Earlier this year I started to participate in MyC4, an online community of lenders and borrowers with the main goal to eradicate poverty before 2015 (one of the United Nations Millennium Development Goals). The main idea of MyC4 is to bring together borrowers (from third-world countries in Africa) and lenders (mainly from the Western world) on a platform where using an auction-based system loans are set up.
The way MyC4 works
As a borrower you can set up your request for a loan through an intermediate in the local country (Ivory Coast for example or Uganda). Next, the auctioning system makes the lenders bid on the loan by providing a desired amount they want to contribute to the loan and a desired interest rate. The loan is disbursed to the borrower by providing the money from the lenders that provided the most attractive bids (for the borrower that is). The entire auctioning-process is handled online, which surely has helped MyC4 enormously.
I think this is a wonderful idea. It’s a market-based system that should (well, that’s obviously a bit ironic to say these days) assess what risk is involved in lending and incorporate any extra interest to compensate for the risk. Moreover, this way, it’s beginning to get interesting to ‘invest in saving the world’ you could say as lending to third-world countries (or rather people living in these countries) can start to be an alternative to putting your money in the bank.
Performance since I joined
Okay, enough about the good and bad of micro-financing in general; that’s not the reason I’m writing this. Before I get on to what I really have to say about MyC4, let me first give you some numbers:
| Uploaded since March 08 |
€2,417.02 |
| Available in account |
€38.07 |
| Pending bids |
€40.00 |
| Outstanding principal |
€2,398.44 |
| Outstanding interest |
€184.18 |
| ~ projected ROI |
10.08% |
| Total investments |
44 |
| Late / defaulted |
5 / 0 |
First-class idea, third-world implementation
The idea is first-class; providing an auction-based system whereby the lenders can themselves specify which interest rate they’d like to get for the money they lend and based on the best interest rates (for the borrower) the loan is disbursed. The online execution however is poor at best. There are a few areas in which MyC4 should improve, will it ever achieve serious adoption. Many of these things (mostly related to risk-management, correctness of information, et cetera) are already covered over at P2P-banking.com and are definitely important to look at while judging if MyC4 will succeed. I will not cover those here however. Instead, I’d like to stick to the more user-experience focused areas and those that will drive adoption from a non-financial point of view.
Open up your data
We live in an era of open software, open platforms and open communication (people sometimes called that Web 2.0). MyC4 should open up and allow for easy integration of MyC4 borrower and lender data and operations into third-party applications. This is what Google Maps does for map-related data, eBay for auctions and Amazon for music, books and all kinds of other products. Apart from that there are plenty of other initiatives that do this. The web nowadays cannot function anymore without the so-called mashups.
Opening up would mean it’s likely far more people will be exposed to MyC4 data, loans, borrowers, lenders and the idea as a whole, thus attracting more capital. Opening up in practice means providing an API that other sites can easily integrate with. This is not rocket-science.
MyC4 should allow third parties to integrate with their site by providing means to do this. One can think about adding a Facebook app for example.
Speak up
MyC4 has frequently been criticized for its lack of communications. If there is something positive to say about MyC4, the site is immediately updated, as far as negative news is concerned, the MyC4 guys are mostly completely silent. This was most evident in the Ivory Coast affair, more thoroughly documented in forum thread. People reacted quite shocked when somebody named Githa Kurdahl, an intern at MyC4 was the first to (not even on behalf of MyC4 but just because she couldn’t stand the silence anymore) open up about this rather itchy affair at the MyC4 platform that affected many lenders (including myself). Frequent suggestions to the MyC4 team to communicate more and more openly about what’s going on are left unanswered and as explanation MyC4 uses the lack of internet in third-world countries where at the time, they’re attending a conference.
MyC4 should communicate much more openly and enter into a real discussion with their lenders. These provide the money after all. The nature of most lenders over at MyC4 is pretty philanthropic (even though most want to make some money too I guess) and would love to help out improving the platform.
Clarity and correctness of data
In a number of areas MyC4 displays incorrect or vague data. In the front page for example after you’ve logged on, you’re seeing your average interest rate. This is calculated over all loans and does not take into account the fact that money pending disbursement does not add to capital growth and money left in your account neither.
As you can see, MyC4 states the average interest rate for me is 13.8%, while (as previously shown), projected ROI is 10.08%. While of course technically correct (the average rate over all investment indeed is 13.8%), this is obviously not what I’m interested in. Putting it differently: if I invest €5,00 in an investment that gives me 20% interest and I leave the remaining €95,00 in my account doing nothing, is my average interest rate still 20%?
Mind the details
There are a few details that are thoroughly overlooked in MyC4. One is security. At the moment your password is sent over plain HTTP, which means virtually anybody can intercept it. While it is possible to send it over a secure channel, but this is not the default, which it should be!
Other than that, the way the login form is created makes it impossible or harder at a minimum to save usernames and password in password managers such as 1Password. This is also not very user-friendly.
Other than that, the site is plain slow in some areas, which doesn’t help either. The forums are not very user friendly either.
Technically speaking, MyC4 should get their act together. The site is a big mess now and it does not really show any sign of improving.
Open source?
Many people have chimed in in various discussions around the MyC4 platform and many asked if the platform could be open sourced. I think this is an excellent idea. Open sourcing makes sense, as long as the platform itself is not a competitive advantage. In MyC4’s case (whose main business is helping eradicate poverty by 2015), the competitive advantage (if you’d even want to speak about one) is the community of borrowers, lenders and providers (the intermediates between borrowers and lenders), not (source code to) the platform itself. MyC4 would be way better off open sourcing the platform to encourage anybody to help improve it. Obviously the choice for the Microsoft platform does influence the possibilities here, but that’s no reason to forget about it entirely.
Concluding…
Concluding, I can say that I’m absolutely thrilled to see initiatives like MyC4 start and I absolutely believe in the idea of making eradication of poverty real business. We live in a market-driven, capitalist world whereby anything turned into real business and offering real ROIs will attract investors. This is what happens with MyC4. The platform however is not ready for serious adoption by the mainstream masses. If executed better, this can be very big. KIVA.org recently crossed the $50M mark for example while MyC4 is only still at approximately $5.5M. KIVA.org does not give lenders interest, which gives MyC4 such a big advantage IMO.
Especially in an initiative where the online part of the community is absolutely vital for success, it’s a shame the online platform doesn’t get a whole lot of attention. So many possibilities… I wish I had a little bit of time left…
