6 ms·

mfheretic, you're counting "active loans" as cash in the bank, but I think you have some active loans that are likely to default and cause losses... This is th

by BobbyH 12y ago

mfheretic, you're counting "active loans" as cash in the bank, but I think you have some active loans that are likely to default and cause losses... This is the account I looked at: https://www.zidisha.org/microfinance/profile/Jessica.html https://www.zidisha.org/microfinance/profile/Jessica.html That account gave a 20% loan to Hellen Festo, made 40 loans, etc., as you mentioned in your blog post. I took a look at the first ten active loans listed on that profile. Four loans in particular are way behind on payments. If those loans default, you'd be out $160. On $1,000 in principal, that would represent a loss of 16%, instead of breaking even. That's more in line with Zidisha's write-off rate of 18.65%: https://www.zidisha.org/index.php?p=43 https://www.zidisha.org/index.php?p=43

mfheretic 12y ago
Completely accurate, which is why I state "I am basing this entire analysis on a number of large assumptions. Firstly, that my current outstanding loans will be repaid with the same reliability as my completed loans", and a number of other assumptions in addition. Nor do I know the extent to which previous loans, which may now be 100% repaid, may have dipped into default and subsequently recovered, which also incur a marginal cost in terms of opportunity cost of capital etc. My analysis is very much "cash based", which is limited, but this is the data I have available. A quick look through some of the 100% repaid loans suggests that at certain points in the cycle these were also overdue. Perhaps I could obtain the individual repayments versus due dates for each loan and work this out with greater accuracy, but I haven't bothered so far. To what extent are my current loans likely to default at the 18.65% rate you suggest? I have no idea. To what extent did my previous loans default to this extent? I have no idea. This is why I simply take a bird's eye perspective and look at net cash flows. However, as you accurately imply, for me to genuinely do this with precision I should wait until all current loans have been repaid, which either means I have idle funds on the platform, or I have to complicate the analysis by considering my average outstanding balance, which I have assumed for simplicity is $1000, which it has been to date roughly. However, are you considering the gross interest income I will earn on the loans that don't default over the forthcoming period? This will partially offset some of the defaults, I can't say with precision to what extent. I count only principal outstanding, not interest income due. So, to some extent this will lessen the impact of possible defaults. Finally, I have done a couple of new bids since my cut-off date of April 6th when I downloaded the data, so the numbers might not add up 100%. Oh, and Jessica is my wife, she started on Zidisha first, before I took over! At the end of the day I am hesistant to say resolutely that Zidisha is a break-even venture. It has been so far, but subject to certain assumptions which I hope I have stated clearly. 18 months is a decent trial-period, but it's not a perfect analysis. And if I do subsequently lose a few percent on $1000 that is tolerable. Would I put $10.000 on the platform? No. And comments warning that Zidisha needs to tighten delinquency are completely accurate, and to an extent I am gambling on their ability to do just that - progress seems good so far (in 2014). What intrigues me is the innovation in the business model. It is disruptive. It is a first-mover in this space. Does that mean the model is perfectly refined and cannot be improved? I doubt it, and I look forward to seeing how they develop. But I think it is worth giving them a chance, which is what I have done (to a modest extent), and waiting to see what happens. I will update my blog periodically when more data comes in.
- BobbyH 12y ago
  I take your point. It's just that if those four loans default, you will be down 16%. If that happens, you will lose your principal and also not earn interest on those defaulted loans. So even though you charged an 8.4% APR, you will only earn interest on 84% of your loan balance. So unless a miracle happens, it doesn't seem likely that you will break even. Here are some details on those four loans: * Alex made one late partial payment ($1.17) on his $100 loan and is 108 days late on his second payment: https://www.zidisha.org/microfinance/loan/Macbul/3583.html https://www.zidisha.org/microfinance/loan/Macbul/3583.html * Margret hasn't "rescheduled" her loan even though she hasn't made a payment for four months: https://www.zidisha.org/microfinance/loan/margret-muthoni/3491.html https://www.zidisha.org/microfinance/loan/margret-muthoni/34... * Cynthia missed her first four payments, rescheduled her loan, and is now two months behind: https://www.zidisha.org/microfinance/loan/cynthia1988/3090.html https://www.zidisha.org/microfinance/loan/cynthia1988/3090.h... * Soknya missed three months of payments, rescheduled, and is now 67 days late: https://www.zidisha.org/microfinance/loan/sdndiaye/1908.html https://www.zidisha.org/microfinance/loan/sdndiaye/1908.html

