FundKo: Peer to Peer Lending
I've been seeing FundKo's ads all over my Facebook feed and I have to admit that they are very catchy, particularly the one with the girl in the snazzy trenchcoat.
FundKo is peer to peer lending, with Fundko acting as the conduit between investor/lender and borrower. After registering in Fundko's site, you will then have the option to lend or borrow money, or even both.
For prospective borrowers, Fundko conducts the necessary credit investigations and pegs the applicable interest rates depending on the assessed risk. As always, the higher the interest rate pegged, the higher the risk.The FAQ page is very informative and pretty much answers every question you may have about the whole Fundko experience.
I've had two experiences with peer to peer lending. The first one was with Kiva, a non-profit organization that connects lenders with small business owners from impoverished nations.
Loans are given out in $25 increments to entrepreneurs to jumpstart a business idea or infuse capital into an existing business. The loans are not interest-bearing though. Instead, they're an alternative to the usual donations because you get to choose who you want to help and personally, if I'm going to extend financial help, I will choose to help those who are intent on helping themselves and do not rely on doleouts.
As a lender, I started with the minimum of $25 which I chose to lend to a lady in Tajikistan (or was that Kazakhstan?) who was trying to raise $500 to buy more goats for her milk business. She was able to repay her loan after a few months and I got my $25 back. I then placed my $25 with another entrepreneur. I eventually added another $25 to my portfolio and must have made almost 10 loans in a span of two years and I always got my money back.
My next experience with peer to peer lending was through a friend who connected lenders with borrowers. She would take investments of at least Php20,000 and guaranteed a 5% monthly interest to the investor. I plunked down Php25,000 with her and it did not go well. They were unable to collect from their borrowers, hence, they were also unable to remit the promised monthly interest payments to their investors.
My friend and her husband have since gone into hiding after their disastrous attempt at peer to peer lending. Almost a year after their disappearance, she sent me a message to apologize about running away with my money and I have forgiven her. She or her husband also sometimes texts me using different numbers every time to ask for Php5,000 or Php6,000 just to make ends meet.
It's a really sad story and I still shake my head when I think about the life and careers that they had to abandon (she worked in a multi-billion dollar MNC for crying out loud and was pretty much set for life!), all because they had the idea that they could have "more" on top of their already very comfortable and cushy lives. Don't let greed destroy your lives, kids.
Going back to FundKo, the borrowers are not limited to entrepreneurs and literally anyone can apply to be a borrower. Approved borrowers are then given a credit grade depending on their assessed risk.
Fundko also has filters so that you can choose the type of borrower you want to lend money to and the terms of the loan.
Because of my positive experience with small entrepreneurs in Kiva, I chose business loans but was surprised to find that there were only two available business loans and were already fully funded.
Social impact loans yielded zero results. Forty-seven of the 49 available loans for funding were personal loans which ranged from gadget loans (seriously?!), tuition fees, house renovations, travel, medical expenses etc.
I was also surprised that some appeals for gadget loans were given an A1 grading, but then I realized that the grading was likely based on capacity to pay and not the loan subject. But really, if you can't afford to pay for a gadget in full or at least be able to leverage your credit with zero percent installment payments, then you have no business taking out a loan for it. Same goes with loans for travel funds and house renovations.
That's why I'm honestly wondering about the wisdom behind an A1 rating for some of the gadget and travel loans. Taking out a loan for such frivolous items implies a lack of maturity which does not bode well when it comes to repayment. Besides, luxuries like new gadgets and travel should be saved up for, with loans being only availed of when you're already pushed to the wall. But hey, at least FundKo's lawyers will never run out of work.
Unless more business loans pop up, I'm not sure if I'll ever fund my Investor account with FundKo. Take note too that even Mr. Money Moustache eventually stopped reinvesting into Lending Club, another peer-to-peer lending group, and had this to say about taking out loans in general:
In my opinion, this is a recipe for bad lending. Nobody should be borrowing money for consumption – buying a truck, boat, or a kitchen renovation.
The only things worth borrowing for are appreciating assets – a house in a reasonable market, and business and education in certain cases.
Maybe I will fund my investor account in the future, but only after I've put my financial affairs in order and even then my FundKo investments will only be a distant second to my stock investments. In short, FundKo is fun-fun lang since I will probably end up losing money by lending to fund consumeristic behavior, but at least it will be interesting to observe Pinoy financial behavior.
Check out a more detailed FundKo article here.