Prosper among best of show at FinovateStartup09

Netbanker just announced the winners of the best of show awards at FinovateStartup09 and they are Prosper, BillShrink (our review), Silver Tail Systems and SimpliFi. The winners were selected by ballots from conference attendees.

After a six-month quiet period to register their platform with the SEC, Prosper re-opened yesterday at Finovate. They are currently serving borrowers in all 50 states and lenders in California.
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Final presenters announced at Finovate

During FinovateStartup09 today, conference attendees voted on the companies they would like to see during the final session of presentations. The companies selected were - HomeATM, Green Sherpa, Silver Tail Systems, SimpliFi, SmartHippo, DebtGoal.com, Rudder, Prosper and Credit Karma. We have previously reviewed several of these companies in prepartion for Finovate.
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Just in Time for FINOVATE: Many Companies Launching New Features

Just in time for FINOVATE many new features are being launched by participant companies, some of which we've profiled here before.

I'm following the conference online today via webcast, though wishing I could be in beautiful San Fransisco, which is lovely this time of year.

I'm starting this list with items I've already made notes of, but may update later during the day as I follow along the FINOVATE presentations today.

  • Mint (see previous my review) has added CD and Brokerage shopping options. I wish they had this when I choose my brokerage two months ago, but I'm glad they have it now, and I'm glad to see I chose well. They've also added the ability to change dates on transactions which is great for those checks that clear late and things like that, so you can keep your budget on track.
  • Lending Club is offering new lender features which Tom posted about earlier today.
  • Wesabe has a tagging system now, which will be a great asset to users.
  • UPDATE: It's 3:00 and I just got an email from GreenSherpa that their beta system is now available.
  • UPDATE: it's 4:30 and Rudder just launched an iPhone app. You can get it in the app store. Now word about what's out there for blackberry users.
  • SmartyPig continues to respond to customers in real-time, and has added a "lower this" to reduce your monthly savings if friends and family members' contributions to your savings goal has enabled you to choose between meeting your goal sooner, or reducing your monthly contribution. It suggests the difference for you too, so you don't have to do the math.

Jessica Ward is a professional writer and blogger based in Seattle, WA. She also blogs at www.pennywisefamily.blogspot.com, to learn more about her visit www.jessicaward.me
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Pay it forward and win a Kindle from Pertuity Direct

Coinciding with the Finovate Conference in San Francisco this week, is a contest from Pertuity Direct, which they're calling Pay it Forward, Pay it Down. Pertuity Direct is looking for people to vote for a $2,500 loan forgiveness. All "voters" will be rewarded with the opportunity to win a Kindle2.

You can find out more about the contest online here, or skip straight to voting here.

Voting closes on May 14th.
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Lending Club previews new lender feature at FinovateStartup09

Today at FinovateStartup 2009, Lending Club previewed a new feature which shows lenders how their returns stack up against other lenders. Currently, the average lender makes 9.05% after fees and defaults according to Lending Club. This feature will show you, via a nice graphical interface, how you compare against others. See the screen shot below:


Lending Club also emphasized the success of their secondary loan platform which launched six months ago. Since then over $2,000,000 in loans have been traded and the time to liquidity is two days. In addition to providing liquidity to new lenders, this platform provides new investment opportunities. There are 1800 loans on secondary loan platform right now.
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FinovateStartup09 kicks off today

FinovateStartup09 kicks off in a few minutes in San Francisco. We will be blogging and reviewing the financial technology startups here throughout the day.

FINOVATE Startup is billed as the "largest group of financial technology startups ever assembled in one place" with 57 companies in the lineup. All the major p2p lending players will be there including Lending Club, Pertuity Direct, and Prosper. Prosper has already announced the re-launch of their platform timed with the conference.

This year, for the first time, FINOVATE offers a real-time webcast. There is still time to purchase access to the webcast for $495.


Here is a complete list of companies featured today as well as links to our previous reviews:
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Prosper launches to borrowers in 50 states; lenders in California

After a six-month quiet period to register their platform with the SEC, Prosper has re-opened to borrowers in all 50 states and lenders in California. They have simultaneously launched FixTheCreditCrisis.org which is a campaign to reach out to elected officials to allow peer lending in all 50 states.

Currently, Lending Club and Pertuity Direct are the only two p2p lending platforms available to most investors throughout the United States. Prosper's model is different because, among other things, loan rates are determined by an auction among lenders.


Here is an open letter from Prosper's CEO Chris Larsen about the new launch and an appeal to regulators to allow lenders to lend from all fifty states:

We are pleased to announce that Prosper is now open for business once again after a six month hiatus. At this time we are launching to borrowers nationwide and to individual and institutional lenders in California. We hope to be fully national soon.

First we would like to thank the Prosper community for your incredible patience and support. We’re especially thankful to the overwhelming number of lenders who have kept their funds in their Prosper trust accounts, eagerly awaiting our re-launch.

