A Response to Your Recent Feedback
Dear Lenders, Borrowers, and Trustees,
In the last several weeks, we’ve received a lot of feedback concerning delinquencies, expirations, paused accounts and more. I’d like to take this opportunity to address some common questions we’ve heard.
JOYWO loan groups have been a recent topic of confusion. Considering their unique loan distribution and collective interdependence, many of you have asked about what happens in the case of expirations or defaults. If a JOYWO loan expires, we will still post all the other loans in the group. If a loan doesn’t pay back on time, the whole group, not just the borrower, is technically responsible for covering the amount. Again, JOYWO functions on a ‘group guarantee’ model, which creates shared responsibility for all the loans between group members, and requires simultaneous distribution of funds.
Many of you have brought up the fact that there are some trustees with a repayment rate below 90% that are still endorsing new borrowers. Ideally, we would like to be able to work with these trustees to help them improve their repayment rates, but at this time there are simply not enough resources for that to be a viable response to all of our trustees. We simply don’t have the bandwidth or workforce to chase every delinquency, so we must make hard decisions. At the moment, we carefully choose those that we believe have the greatest potential for improvement and make exceptions on a case-by-case basis. We recently paused Safe Spaces, but Youth Banner is one that we’ve decided to make an exception for. We understand that when we make these exceptions, we are responsible for a certain level of transparency to all of you, our stakeholders, and admittedly we haven’t given you that. Moving forward, we will work to make it clear on a trustee’s profile that their repayment rate is less than 90% and are therefore higher risk. We also intend to work with Metropol to do credit reporting for our trustees so that we can more closely monitor trends and predict future changes.
In the vein of transparency, we hope to improve upon the way we communicate defaulted loans to borrowers, trustees and lenders. This is an important, albeit delicate, piece of information. You’ve rightfully brought up the point that there can be a delay between when a loan is listed as delinquent and when that is communicated to it's lenders. Unfortunately, we can’t predict this changing anytime soon. We would love to have more automated processes on the Zip platform, but the reality is that much of our work is still done manually. This will remain a manual process for the foreseeable future, and we appreciate your understanding and patience as we try to keep our lenders as up-to-date as possible on the status of their loans.
As you have pointed out, communicating defaults to borrowers and trustees may de-incentivize borrowers from continuing payments. Defaults are only lender-facing right now, especially in Kenya, as most borrowers don’t check the website. We don’t want to say no to a repayment, but it’s not fair to the trustee or the borrower to keep them in the dark as to their loan status. With our model, it’s hard to work around the potential of defaulted loans resulting in the inability to apply for another loan, so we focus on incentives for trustees and borrowers to continue or resume their payments. Our built-in incentives include getting larger loans and more flexible terms for repeat borrowers, and being able to endorse more loans for trustees, but we would like to do more to incentivize specifically those who have defaulted. Some suggestions we’ve heard from you include: reporting defaults to a local credit bureau and canceling the report if they finally pay back, providing more detailed statistics on defaults and delinquencies, and reviewing/updating/eliminating repayment and communications badges that do not match the reality. These are all constructive suggestions, but at this time these extra processes are contingent on our engineering resources, which are already spread thin. We can’t say our exact plan to expand our incentives, as we are still weighing options based on capacity, but we would like to focus on credit reporting for borrowers and interest for trustees. The borrower badges for repayment and communication, however, will most likely be deleted in the next few weeks.
The issue of trustee communication, or lack thereof, has also been brought to our attention. While we encourage proactive and open communication from our trustees and borrowers on their loan pages, we can’t exactly set requirements or penalize those who don’t or, more likely, can’t update lenders very often. We see Zip as a marketplace. There is of course room for improvement, but ultimately our goal is to give lenders the information they need to decide who gets their dollars and who doesn’t. Basically, we would like to see the preferred level of communication become a self-regulating metric. Lenders should be able to see who has proven to be communicative in the past and, if that communication is important to them, choose to fund loans accordingly.
Finally, there is the issue of borrowers having the same photo and information on multiple loan profiles. This is a serious, though rare, problem that undermines the perceived legitimacy of our work, and is something we are actively trying to resolve. Unfortunately, some of these are fraud, in which case we try and refund the loan and remove the posting as soon as we become aware of it. In most of these cases, however, it is a lack of understanding on the part of the trustee, and moving forward we will work to improve the training we provide for them.
The impact of our work, our recent growth and the sheer numbers we’ve seen in the past year can create the perception that we have much more resources to change and improve our platform as we scale up than we actually do. Though we’re incredibly proud of the recent milestones we’ve passed, the fact of the matter is that below the surface of our website exists a small group of incredibly devoted people working to make something greater than themselves. Our team has done wonders with what we have, but our work would be impossible if it weren't for several unique factors: the lessons we learn and vital connections we make from our experience in kiva.org, Kenya’s unique MPESA system that allows us to deliver loans at 0% interest, and most importantly our lenders, borrowers and trustees that give us fresh perspective, objective feedback, and new ideas. We stand on your shoulders each day so that we can come closer than ever to our goal of delivering true person-to-person microfinance. With only so many hours in the day, we need all of your help to identify problems and weaknesses, and we want you to see yourselves as partners in our work who are invested on more than just a financial level. The very fair concerns you’ve raised due to resource constraints on our end has helped raise the level of urgency of supplying Kiva Zip with the necessary marketing, engineering and community support it needs to live up to our potential. Your support and feedback has helped us decide to integrate with the kiva.org platform this year, and your participation has helped us prove that it is possible to deliver direct person-to-person loans to excluded populations in the developing world. As Kiva Zip grows, we need to remain flexible and self-aware to keep up with important changes. Kiva is ultimately a conduit to facilitate your collective impact, and we will always take your comments seriously and try our best to reflect your feedback in our work. Thank you all for being present, vocal, and critical through the years.
Kiva Zip Kenya