Rashid Umar is an online media professional who specializes in web content production, social media marketing, and search engine optimization. You can connect with Rashid via social media or on his personal website at www.rashidumar.com.
Once upon a time, community banks would grant personal or business loans to residents in the area based on their reputation. However, as time processed, strangers to the community proved to be untrustworthy, which would eventually spawn the birth of the credit rating.
Fast forward to the present day, and you see that there are a variety of requirements that one would have to meet in order to be considered for funding. Now, startup company called Lenddo hopes to return lending to that community bank era, but with a modern twist.
The company’s unique method, determines a potential borrowers creditworthiness by gauging their online reputation thru social media sites like, Facebook, Twitter, and Linkedin. Instead of requiring collateral, the company uses a measure of peer pressure through those sites.
The targeted demographics are people who are largely in developing countries and who are usually ignored by big banks.
For now, Lenddo is only lending several hundred dollars at a time, the equivalent of one month’s salary.
The company relies on three classes of algorithms to gauge a person’s likelihood of loan repayment. One validates truthfulness; for example, it would be statistically odd if a supposed engineering student in Bogota had few friends at school or never wrote emails containing certain words. Another looks for behavioral and demographic clues that predict the probability of repayment, similar to how online ads are targeted based on web-surfing patterns today.
Talk about innovation.
Written by Rashid Umar