We also want to thank Governor Schwarzenegger’s team, particularly Preston DuFauchard of the Department of Corporations, for embracing peer-to-peer lending as a promising new technology and alternative credit system for getting credit flowing to consumers and small businesses at the very time they need it most. California regulators have always been known as innovation leaders and they just proved it again.

We remain hopeful that the SEC, which until now has effectively hamstrung the growth of the peer-to-peer and micro-lending industries in the U.S. will start applying the same common sense approach as California’s regulators. California has recognized that Internet auctions, just like the Google IPO, are the most efficient means of price discovery; that loan level transparency is better than the opaque loan pooling that brought the financial system to its knees; and that requiring regulatory filings every other day of web site transactions that are already visible in real time, is redundant and cost prohibitive.

We want our users to know that while we have been in a quiet period, we have been innovating. Most significantly, we are launching our Open Market initiative, which for the first time will allow other financial institutions, such as auto lenders, small business lenders and community development lenders, to place their already funded loans on our site for auction. This is both exciting news for lenders on Prosper as well as a much needed solution to the credit crisis.

As we all know, America is in the midst of the greatest financial meltdown since the Great Depression. Creditworthy consumers and small businesses can’t get loans. The government is scrambling to get money on the street by pumping hundreds of billions into our banking system. Yet, the banks are still pulling back and consumer loan securitizations, which make up nearly half of the lending market, are still frozen. We all know the causes of the crisis - lack of transparency, over-complexity and reliance on single points of failure.

The crisis is painful but is also a once in a lifetime opportunity to rewire finance in a way that is fundamentally more transparent, more participatory and more durable.

Prosper and our Open Market initiatives were built on these fundamental values.

Prosper’s Open market model could be the securitization market of the future. Rather than pooling loans, using rating agencies, and creating artificial tranches that are too complex, and opaque, Prosper now allows each loan to be sold separately, priced by the originator and auctioned in a fair and transparent Dutch auction. It uniquely provides a direct line of sight from the money invested to the loan itself.

In addition, Open Market brings the same social lending possibilities to securitization that we have always seen in the Prosper Loans Marketplace. For example, auto loans listed on the Open Market will show in which auto plant and city the car was made. That way fellow Americans who put a value on American jobs might make loans to cars made in Ohio, for example, at a better rate than loans to cars made in Germany. This could never be done with traditional securitizations because investors never had that level of transparency.

Obviously some areas of our financial system need more regulation and more limitations on what can be done. Understandably many in Washington now equate innovation with the toxic Wall Street concoctions like the Credit Default Swaps or CDO-squared monsters that nearly wrecked our economy. While these exotic instruments need to be reigned in, a sweeping ban on all innovation would be a grave error with lasting negative consequences. What we need is a common sense approach to innovation that is judged on its merits. For instance, shouldn’t innovations that result in more transparency, fairness and accessibility be embraced?

We can draw a parallel to how America is dealing with the on-going energy crisis. We know that we can’t depend solely on an oil based economy. The solution is not to just “drill baby, drill”, but to concurrently develop new energy systems that are cleaner, more sustainable, and fundamentally more diverse and durable. The same idea should apply to fixing our financial meltdown. If all we do is clean up the toxic mess while propping up the too-big-to-fail institutions, we will be engaging in a “drill baby, drill” mentality and will have missed a tremendous opportunity to rewire our financial system. As in the energy crisis, we need to encourage new alternative sources of credit by embracing innovation and entrepreneurs. This is at the heart of what makes the American economy continue to thrive.

But we need the help of our political and regulatory leaders. That’s why we are so grateful for California’s leadership in embracing peer-to-peer lending. And it’s why we’re asking for your help in encouraging other regulators and leaders across the country to take a similar view.

You can help us get this message to Washington and other leaders. We invite you to call or email your State’s elected officials using the tools we’ve provided for you at FixTheCreditCrisis.org. By reaching out directly to your state’s elected officials, we’ll ensure that our collective voices are heard.

Best regards,
Chris


Update: Prosper closes again after less than two weeks
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BillShrink touts money saving features on cell phone plans, credit cards and gas

BillShrink is a free service to help consumers save money when making complex purchase decisions such as with credit cards and cell phone plans. The service is a media darling and has received numerous mentions in the business press and media including Forbes, CNN, The New York Times, Business Week, and The Wall Street Journal. They have a very effective public relations strategy. This review is based on reading over three dozen of these news articles, watching several TV spots, and using the service.

BillShrink has a slick, easy-to-use interface. The site currently offers three services – cell phone plans, credit cards and gas prices.

With credit cards you provide answers to about 6 questions. This allows the system to determine the best credit card for your usage habits. If you pay your credit card off each month the interest rate is of less importance than rewards, for example. Other considerations are credit score, how much you spend and what type of items you purchase. Based on your answers to these questions, the system will recommend a credit card and tell you how much money you can save by making the switch. According to BillShrink, the average user saves $1,000 on their credit card. With over $1 trillion dollars of credit card debt in the United States, the potential for savings is significant.


