Forum > Lender Questions > Loan economics Forum Guidelines

  • Jan 26, 2018

    Hi everyone,

    I am looking at a loan application that I can't make sense of. I don't know if it's appropriate to post direct links from here, so I thought I'd just give you the salient facts.

    The loan is for $202.
    The cost details for the loan show the following:

    Service Fee: 5% of $202.00 = $10.10
    Borrower opted to pay $136.65 into the Zidisha Members Loan Fund in return for a higher starting credit limit.

    In other words, the borrower is paying $147 to borrow $202, in other words the gain is $55. My question is: why would the borrower not simply apply for a $60 loan?

    The borrower has previously had loans for $13 and $35.

    Cheerio,

    Bastiaan


  • Volunteer Mentor
    John Thiaro
    Nakuru, Kenya

    Jan 26, 2018

    Hi Bastiaan,

    Thanks for your observation. I would think that the borrower is investing in his future loans and not necessarily this current one.

    Since you have said he had a previous loan of $13 and $35 which perhaps did not meet his expectations, he would provide his account with $136 so that after he gets the "$202" his next loan maybe more than $500 which would be enough for the type of project he is planning for.

    This is my thinking and not necessarily the actual reasons for this act.

    I would also like to thank you for being a lender in Zidisha platform, I wish you and other lenders know how you have changed lives for the better for some of us who had no hope before!

    John
    Kenya.


  • Volunteer Mentor
    Fitri Fauziyah
    Kota Surabaya, Indonesia

    Jan 26, 2018

    Choosing loan with loan amount which MLF in it will give the borrower more higher credit limit for the next loan. Some have a thought that choosing loan with MLF in it will make lenders will funds their loan sooner (read this from facebook grup).
    If this borrower apply for $60, the base credit limit for next loan is $ 72 (I saw from others that the base credit limit for next loan increase 20% , it used to 50%)
    if the borrower choose $202 then the base credit limit for the next loan will be $ 242.4
    If this borrower choose to apply the loan without MLF, I think the borrower can apply for $42 ( this is without adding invite bonus or VM bonus if the borrower is a VM too)

    Translated by Google     Show original

    Choosing loan with loan amount which MLF in it will give the borrower more higher credit limit for the next loan. Some have a thought that choosing loan with MLF in it will make lenders will funds their loan sooner (read this from facebook grup).
    If this borrower apply for $60, the base credit limit for next loan is $ 72 (I saw from others that the base credit limit for next loan increase 20% , it used to 50%)
    if the borrower choose $202 then the base credit limit for the next loan will be $ 242.4
    If this borrower choose to apply the loan without MLF, I think the borrower can apply for $42 ( this is without adding invite bonus or VM bonus if the borrower is a VM too)

    • Volunteer Mentor
      Fitri Fauziyah
      Kota Surabaya, Indonesia

      Jan 27, 2018

      for information, when borrower applying for new loan, zidisha will show about 4 or more loan amount.
      1. loan without MLF, this is the borrower credit limit, as in your example, the borrower can't apply for $60 if he choose without MLF. The maximum the borrower can ask is $42. unless he have bonus with on-time invitee and VM bonus with on-time mentee.
      2. Loan with smallest MLF.
      3. Loan with Mediun MLF.
      4. Loan with Higher MLF.
      there are always explanation in it, the net amount that will disburse and the amount they have to pay.
      it used to the new member who get this options. Just last year Zidisha give this options for every borrower who applying loan, because some of borrower wanna have higher loan amount. The borrower can ask their MLF when they already pay off their loan.

      Translated by Google     Show original

      for information, when borrower applying for new loan, zidisha will show about 4 or more loan amount.
      1. loan without MLF, this is the borrower credit limit, as in your example, the borrower can't apply for $60 if he choose without MLF. The maximum the borrower can ask is $42. unless he have bonus with on-time invitee and VM bonus with on-time mentee.
      2. Loan with smallest MLF.
      3. Loan with Mediun MLF.
      4. Loan with Higher MLF.
      there are always explanation in it, the net amount that will disburse and the amount they have to pay.
      it used to the new member who get this options. Just last year Zidisha give this options for every borrower who applying loan, because some of borrower wanna have higher loan amount. The borrower can ask their MLF when they already pay off their loan.


  • Jan 27, 2018

    Thanks to you both.

    I did a quick calculation and going by the 20% increase, the borrower would have to take out 10 separate loans to reach the same credit level, that is, loans for 42, 50, 60, 72, 87, 104, 125, 150, 180 and 216 USD. (That assumes that the credit level only goes up after taking a higher loan than the prior limit. Is that the case?). The total cost of those loans would be 5 percent of each loan, amounting to a total of $54.30. A lot less than what the borrower pays now.

    What of course I cannot predict is whether the borrower would actually get all these loans approved, and how long the whole process would take. So if time is an important factor, I see the point of doing the high-MLF option.


  • Volunteer Mentor
    Fitri Fauziyah
    Kota Surabaya, Indonesia

    Jan 27, 2018

    your calculation is correct, but I don't know does that the reason. as Far as I know from reading in facebook grup, a lot of borrower wanna have higher loan amount faster, some of them give suggestion for them to as John said, investing for their loan future by taking MLF in their loan.
    and Bastiaan, Thank you for supporting borrower in Zidisha. have great weekend:)

    Translated by Google     Show original

    your calculation is correct, but I don't know does that the reason. as Far as I know from reading in facebook grup, a lot of borrower wanna have higher loan amount faster, some of them give suggestion for them to as John said, investing for their loan future by taking MLF in their loan.
    and Bastiaan, Thank you for supporting borrower in Zidisha. have great weekend:)


    Mimin Munawaroh and Bastiaan like this.

  • Edwin Mmwacha
    Nairobi, Kenya

    Jan 29, 2018

    There is much sense in the MLF concept for members who cannot be allowed to take huge loans immediately and may need these loans for their projects at a future date.


    Rene Gyimah Amoah likes this.

  • Nathan Mureithi
    Eldoret Kenya, Kenya

    Jan 30, 2018

    For my vew and through my experience as a mentor, Many borrowers apply for mlf thinking that they will get the full amount and get a higher amount afterwards and after disbursment, they get less than they expect to pay more than they expect. That disappoints most of them and are most that us vms always have on our dashboards with arrears. Especially Kenyans are used to borrow like 5 times of their savings or so and when they join Zidisha, they enters with that mentality and applies without understanding even the meaning of mlf .thanks .



  • Feb 2, 2018

    Zidisha is a powerful tool when used correctly to grow a business


    Fitri Fauziyah likes this.

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