you'd be going through imagine that everyone here in the room and everybody listening is uh a borrower and we're going to have an auction where we're going to have some asset and in this case it'll be a houseor a series of houses that you can bid on you can borrow whatever you want
loan money to those people and then kind of this gray area in between are the alt a borrowers uh this would this discussion will become a little important later I just want you to give some background into who these peopleare and you can also look at the types of loans that are being offered there's there's really three types of loans
They grew and as you put in, central banks would give them support against collateral. A borrower always becomes a bit addicted to borrowing, will take my another loan as long as the creditor doesn't scream, as long as it doesn't violate
There were a lot of bad loans made. Some borrowers defaulted. It was not an amount of money that should take down the global economy. And yet the system was so fragile it couldn't withstand that.
Colleges are the ones who are charging the tuition. If a borrower defaults on a student loan, should the college be responsible? That's something that's been brought up right now.
So there's reason to take the company and put it on the roulette if there's nothing to lose. So the borrower is playing with the creditors' money, basically. And only can win from the upside and otherwise the creditor loses.
So for-profit education, as you can see with both defaults and the borrowing amounts, have been difficult. This is pretty predictable. But the borrowers by age-- just to show you, the largest contingency is the less than 30 years old followed by 30 to 39 and then the 40 to 49 category. Again, the 60 to 69-- largest percentage increase.
Next 10 years, if you continue, with just mere doubling of the number of branches from 20 to 40, it will mean half a million borrowers from 100,000 to half a million borrowers . And lending out to, in 10 years, about $10 billion with the same repayment record of near 100% without any documentations or anything else.
About 10 to 15 years ago, I read this book by Frank Partnoy, it's called "Fiasco," which talks about derivatives. the shareholders the borrowers , the depositors, aren't going to be as vigilant as they need to do.
Itís incredibly promising, in fact, thereís this quote by William Gibson, he talks about the futureís here, itís just not evenly distributed yet. We have 80 borrowers in Kenya, itís a pilot called Kiva Zip.
before I kind of re-make my financial lives because-- we all hear that, you have to wait seven years before you can start improving your credit score, right? So if the lender and the borrower don't necessarily know each other before they come to you, what is the primary incentive for the people
In the second example, subprime lenders cajole buyers into accepting devices called startup interrupters, which can be activated remotely to shut down the car if the borrower is even a day late on a payment. Many people who take this kind of deal have little choice.
They grew and as you put in, central banks would give them support against collateral. Because they know that the borrower is playing with their money and will be tempted to take another loan on top of them or equal seniority.
Itís incredibly promising, in fact, thereís this quote by William Gibson, he talks about the futureís here, itís just not evenly distributed yet. to using the maps on every single borrower page to, weíre really trying to drive more video on the website cause that seems to resonate with the internet community.
But that's actually a very small fragment of the outstanding student loan debt. So only about 6% of borrowers owe more than $100,000 in student loan debt. And many that do are graduate school students.
About 50%, so about $800 billion, is due to graduate school debt. So about a quarter of all borrowers , 11 to 12 million, are borrowing graduate school debt. That tends to be repaid at a higher rate.
This is a big issue. About a quarter of all borrowers don't even have a bachelor's degree, meaning they didn't finish school. They had to drop out for one reason or another.
So what we started to build up was this agent network. And we worked with all these borrowers that we have who actually own stores. So there are these small shop owners who we went to and say that, you know the community, the community knows you, are you interested to be an agent?
before I kind of re-make my financial lives because-- we all hear that, you have to wait seven years before you can start improving your credit score, right? So they're both the lenders and borrowers at the same time.