BillShrink says 85% of people pay more than they need to for their cell phone. Using the cell phone tool, you answer about 6 questions such as monthly minutes used and data and text preferences. For more accurate results, you can upload your recent cell phone bills. The best cell phone plan for you is calculated using a ‘ShrinkScore’ which includes savings and signal strength in your specified area. The available cell phone plans are ranked by ShrinkScore. These results can be further refined by the user according to categories such as service provider, plan type and phone compatibility.

The most recent service released is gas prices. While there are tools which help you find the best gas prices, BillShrink goes a step further and helps calculate the best gas station based on the type of car you drive and the roads you drive. The distance to the gas station incurs a cost, and the least expensive gas station may not be the one with the lowest prices when the total cost of obtaining the gas is considered. Like the other services, you can modify the results based on your preferences such as station operating hours and amenities.


BillShrink makes money by referring customers to cell phone plans, credit cards and other services. This provides a potential conflict of interest. The company may have a financial interest in showing a plan which optimizes their own revenue instead of customer savings. While there is no evidence this bias has influenced results, users must be wary of the potential.

BillShrink launched in April 2008 and has been gradually rolling out new features. They have received 9 million dollars in venture capital. BillShrink has augmented their service with a popular money saving blog.

BillShrink is up against Lending Club and Mint for a 2009 Webby in the financial services category.
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Speculating on a possible Prosper Re-Launch

I’ve been spinning through the list of FINOVATE participant companies watching for changes and upgrades that are coming out just in time for FINOVATE and I’m excited to see some really cool things coming up. However, this one certainly took me by surprise.





After months of “quiet period” the Prosper.com web site is down for maintenance.

Now, I’m gonna go out on a limb here and project that prosper.com will launch Monday or Tuesday, in time for Finovate. It makes sense. When you compare the Lending Club S-1 documents to the Prosper documents, the timeliness match nicely.

I’m not the only one speculating about the possibility of a Prosper re-launch. Investar on the “Prosper Quiet Diary” forum notes the difference between the normal notice and the current notice and that Prosper’s normal blackouts are just a few hours, not two days. They also normally include the term “routine maintenance” which this notice certainly does not.

Another post from “Investar” says that one of his “notes” has been charged off, when usually the language says “loans.” Semantics or quiet hints?

I guess, in a few days, we shall know. Most of us expected Prosper to resurface after their April 14th filing, but if the SEC required further communication (and note that the SEC recommended “accelerated” communication) another 10-15 days would be a great window.

Also, they’re a registered FINOVATE company. Why bother promoting themselves when there’s nothing to promote? Re-launching for FINOVATE just makes sense.


Jessica Ward is a freelance writer and blogger based in Seattle, Wash. She also blogs about frugal family living at www.pennywisefamily.blogspot.com
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Uncrunch America Contest for $5,000 0% APR Loan


Uncrunch America is a consortium of peer to peer lending companies including Lending Club for personal loans, Virgin Money for mortgage loans and On Deck Capital for small business loans. Credit Karma and Geezeo are also part of the “Uncrunch” team because of their money management tools.

Uncrunch America formed in January 2009 because of the tightening credit market to educate people about social lending opportunity and available alternative capital sources. This month’s prize is a $5,000 interest-free loan. Participants submit an essay about how they would like to “Uncrunch America” through access to credit.

Participants can enter by submitting a story online and encouraging others to vote for it. Uncrunch America’s stated goal is to “help resolve the credit crunch and rebuild the economy by delivering consumers secure, trustworthy tolls and infrastructure to finance necessary expenses and make critical investments.

About the organization:

Lending Club is a social lending network where members borrow and invest money. Qualifying borrowers can obtain a personal loan of up to $25,000 at fixed interest rates for 3 years with no penalty for early payment. Read more here.

Virgin Money is a financial services pioneer dedicated to improving your overall mortgage experience. Read more here.

On Deck Capital is a direct lender for small businesses unable to obtain traditional funding or that need faster access to capital for unexpected business opportunities.

Credit Karma is a provider of free credit scores and credit improvement resources and tools.

Geezeo is a suite of online personal finance tools with tasks like budgeting.
You can read Tom's earlier post about the launch of the Uncrunch America campaign online here.

Jessica Ward is a freelance writer and blogger from Seattle. She also blogs at http://www.pennywisefamily.blogspot.com/.
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Pertuity Direct clarifies underwriting philosophy; discloses loss assumptions

Peer to Peer lenders have a little more information readily available now from P2P Mutual Fund Pertuity Direct. This month, Pertuity Direct has updated it's online credit policy and disclosed loss assumptions.