by BobbyH 12y ago

mfheretic 12y ago

Completely accurate, which is why I state "I am basing this entire analysis on a number of large assumptions. Firstly, that my current outstanding loans will be repaid with the same reliability as my completed loans", and a number of other assumptions in addition. Nor do I know the extent to which previous loans, which may now be 100% repaid, may have dipped into default and subsequently recovered, which also incur a marginal cost in terms of opportunity cost of capital etc. My analysis is very much "cash based", which is limited, but this is the data I have available. A quick look through some of the 100% repaid loans suggests that at certain points in the cycle these were also overdue. Perhaps I could obtain the individual repayments versus due dates for each loan and work this out with greater accuracy, but I haven't bothered so far. To what extent are my current loans likely to default at the 18.65% rate you suggest? I have no idea. To what extent did my previous loans default to this extent? I have no idea. This is why I simply take a bird's eye perspective and look at net cash flows. However, as you accurately imply, for me to genuinely do this with precision I should wait until all current loans have been repaid, which either means I have idle funds on the platform, or I have to complicate the analysis by considering my average outstanding balance, which I have assumed for simplicity is $1000, which it has been to date roughly. However, are you considering the gross interest income I will earn on the loans that don't default over the forthcoming period? This will partially offset some of the defaults, I can't say with precision to what extent. I count only principal outstanding, not interest income due. So, to some extent this will lessen the impact of possible defaults. Finally, I have done a couple of new bids since my cut-off date of April 6th when I downloaded the data, so the numbers might not add up 100%. Oh, and Jessica is my wife, she started on Zidisha first, before I took over! At the end of the day I am hesistant to say resolutely that Zidisha is a break-even venture. It has been so far, but subject to certain assumptions which I hope I have stated clearly. 18 months is a decent trial-period, but it's not a perfect analysis. And if I do subsequently lose a few percent on $1000 that is tolerable. Would I put $10.000 on the platform? No. And comments warning that Zidisha needs to tighten delinquency are completely accurate, and to an extent I am gambling on their ability to do just that - progress seems good so far (in 2014). What intrigues me is the innovation in the business model. It is disruptive. It is a first-mover in this space. Does that mean the model is perfectly refined and cannot be improved? I doubt it, and I look forward to seeing how they develop. But I think it is worth giving them a chance, which is what I have done (to a modest extent), and waiting to see what happens. I will update my blog periodically when more data comes in.

BobbyH 12y ago
I take your point. It's just that if those four loans default, you will be down 16%. If that happens, you will lose your principal and also not earn interest on those defaulted loans. So even though you charged an 8.4% APR, you will only earn interest on 84% of your loan balance. So unless a miracle happens, it doesn't seem likely that you will break even. Here are some details on those four loans: * Alex made one late partial payment ($1.17) on his $100 loan and is 108 days late on his second payment: https://www.zidisha.org/microfinance/loan/Macbul/3583.html https://www.zidisha.org/microfinance/loan/Macbul/3583.html * Margret hasn't "rescheduled" her loan even though she hasn't made a payment for four months: https://www.zidisha.org/microfinance/loan/margret-muthoni/3491.html https://www.zidisha.org/microfinance/loan/margret-muthoni/34... * Cynthia missed her first four payments, rescheduled her loan, and is now two months behind: https://www.zidisha.org/microfinance/loan/cynthia1988/3090.html https://www.zidisha.org/microfinance/loan/cynthia1988/3090.h... * Soknya missed three months of payments, rescheduled, and is now 67 days late: https://www.zidisha.org/microfinance/loan/sdndiaye/1908.html https://www.zidisha.org/microfinance/loan/sdndiaye/1908.html