Dec 16, 2018
Starting this week, we are making two changes to the risk fee structure: 1) risk fees are reduced for most loans, and 2) risk fees for new loans issued after today's date will no longer be refundable.
Eight months ago, we announced that risk fees would be refundable once loans were repaid. The intent was to allow the risk payments to act in a way similar to security or collateral, in that they would allow us to compensate lenders for loan defaults while continuing to be available to borrowers who completed repayments.
What happened in practice is that most borrowers did not request refunds, usually because they were not aware of the option or did not wish their credit limit to be reduced.
Making the fees refundable also carried a cost, in that we must increase fees to compensate for the percentage of them that we expect to be refunded. This led to a situation where everyone was paying higher fees, but only a minority were benefiting.
An additional problem with the refund policy is that it made our legal and financial sustainability analysis complicated, because it was not clear how the fees should be classified financially.
Making the fees non-refundable will allow us to sustainably reduce fee rates for all members, and ensure that all members of a similar risk profile pay the same cost for their loans. It will also make the risk fees easy to understand as a cost of the loan, rather than asking members to factor in a complicated refund procedure and the impact of refunds on credit limits.
The non-refund policy will only be applied to loans issued after today's date. Risk fees (and MLF payments) that were paid for loans taken out on or before today will continue to be refundable, under the same policy as previously.
Luke Gitonga, Duncan Nduati, Rosemary Kinya, Daniel Simiyu, Agustinus Mangun, Abdul-rahim Abdulai, Beatrice Mirekua, Asante Dennis, Evans Mose, Kolawole Funmi and Okeoma Uzoma like this.
Faisal Mohammed Zakari
Dec 21, 2018
Hello Julia, hope all is well with you. The idea of not paying back the credit risk might be ohk, but I believe for some amount of loan taken the credit risk seems high and makes the overall money received not sufficient enough per the borrowers request. It would be good if you could range the credit risk better as compared to the existing structure. Thank you
Abdul-rahim Abdulai, Okeoma Uzoma and Michael Uzolisa like this.
Also base on the given information how do make a request for a refund on my previous credit risk dated before the initiation of this policy.
Jan 2, 2019
i want to know is it maximum of 3 weeks is all loan borrowed or the higher the loan the higher the repayment day
Dec 20, 2018
Hi Julia, trust you are keeping well, and many thanks for everything you are doing to keep Zidisha going strong.
I wish to ask if you can advise what percentage (the non refundable) of the risk fee this is going to be. Is it a fixed % over the amount of the loan? Kindly let us know.
Okeoma Uzoma, Michael Uzolisa and Joel Kamau like this.
Dec 20, 2018
i cant see the upgrade options on my dashboard please please
I will like. Know if still possible to request back the MLF paid.
Dec 21, 2018
Yes, both the MLF and all risk fees for loans applied for before Dec 17, 2018 are refundable upon request, by the same process as before (send us a message from your Help page).
Daniel Simiyu, Evans Mose and Okeoma Uzoma like this.
Dec 21, 2018
Julia please ,will the refund affect my credit limit?
Jan 17, 2019
Hi Julia. When taking my previous loan, an MLF of KES. 10,000/= was deducted. I have since finished repaying the loan and have taken another loan from which a credit risk payment of KES.
8600/= was deducted.
My question is do I qualify for a refund of the KES. 10,000 previous MLF.
Dec 21, 2018
am VERY HAPPY about this change!! I cringe when I regularly see credit risk payment that is a whopping 25% of the loan amount (at times, even upto 35%) being 'cost of loan'. It is on top of the 5% fee and is seen even for seasoned borrowers who have 100+, 130+ repayments at 100% OTR.
Can you indicate how much are they reduced? Especially since they are no longer refundable?
Salihu Arimiyawu Sariki, Christian Golo, Georgina Ansere, Daniel Simiyu, Joost, Robert Antwi, Gandalf and Purity Gacheru like this.