As you may know, mutual funds are prohibited from projecting potential returns. A savvy investor now has a little more information available from Pertuity's updated credit policy. PD has added loss assumptions by FICO band, which makes an interesting read for people who like to crunch numbers. Default predictions range from 2.7% to 6% based on credit grade. PD has maintained the requirement for a minimum FICO score of 660 and no more than 40% debt-to-income ratio.

Here is the complete, newly published underwriting philosophy:

Our Underwriting Philosophy

At Pertuity Direct, we evaluate an applicant's eligibility for a loan and determine the interest rate of that loan based on the following criteria:
  • we do not overextend a borrower with new debt
  • approved borrowers are offered low market interest rates
  • lenders in the community preserve their investment capital and earn a competitive return

These goals can be met by ensuring that each borrower's financial situation is reviewed with regards to their willingness and capacity to pay and an appropriate decision rendered.

In recent times, some financial institutions have suffered because their credit policies began to ignore key components to underwriting a healthy loan portfolio. Pertuity Direct does not solely rely on a credit score or whether the loan is secured against home equity. What we do is use a mix of human review, statistical decision making, and verifications to make sure that we deliver the right product to the customer. In some cases, that may mean that we are not able to approve a borrower due to the fact that we do not charge usurious interest rates to compensate for high risk, nor will we lend to a borrower who we feel we may endanger with over-indebtedness.

An additional strategy to ensure the health of the portfolio involves making conservative assumptions regarding the default risk of the underlying assets. Both eligibility decisions and interest rate assignment are driven from the estimated risk of new bookings, and Pertuity Direct has taken a conservative approach. For example, for the prime and super-prime segment that we are targeting (average approved borrower FICO to date is about 740), our pricing policy has built in the following expectations for default risk (based on a $12,000 loan):

  • 660 – 700: 6.0%*
  • 701 – 750: 3.8%*
  • 751 – 850: 2.7%*

*default risk is annualized in the form of balances defaulted over balances outstanding

We believe that transparency is important so our borrowers can understand what affects loan eligibility and investors can understand how we generate the assets in the loan portfolio. To that end, below are some of the criteria used in our underwriting. We welcome any feedback from borrowers or investors which can be sent to underwriting@pertuitydirect.com.

Underwriting Criteria
  • A debt-to-income ratio generally below 40%
  • We often require proof of income in the form of documents, especially for larger loan sizes
  • A minimum credit score (FICO) as reported by the Experian credit bureau of 660 or higher
  • No bankruptcies within the past ten years and no more than one public record in the past ten years
  • An established credit history at least two years long with five total accounts
  • No current delinquencies on any trades

In addition to these criteria, Pertuity Direct also looks at factors such as number of recent inquiries, loan size in relation to income, amount of recent debt opened, number and type of mortgages held, and credit card balances as a ratio to available card lines.



Jessica Ward is a freelance writer based in Seattle. She also blogs at www.pennywisefamily.blogspot.com.
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NeatlySaid targets Financial Hobbyists with Mircoblogging



I was surprised this week to receive an invitation to join “NeatlySaid” because I’m a financial blogger. I’m not in to following stocks, commodities, etc at this point, but I took a spin through microblogging because I’ve seen some really cool mircoblogging applications lately.

For Twitter users, this is a little bit better than Twitter because you can rate the credibility of the user’s prediction. If someone is clearly blowing smoke, their rating will show that way.

Another thing that makes it a little better than Twitter is that you can’t post your lunch menu or your cat’s latest (however adorable) antics. Every post needs to be tagged to a ticker or subject. I personally, couldn’t think of anything relevant to post, so I haven’t yet. However, you should see what my cat is doing right now…

If you’re a stock, commodities or currencies nerd, you’ll have fun with Neatly Said, and I encourage you to give it a try.

Jessica Ward is a freelance writer and blogger and also blogs at www.pennywisefamily.blogspot.com
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FinovateStartup: Stock Market Resources





FINOVATESTARTUP 2009 opens next week in California and we’re still researching all of the amazing participant companies.

Here are quick profiles of several applications that might be of interest to prospective stock market investors.

First up is WeSeed.com:
WeSeed’s basic principle is that everyone should be able to use the stock market. It uses a gaming-type platform to match your interests with stocks you might like to follow, and then gives you a virtual investment to create a virtual portfolio. While the money and the trades are imagined, the data is all real, allowing users to get their feet in the sandbox without the risk of loosing their hard-earned-savings. It also opens stock trading fun up to those of us who don’t have spare change to sink into the market.

Next is KaChing, previously the Facebook app FSX) KaChing allows you to follow 1500 users who generated positive returns in 2008 (perhaps the only investors who generated positive returns in 08?). It proves free open-source access to previously unavailable financial data for those who are serious about breaking down the stock market. KaChing allows users to track real or virtual portfolio and build, test and populate investing algorithms. This isn’t the sandbox folks, this is the nitty-gritty.