They grew and as you put in, central banks would give them support against collateral. And no industry and no borrowers in the economy without any regulation has as little equity
Now, after we had identified the related parties, we then merged them to the portfolios of the banks-- the loan portfolios-- and lo and behold, we found out that the borrowers were, to a large extent, the owners of the banks. It varied a little bit in levels how much access they had to their bank, but here, this particular group,
want to loan money to because they know they're going to get paid back then you got the people at the bottom of the scale these are the subprime borrowers these are people that have a history of not paying their debts and that lenders really don't want to borrow to those or loan money to those people and then kind of this gray area in between are the alt a
and high priced homes uh and U I haven't mentioned the subprime uh Revolution yet but subprime loans are loans to uh borrowers who normally wouldn't qualify for a loan because of poor credit or no job or something like that uh and one thing that has happened
starting in the 1990s and accelerating in the 2000s is that we have more and more institutions that lend to subprime borrowers uh and uh they have been poorly regulated so some of them are predatory they seem to be giving loans to people that U didn't have a good
What are some of your approach recommendations? But just be careful that you don't become a co-borrower , a cosigner, that-- people are under the assumption that if you get divorced,
And often times, itís called asset-based financing. So when you lend to a Juhudi Kilimo borrower on Kiva, instead of the borrower getting money theyíll get a cow and usually itís a two for one where the cow is pregnant. Premal Shah: So, itís amazing and youíre literally right there doubling the farmerís dairy income, right?
In fact one thing that happens over and over again in so many different traditions is you find that borrowing money or -- they frame morality as the obligation of the borrower to pay it back. So obligation and debt are considered the same thing; morality is just doing your obligations as paying your debts.
But people still are holding that debt. As I mentioned, borrowers who owe the most student loan debt are not the ones who default. It's actually the people have the lowest amount of student loan debt, believe it or not.
Surpluses come. Profits come. Profit is distributed. Having borrowers on the board itself is an unusual move for a bank. Let's just put it that way.
Just to set a context, there's a story that our microfinance director talks about, that when we introduced mobile money for our microfinance borrowers to pay their loans on time, they would send the mobile money through their phone and then they would walk to our offices and come and make sure that it actually has come through.
In the spring of '05, we put seven entrepreneur's pictures, much like Sophia. And so to be able to talk to borrowers about this global community of supporters, I mean, almost all over the planet.
In the spring of '05, we put seven entrepreneur's pictures, much like Sophia. When you look at the number of countries where borrowers and lenders are, it's all over.
to give them. What Yunus did was figure out that the women did have collateral and he found a way to shift the transaction cost of determining credit worthiness from the shoulders of the banks onto the shoulders of the borrowers themselves. What was the most valuable thing these women had? Their social standing in the village.
attracted a fairly um you know low uh quality level among borrowers and and
wanted to see who were some of these borrowers .
just was 114th of its size today half a million borrowers and I was once telling the story at actually at Google and
can charge more fees and a higher interest rate to these borrowers then I can make bonds that have a higher yield
You choose the level of risk you take because you choose the borrowers .
And many that do are graduate school students. And similarly, only 2% of borrowers owe more than $200,000. So if you look at the entire schematic, about 8% have more than $100,000 of student loan debt.
And that's been one of the critiques of that system because they don't actually receive gainful employment. On a positive note, 30% of borrowers graduate with no student loan debt. And that's due to a variety of reasons.
who were being paid for each mortgage they issued, and they didn't care whether the borrower was capable of paying
the mortgage back. And he wasn't really giving the borrower very good advice.
They grew and as you put in, central banks would give them support against collateral. Once that is in place, the same reason or incentive for a heavy borrower to take a little bit more risk, the downside of which is shared by the creditor,
They grew and as you put in, central banks would give them support against collateral. In the book, we have a chapter in which our homeowner/borrower , Kate, has an aunt Claire.
It would never had occurred to banks to do so, mainly for two reasons. First of all, these women had nothing that banks would ever consider collateral. And second of all, the transaction costs of determining each borrower 's credit worthiness would have been an astronomical percentage of the tiny loans that the banks were going to give them. What Yunus did was figure out that the women did have collateral and he found a way to shift the transaction cost of determining credit worthiness from the
I'm going to loan them people money to buy the phone and um and then what the idea was that the grooming borrower
In total, we have 20 branches all over the United States-- seven branches in New York, in total 11 cities, 20 branches. So within these four branches in California, there are 17,000 borrowers . It started four years back here.
So with $250 million-- The license will allow you to have that capital, take deposits. Take deposits. Globally today, we have over 300 million borrowers , mostly women, all over the world. So almost every single country has microcredit program.
before I kind of re-make my financial lives because-- we all hear that, you have to wait seven years before you can start improving your credit score, right? The lenders, are they people from the same social circles as the borrowers ?
before I kind of re-make my financial lives because-- we all hear that, you have to wait seven years before you can start improving your credit score, right? Yes. So imagine that 10 people in the lending circle are both the lenders and the borrowers .