Ngoingwa Estate, Kenya
Dec 22, 2018
Thank you Julia for the information but about non refundable risk fee it must be clear which % of the total loan amount is non refundable??Another issue is depending with the loans the borrower have applied with every risk fee and MLF deducted all accumulated? For example a borrower have been with Zidisha for 10years & have applied ten loans with every loan deducted non refundable risk fee this would be a huge amount amount of money accumulated??
Dec 22, 2018
Please I want to become a volunteer mentor.
Kota Surabaya, Indonesia
Dec 24, 2018
In my opinion it will be harder for the borrowers if the credit risk become not refundable anymore.
why not make it that the credit risk will refundable to borrower when their credit risk reach certain amount?
When you announced credit risk the first time, it was 10% non refundable. I thought the credit risk rate will coming back to that rate, but I still see that the credit risk are higher, more than 25%, even I saw credit risk 30% to borrower who have on-time score 100% (55), 95% (187)
If the credit risk not refundable rate over 10%, what is the different between Zidisha and other microfinance that have middle man that Zidisha said makes the borrower get less amount because the fee are too high?
I hope you will review again this decision.
as many still not familiar with forum (especially on the announcement section) and also a lot of borrowers thinking that their discussion page is the place for them to reach out Zidisha staff, Could you please make it on the system to send them first to read the announcement about credit risk section before they can accept their loan? especially with this new information that the credit risk are not refundable anymore( I really hope this will change to refundable). This way hopefully make them fully understand what is the meaning of their agreement to accept the loan with credit risk in it.
Translated by Google
James Wambugu, Alex Masumbuko, Stephen Kuria, Salihu Arimiyawu Sariki, Martin Gachie, Christian Golo, Elinam Sekyi, Daniel Simiyu, Agustinus Mangun, Nicholas Saddari, dave2319, Joost, Gandalf, Katie, Nico Robin, Purity Gacheru, Kolawole Funmi and Okeoma Uzoma like this.
Dec 27, 2018
I agree with you that we want to keep fees as low as possible, so that borrowers can keep more of the profits and benefit more from their loan projects. But if we lower fees too much, then there won't be sufficient fee income to compensate for the amount lost to defaults. This will lead to our lending capital being lost over time, and also in lenders no longer wishing to contribute more capital. Excessively low fees may be popular in the short term, but in the long term it undermines our ability to continue to lend and support people in the future.
For example, we know from having made hundreds of thousands of loans over many years that loans of a given risk profile have a 20% default rate. This means that we need to set the risk fee at close to 20% in order to be financially sustainable. If we were to set the risk fee for this category at 10%, the lending funds would lose value over time and we would eventually have nothing left to lend.
In the past, the Members Loan Fund income compensated for defaults. Risk fees now serve this same purpose. Unfortunately, a 100% on-time repayment rate does not necessarily mean a loan is low risk. Most loans that default previously had a high on-time repayment rate. We are constantly working to improve our service to more closely match risk fees to the actual default likelihood of each loan. This is a complex challenge that requires observing how loans repay over time and adjusting parameters accordingly.
George Kiio, Joost and Okeoma Uzoma like this.
Dec 27, 2018
I was going through these whole article and comments just to find one thing, yet, it is not mention anywhere even when some commenter asked of it.
What is the % of the risk fee charged on a loan. From my last loan, it seams to be around 20%, but doesn't seems to be a fixed % compare with my previous loan.
Please can you state categorically, how the risk fee is calculated.
George Kiio and Josephine Yeboaa like this.
Dec 27, 2018
Hi Julia, let me ask you a silly question as I hope you will answer me. What would happen to Zidisha if you gave out flat loans without interest nor service fee and define well the repayment installments? No reduction of repayments once a loan is drawn. Will this not be beneficial to developing countries? I am assuming you(here Zidisha)/lenders will be covering the currency fluctuations.
Jan 5, 2019
The problem is really those who do not repay George. I have many loans where the loan was disbursed and no repayment was ever made. Some are over $1000.
Philip Chenje likes this.
Dec 28, 2018
Sure it will serve as better since we were fearing the deductions if the borrowers requested for the refunds .
Jan 1, 2019
Please do calculation before commenting
When is this going to be reflected on our dash board.
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