Kapitall.com is next. They’ve recently registered with the SEC as an investment advisor. They allow for real or virtual portfolios. The novelty here is that all trades are completely transparent and public to all users. Pretty interesting stuff!

Finally, PortfolioMonkey.com is an application which shows potential diversification options for your portfolio. It’s free to use and again can be used with your real or your virtual portfolio.

Within this list there’s something for everyone at every level of stock-market-knowledge. Good luck and happy trading!


Jessica Ward is a personal finance blogger and freelance writer based in Seattle. She also blogs at www.pennywisefamily.blogspot.com
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Finovate Profile: CalendarBudget

CalendarBudget is going to be a participant at the 2009 Finovate conference later this month.

The company, which was founded by husband and wife team Eric and Robin Poulin in Toronto is planning to exit beta mode just in time for the start of FinovateStartup on April 28th. (Hint: if you want to take advantage of their lower fees for beta users--sign up now!)

CalendarBudget is a unique method for planning your family's budget and expenses, showing it in a visual format. No more spreadsheets. The CalendarBudget system plots your transactions on a calendar. You tag your in-and-out transactions with a category (cable, debt, auto, mortgage for example) and you can see when your monthly ups and downs in income are. It also plots your daily bank balance across the top of the calendar (see example).

For right now, CalendarBudget is free, but upon exiting the beta testing period, there will be a monthly charge of about $5 for beta-testers and $8 for new users. There are also six-month and annual plans. A 30-day free trial period is also available.

Another interesting feature is that CalendarBudget is available for banks and corporate users in an unbranded system, where the client can add their own branded "skin." This could be an excellent value-added-service for banks, credit unions and other financial service providers to offer their customers with their accounts.

CalendarBudget does not aggregate your information, but allows you to import it from several accounts. They are considering offering a free version that would allow users to try the system with one account for free with reduced functionality.

CalendarBudget has been in testing for 18 months with 1200 users worldwide. The platform is intuitive (similar to Outlook) and support is available through their forums.

Jessica Ward is a Freelance Writer in the Seattle area. She also blogs at www.pennywisefamily.blogspot.com. She covers personal finance and family.

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See 57 financial technology startups in one day

At Prosper Lending Review we are not only interested in p2p lending - all financial technology startups capture our attention. For this reason, we are quite excited about FINVOATE Startup 2009 which will be held in San Francisco on April 28, 2009.

The regular ticket prices for FinovateStartup09 will expire today (April 17th) at midnight. Register before the end of today and save $100 off the last-minute ticket prices. Use offer code fan109 to save an additional $100 on the ticket price.

FINOVATE Startup is billed as the "largest group of financial technology startups ever assembled in one place" with 57 companies in the lineup. All the major p2p lending players will be there including Lending Club, Pertuity Direct, and Prosper.


Here is a complete list of companies:
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Makeover at DebtGoal.com

I posted earlier this month about DebtGoal.com, one of the many up-and-coming financial services companies that will be participating in FINOVATE later this month.

I wanted to let Prosper Lending Review readers that the site has gotten a dramatic face-lift today and is far easier to use and navigate. Data-entry is simpler and the results more useful.

The interface has a much better "Web 2.0 feel" and the charts and tables are relevant and well-placed. Overall, it is intuitive and comfortable.

They are not yet aggregating but that is in the works. I've also suggested a couple of ideas that would be helpful--for instance, flagging recurring transactions. I'm really encouraged by how quickly this company is jumping to implementing user recommendations.

If you haven't checked out DebtGoal.com yet, or if you have and didn't like what you saw, I encourage you to give it another try.
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At Finovate 2009 Budget Solutions Abound


Holy budgets Batman! Finovate 2009 is showcasing no less than ten (count them 10!) budget solutions for personal finances. I explored some of these on my blog this past week as I wrote all about budgeting for a week, but there’s a lot out there and I couldn't do them justice there.

For the sake of the reader, I’m going to make some categories here to differentiate what might be right for your style as a prospective user or curious reader. Some of these will overlap due to the nature of the features. All are free to use unless otherwise noted. The denotation ($) means fee-based and (*$) means free during Beta trials, or some features are subscriber-based.

I included a “social media” category here—because two of these are very similar to common social applications. Wesabe is a lot like Facebook in that people can recommend or comment and share information. Geezeo has a lot of Twitter-like features and their “confession booth” even integrates with Twitter (not to mention, it's outrageously addictive).

Rudder is in a bit of a class of its own. It appears to include bill-pay features (note to self to play with this one a bit more).

There are essentially two "classes" of personal finance application in my view. Those that require data-entry of transactions, and those that don't. Otherwise, the items below appear in no particular order and none of these are paid placements.

Data-Entry

Social Media Features
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Peer to Peer (p2p) Lending in Japan

Several companies are entering the market in Japan to offer p2p lending services.

Japan has securities regulation that is similar to the US, which provides a substantial barrier to entry into the marketplace.

Two providers of p2p services have made it through the hurdles and two more are online to launch soon.

