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I would only need to raise my average APR by about 0.2% to cover the PayPal fee. Interestingly Kiva gets around this: "Kiva is the first organization that PayPal has supported by providing free payment processing. This support saves Kiva up to one million dollars each year, which helps us to keep our operational expenses low and send 100% of your loan contributions to the field." The CEO of Kiva is formerly from PayPal. This is a serious advantage to Kiva, and disadvantage to Zidisha. I have no idea if there is an alternative way of uploading funds to Zidisha without incurring these fees. Regarding my profit motive, I don't see these platforms as an effective means to profit. I seek to break-even. By seeking to break-even this permits side-by-side comparisen. It creates a level playing field to compare, and from this, one can modify the break-even criteria to measure the impact. For example, on MyC4, if I see a loan is fully-funded at 12.2%, but the interest ceiling is 12%, I have a simple Excel tool that tells me how much I need to bid at 5%, or 0%, in order to displace enough of the highest-cost bidders in order to faciliate the loan. So, I might do a modest loan of only $25, at a very low or zero interest rate, but as a result of this a loan for $500 which may not have otherwise been disbursed is able to be disbursed. I consider this a good use of my funds. Also, by constantly displacing the highest bidders, at the margin this may frustrate them by constantly having their bids removed at the last minute, and persuade them to lower the rates they charge - who knows if this is effective or not, but this is one strategy I use. But, overall I seek to break-even on all these platforms. This is not entirely altruistic. I also have a one-year fixed-term deposit at a regulated microfinance bank that I know very well, which yields 8% APR and suffers no forex risk. My funds are also used for lending to microfinance clients, only I don't know precisely which ones. My logic is that this generates a relatively risk-free return (the credit risk is with the bank itself, not the individual clients), and means that if I break-even, or take a few hits on my P2P lending, then in the long-run this all cancels out, and I might cover inflation hopefully. Such fixed-term deposits might be considered an alternative mechanism for microfinance lending, but it is relatively undiscovered in the mainstream retail sector, also invovles transaction costs, and requires more paperwork to set up. And of course, it doesn't harness the feeling (imaginary or otherwise) of P2P lending. |