In the U.S., such loans aren’t that hard to secure. But in emerging countries like the Philippines or Brazil, these loans can be a headache for middle class consumers, says Jeff Stewart, cofounder and CEO of Lenddo.
Often times, these countries don’t have the infrastructure to provide student or housing loans, Stewart says. Customers typically wait hours in a local bank to speak to a loan rep, fill out applications on carbon forms and then wait weeks to find out whether they were approved. If they aren’t, these college educated consumers–which are typically accountants, call center employees or computer programmers– are often at the mercy of local loan sharks, Stewart says.
“These people are the emerging middle class,” says Stewart. “They work, they have jobs and they have some level of education but there’s no real credit history on them. They couldn’t go to a bank.”
Into this void pops Lenddo. Founded in January, Lenddo uses social networks (i.e. recommendations from peers) to determine a credit score for customers. Lenddo asks consumers to vouch for each other and compiles a score based on responses. The higher the score, the better the loan, says Stewart, a serial entrepreneur who also founded online printing company Mimeo.com. “The Lenddo score is basically the result of a social graph and who endorses you,” he says.
Lenddo helps users connect to lenders, Stewart says. Lenddo loans are typically one month’s pay in an emerging country, or about $300 to $400, Stewart says. Lenddo is not a lender itself but administers a pool of capital on behalf of institutional lenders. It charges an administration fee and takes a portion of any excess capital, he says. Interest rates for any loan depend on the customer’s Lenddo score and the local rates in that country, according to the company’s web site. Lenddo loans are typically cheaper by one-third than other resources, Stewart says.
About half of Lenddo loans are for education (student loans) but the company also provides medical, relocation and home improvement loans, he says. Stewart wouldn’t disclose exactly how many customers Lenddo has but said they were in the “thousands.”
Instead of waiting weeks for a traditional bank loan, Lenddo users fill out an online applications that usually takes about 15 minutes to fill out. Lenddo can respond as quickly as 24 hours. “We take out all the friction of getting a loan,” he says.
Currently, Lenddo has a lending license from the SEC in the Philippines and provides loans to consumers in that country. But Lenddo plans to branch out to 35 other emerging countries including Brazil, China and Indonesia.
Stewart and cofounder Richard Eldridge helped fund Lenddo. The company also has an open bridge note of $2 million which it draws down on, Stewart says. Later this year, Lenddo plans to raise a funding round but hasn’t decided how much. The future round “will be bigger” than the bridge note, Stewart says. “It’s a bridge to a larger round at the end of the year,” he says.
Lenddo’s use of social media to provide credit scores for consumers in emerging markets is “a very novel approach,” says one VC. “It’s an enormous, huge opportunity but obviously very early. So we’ll see how it works.”
Lenddo was recently selected to participate in the annual FinTech Innovation Lab here in New York. Created by the New York City Investment Fund, the economic development arm of the Partnership for New York City and Accenture (the management consulting firm), the Lab was founded to help New York City keep its edge in financial technology. Each startup selected (this includes Aqumin and Zipmark) received $25,000 in funding, as well as coaching and business advice from VCs including Countour Venture Partners, Polaris Venture Partners and Warburg Pincus.
But the best part? Lenddo and the other five firms spent an afternoon with senior executives including Henry Kravis, KKR’s CEO, and Jamie Dimon, JPMorgan Chase Chairman and CEO. “It’s was a great opportunity to get the perspective of all these executives,” Stewart says. “One of the things they drove home is that the credit markets are so much bigger than people realize.”