Maneo, which launched in October 2008, offers unsecured peer-to-peer loans. The guaranteed loan “G-Loan” product is providing lenders with a guaranteed 1.5% interest rate, substantially greater than the average .25% savings account interest. Other loans are fixed at 7, 8, 9.5, 11 and 12%.

Another option for lenders who know one another is Aqush Tomo, which provides loan documentation and servicing, but doesn’t actually do the banking parts of the transaction. These loan documentation and payment reminder services are available similar to Lending Karma.

Two other well-known p2p players, Prosper and Zopa are planning expansion into Japan, but are not yet online.

Jessica Ward is a freelance writer and blogger who writes on personal finance among other things. She also blogs at www.pennywisefamily.blogspot.com.
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Ever wonder how microcredit works under Islamic law?

How does finance work when falling Islamic law (Shariah)?

A longstanding problem in the adoption of microfinance in the Arab world is adapting the programs to work for followers of Islam. Muslim Law (also called Shariah) has several tenets that contradict traditional financial systems including:
  • Payment of zakat (charity)
  • No riba (interest) paid or earned
  • Socially-responsible investing/saving (Gharar)

In order for microloans (or any loan product) to be Shariah-compliant, it is generally structured through a trust-sale known as a murabaha—a negotiation of profit margin, rather than interest—into the final price. It’s sort of like paying your mortgage in all points, without annual interest. This sort of loan is called a Qard al-Hassan, or benevolent loan.

Naturally, this format is difficult to translate into microfinance, but many organizations and banks which cater to Muslim borrowers are springing up. Currently there are 265 banks operating in 40 countries with assets in excess of $262 billion USD. Even commercial giants such as CitiGroup are adapting to reach this growing population.

Similar to debt, interests are also structured to be socially-conscious and non-interest bearing, looking more like leases of capital.

I hope you’ve enjoyed learning this different financial paradigm. It sure has been an education for me.

Jessica Ward is a freelance writer and blogger in Seattle. She also writes at www.pennywisefamily.blogspot.com.

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Pertuity Direct Sees Rapid Growth

In an email to members, Pertuity Direct's management team said thousands of people have joined the p2p lending platform and their membership has grown by 300% from February to March. Here are some additional statistics about current PD borrowers:
  • $15 Million in loan demand in the first few months
  • Average Credit Score: 737 ("Super Prime")
  • Average Interest Rate: 13.6% (range is 8.9-17.9%)
  • Average Loan Amount: $14,600 (range is $1,000 - $25,000)

The average loan amount is up significantly from $9,800 reported last month while the average credit score has remained steady. Pertuity Direct launched in January and is one of two p2p lending companies registered by the SEC to operate in the US.

Our previous coverage of Pertuity Direct:

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Finovate 2009: DebtGoal.com Review

In case you’ve forgotten, Finovate 2009 begins on April 28th. In advance of the conference, we’re profiling a lot of the presenting companies. One of these companies is GoalSpring’s DebtGoal.com product.

DebtGoal.com is a free tool intended to help users get out of debt. I’ve had a few conversations with the DebtGoal team (I’m an alpha-tester) and they really are passionate about helping people get out of debt, and stay out. While DebtGoal is currently a little rough around the edges, I’m excited to see what’s coming up next—as I know they’re working on some new projects.

Right now with DebtGoal you enter your debts, payments and interest rates (no account numbers or other scary things), aggregation is “in the hopper” in the next phase rollout, but at this point everything is manual data-entry. I’m hoping that they’ll allow an “enter manually” option for technophobes who are nervous about the aggregating systems. I personally love them, but I can understand those who don’t.

Using your outstanding debts and interest rates, DebtGoal produces a payoff plan for you and suggests paying off in the order of highest interest to lowest interest, and based on the minimum payment requirements, it sets payment schedule for you, based on your budget and priorities for these debts. I personally adhere to the “snowball method” of paying the smallest balance first, closing the account and then moving on to the others. I’ve requested that DebtGoal provide both options. Not sure if they’ll be able to incorporate that feature, but it seems like both methods are sound.




Why use a system like DebtGoal? I think it can help if you’re juggling multiple credit accounts and overwhelmed by deciding what to pay on what account. Perhaps you find yourself paying minimums only because you can’t decide or don’t know what to do about the next one. Then you’ll just make a big payment with the “extra” at the end of the month, right? DebtGoal encourages you to make a goal and stick with it. It can also help you plan your monthly budget so you know how much to set aside for each bill.


Another nice feature is that it shows you how long it will take you to get out of debt if you pay only minimum balances. I set a goal to be debt free by the end of this year, and adjusted my Mint.com budget accordingly. You can chose either a desired debt-free date, or tell DebtGoal your desired combined monthly debt-payment budget, and they will show you the smartest way to allocate, and provide you with a debt-free date based on that plan.


