the CRP should not be charged on it. The service fee, yes, because if the borrower does ask back for the MLF contribution, Zidisha will have to pay transfer fees.
I dont have confusion about this being 'one time upfront fee' for a loan and not something being charged at an 'annual rate'. Actually if you think about it, on annualized basis, the upfront fees result in even higher rates. But no need to bring in annualization here as borrowers have freedom to choose loan term and they choose shorter terms based on their needs. So higher annualized rate is a business cost for them that is known to them upfront, nothing is hidden.
I sure understand the need to build MLF to be able to help more borrowers. With some of the loans being stuck as they seem to be neglected loans at this point, I like strategy to increase MLF. But at the same time, I feel that doing so by mandatory CRP fee and including MLF amount when computing the CRP is not the way to achieve it. This way is a burden that is being placed on ALL borrowers, whether they have ability/track record to support it or not.
Thanks again for the details. And for your patience as I raise these questions - here on forum and via emails to Support. I do realize that I am taking Julia's/your time on top of all the things that you do for this wonderful platform. But do feel that I need to table my concern. Wish I had more $$ to contribute more to MLF myself!
Jan de Wit, Laurie, Fitri Fauziyah, Christian Golo, Julie and Mimin Munawaroh like this.
Mar 30, 2018
"Wish I had more $$ to contribute more to MLF myself"
I admire your good thoughts about Zidisha, especially we the borrowers. God bless, protect and provide to you your heart desire for your good thoughts about the have not and all the efforts you are always putting in to make lives better for the borrowers.
Mar 28, 2018
Please i have posted for a new loan over a week now and the loan has not been approved for funding. Thank you and hoping to hear from you soon. Donkor Jeff
© 2009 - 2019 Zidisha, Inc. • Terms and Privacy • Contact
Not a member?
Already a member?