One feature that I really like, and haven’t seen other places, is that it shows new spending separately, by basically showing you that you have to pay A: your regular debt-busting budget amount and B: your new spending to keep up on your goal.

I’ll attach a screenshot here, but for my pride’s sake, I’ve removed my account balances. Rest assured, this will be paid off by year’s end. I’m on track!

If you have debt and you’d like a nice graphical way to tackle that, I’d encourage you to give DebtGoal.com a try!
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LendingKarma poised to launch at Finovate

**Disclosure: This post has been edited. Since it's original posting, we have been contacted by Lending Karma founders with new information and have adjusted the post accordingly. Changes in bold.


Sometimes I just can’t get enough Karma.

Here’s another “Karma” company that will also be presenting at Finovate 2009 later this month. LendingKarma.com isn’t officially launched yet, but I used Google’s handy cache system to investigate further to see what they’re all about. They appear to be a re-branding of the San Francisco-based company LoanBack.com, which provides a system for generating promissory notes. (LendingKarma.com went live on 4/7/09). LendingKarma is not affiliated wtih Loanback.com, except that LendingKarma's founder was once a founder of LoanBack, but left the company a few years ago. Lending Karma is a compeitor but plans to add additional services in the near future.


I’ve investigated LendingKarma with the SEC and was unable to find a record of them, so I’m presuming the business model remains the same: To provide a system for creating a mutually-agreeable peer-to-peer loan. They offer services to “invite” someone to lend to you, based on the agreement you write up with the assistance of their system. They also provide email reminders to the borrower about payment. Both companies are based in San Francisco.

According to cached LendingKarma.com pages, rates for services vary from $29.95 to $59.95 per year.


In my house, I’ve recently had occasion to write up a simple promissory note for my ten-year-old daughter. I’m happy to loan her a little bit of money (I think the balance owed is $10.00) but I can see that later on in life, I would like to be able to loan her money in greater sums, with understanding the payment expectations. If I were to loan a teen or young adult money for a car or home downpayment, this might be just the product I need.

LendingKarma doesn’t appear to handle the collections but does remind borrowers of a balance owed, and tracks the amount outstanding, which could help manage both parties’ recordkeeping. It also provides a legally-enforceable promissory note. As the old adage goes, “good fences, make good neighbors.” This written agreement is tailored to be specific to the circumstances and may reflect a secured, or unsecured loan. Also, being enforceable could settle a financial dispute without damaging an existing relationship.

Jessica Ward is a freelance writer and blogger based in Seattle, WA. She also blogs at http://www.pennywisefamily.blogspot.com/.

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CreditKarma: Never Pay for Your Credit Score Again!

I feel like a moron. Just two weeks ago I paid $14.95 for three-month access to my credit score. Let me tell you a little story about how this began:

My neighbor, four doors down, has the same name as me, with the minor difference of a different middle initial. Her middle initial, happens to be that of my maiden name. Because I hyphenated my last names for the first few years after I was married, I have a registered “credit alias” that is exactly the same as her name, and a mailing address just a few digits off.

That really isn’t too much of a problem, except that because our addresses our so similar, and she doesn’t pay her bills, her collections accounts arrive on my credit score routinely.

Four more of these recently appeared on my credit report and were discovered by my mortgage bank during my refinance. I shot off another letter to TransUnion last week hoping to intervene before my rate-lock was threatened.

I’ve got to say, I’m pretty tired of paying for my own credit score. Yes, you can get a credit report free annually, (just one) but it’s far more helpful in a situation like mine to check it more frequently than that.

Finovate 2009 presenter, CreditKarma may be the solution people like me are looking for. It provides constant, free access to your credit score as well as some other features.

You can see how your credit score stacks up to those in your age range, state, or even email domain. You can also use their calculator system to see how adjustments in your financial situation would affect your score in theory. Would it help or hurt you to close a high-interest account, extend your credit limit, or even file for bankruptcy? I was surprised to know that paying off my credit card balance entirely will actually hurt my score, and that optimally I should be carrying some credit card debt. (Thanks anyway, but I’ll still be going debt-free). There’s a screen to view your long-term credit score over time, which will be very helpful for tracking identity fraud or excessive credit inquiries (which cost you points).

The site is free because of sponsorship (think Mint), but I found the sponsorship to be rather oppressive and cluttering. However, not so much that I won’t be using CreditKarma. Also, be reassured, that they fund the site through ad partnership only, not through selling your personal info.

There are some features that I especially like including a credit card debt calculator which allows you to either enter your projected monthly payment and calculate a payoff date, or enter a date and it will show you your estimated monthly payments. Adding a little extra value to this calculation is their friendly nudge that shows you how much you can cut your payoff time by paying just a little bit more.

At this time, CreditKarma is only showing credit scores from TransUnion, and not Experian and Equifax, but in my experience, TransUnion’s scores have always been the lowest (They’ve also been the only ones routinely confusing my neighbor’s accounts with mine).

Because CreditKarma is requesting your score on your behalf rather than for a lender, your credit score won’t be affected by the inquiry.

Jessica Ward is a freelance writer and blogger located in Seattle, WA. She blogs on finance, credit, family and food at http://www.pennywisefamily.blogspot.com/.
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Microfinance: By Children, For Children


My only travels in the developing world thus far are limited to the month I spent in Ethiopia last year. I marveled at the ingenuity of the children—many of whom fended for themselves. When I visited orphanages, I carried with me more than 5,000 “twisting balloons” to make balloon hats and animals for the kids. The rough terrain, rowdy behavior and stray voltage common there was hard on the balloons, and they popped almost instantly.

What surprised me was that the children collected up every last scrap of broken balloon and put them to use. Some made jewelry, some built sling-shots, others took the ends and made hair elastics from them for braids. A balloon micro currency erupted in each building that I visited over the two weeks that my balloon supply held out.

Another thing that I’ve learned from families who have since visited is that the balloon currency still exists in some of the buildings—months later! Children have stashed and preserved balloons (some still intact and un-inflated) for another day.

My mind came back to this scenario when I saw a story today on the Children’s Development Bank (CDB). CDB is a bank run by and for children in India, Afghanistan, Bangladesh and Nepal.

CDB serves the street children of these countries. These kids use their entrepreneurial skills as workers for hire. Because street children are so vulnerable to theft, they rarely amass enough money to make an entrepreneurial move in building their business or education. Instead, they spend what they need to meet their day-to-day needs and spend the rest of their money on small luxuries (Pepsi and chewing gum were the favorites among the street children in Ethiopia).

CDB is solving this problem by providing interest-bearing deposit accounts to children as well as low interest microloans. The novelty of this plan is that the entire business is operated by children. A board of children determine who will receive loans—and they evaluate the credibility and creditworthiness of the child who wants the loan, as well as their intentions. The children on the advisory board also determine membership, eligibility and the size of the loan available as well as interest paid on savings for members of the bank.

Children are encouraged (and do) invest in the bank their daily earnings. They also take loans to improve their education or business services. They can borrow for items such as inventory (many children in Ethiopia had toilet-paper sales businesses) or shoe-shine supplies or any number of other tools to provide their services.

While the process is facilitated by adults with knowledge of finance, recordkeeping and banking, children are the decision-makers.

You can read more about the Children’s Development Bank by visiting their Web site at http://www.childrensdevelopmentbank.org/new.htm.
IMAGE CREDIT: CDB Web Site www.childrensdevelopmentbank.org

Jessica Ward is a freelance writer, blogger and mother of two children. She blogs at www.pennywisefamily.blogspot.com.
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Micro Health Insurance the Grameen Way

Did you know that in America, the leading cause of bankruptcy is medical bills? Indeed, even with a pretty cushy health care plan in my household, medical bills certainly get our attention. For many families, this is the last straw. For the very poorest in the world, medical care can be financially out of reach entirely.

Grameen Bank hopes to fill that gap and has formed another division, “Grameen Health” which will be a provider of Micro-Health Insurance.

Grameen Bank is leveraging it’s reputation and infrastructure in rural and impoverished places in Africa. Grameen Health has been operating in India and Banlgadesh for some time, but with a $100 Million Euro investment from the Dutch government, Grameen is beginning a pilot program in four sub-Saharan African nations.

This will pose initially education and credibility challenges for Grameen—how to convince families to pay $1.75 per year for a family of six, up front before an illness, when alternatively the family could save up for an illness or may not be sick at all.

In nations where the average annual wage is less than $3,000 per USD, that $1.75 premium will not go unnoticed.

I read in a brief article from the knowledge bank at INSEAD that several organizations are branching in to micro health insurance including Africa’s largest HMO, AAR, but few are finding wild success.

All seem to agree that experimentation and developing a consistent supply of medical support is critical before micro insurance can be successful. “The one day that the medication isn’t available…they are never going to buy insurance again. Then you’ve lost them. That’s why it’s so different from micro finance” said Johanna Mair, a former doctoral student at INSEAD, who is now an associate professor of strategic management there.

I’ve mentioned before about my brief travels in Africa last fall, and I certainly saw the need for medical care there. (I had to be treated in a hospital there for a dog bite—that was an experience in and of itself!) I could see how families had to go out and buy their loved one’s wound dressings and surgery supplies and medications at the pharmacy. While it wasn’t wildly expensive by my standards, I don’t believe that many people would seek preventative care, based on how expensive it could be, and competing financial priorities.

The potential here is fascinating, should this catch on, that the poor worldwide might have access to preventative health care for themselves and their children. This would mean there are more people studying medical coding and billing to work for the expanding health care industries.

I’ve looked around for more articles on the subject but most seem to be theoretical and scholarly, if you see any articles about micro health insurance reaching the masses—please let us know.
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