Online community platform helps the emerging middle class engage their social network to establish credit-worthiness, gain access to financial services and achieve financial wellness


There were three things that sealed the deal for, an online lending platform, to try out its “crazy idea” in the Philippines: a growing middle class, a lack of innovative financial products catering to that income bracket, and the phenomenal rise of social media. Richard Eldridge, who co-founded Lenddo with U.S.-based Jeff Stewart in 2009, noted that there were a few things happening in the Philippines that spelled huge potential.

“Number one was the size of the middle class… the call center workers, the creative industries, the tourism and travel here in the Philippines, it was becoming so big. The second one,” he adds, “was the absence of financial products catering to that market—the rich had quick access to loans from banks, the MFIs (microfinance institutions) were working with the grassroots, but for the 600,000 people in call centers, there didn’t seem to be anything apart from the payroll account or savings account.

And they had no credit rating agency, which we thought was interesting.” Add the fact that the Philippines is the number one country in Asia in terms of Social Media usage, and the co-founders came up with the idea to combine the two elements—using social media as a means to an end—and create a business that seeks to economically empower the emerging middle class segment in developing countries. “Lenddo is basically an online platform that helps members engage their social network to establish creditworthiness and gain easy access to financial services,” explains Eldridge.

Community-based Lending

Group- or community-based lending has been around for centuries, but the proliferation of social media, mobile computing, and the deep social graphs enable it to be implemented on a global scale.

“We believe that professionals in emerging markets should have access to the same high level of financial  products and services enjoyed by more mature markets like Japan, Germany, United Kingdom and the United States,” says Eldridge. He adds that the middle class in developing countries are typically under-banked and still use informal sectors such as family, friends and 5-6 schemes for there financial needs. “Some 5-6 lenders charge interest rates for as high as 20 percent. We were surprised that a lot of people take advantage of people this way,” he says.

A typical loan from Lenddo is charged an average interest rate of 0.99 to 2.49 percent per month, lower than the 3.0 to 3.5 percent rates charged by credit cards. “We can charge lower and still make sustainable profit because
everything is done online. By using technology, we reduce our operation costs and we pass on the savings to our community members,” shares  Eldridge.

Life-improving Loans 
Lenddo was created with the premise that improving the lives of individuals entailed economic empowerment.

As such, the company is socially responsible when it comes to lending. “We only lend for specific purposes,” explains Eldridge. “We don’t allow you to go out and buy a cell phone with our loan—we’re not in that business.”

But if members need educational loans for themselves or their family, Eldridge shares that Lenddo can cover that. “We also help people start or expand their business, we help them with home repairs and relocation, and with debt consolidation and healthcare/ medical emergencies. We’re quite limited in the scope of the loans we give…we call them

‘life improving loans,’” says Eldridge.

What also sets Lenddo apart is that when members ask for a loan, they first need to establish an online “trusted community” to determine their credit score. “Using our algorithm, Lenddo can calculate a person’s credit score based on the quality people in his/her network. The network serves as a group of people willing to vouch for your ability to pay loans—the more quality people in your network, the higher your loan application’s chances are of approval,” says Eldridge.

It’s a formula that works, as the company currently experiences dramatic growth rates. Since its launch in March 2011, Lenddo now has over 25,000 members and has processed over 2,750 loans. “The nature of our products is very viral so it’s becoming bigger and bigger. We double in size (in terms of members) every 90 to 100 days, and we see that continuing over the next two to three years,” shares Eldridge, adding that the default rate of their target market mirrors that of traditional MFIs, between 2 to 4 percent. “Majority of Filipinos in the Lenddo community pay back their loans on time, every time,” he says.

Financial Wellness

More than providing loans for its growing community of members, Lenddo also offers financial education to increase awareness about the importance of financial wellness. “One of the challenges when we started in the Philippines is that there is such a lack of financial education,” says Eldridge.

“One example is one person applied for a loan to put in a savings account, which is not a good investment at all. We get a lot of people like that, and it’s nothing against them personally. It’s just that no one’s taught them basic financial wellness,” he says, “which is why we felt it crucial to bundle the loan and financial awareness elements together.”

The company’s biggest conduit for financial education is its Facebook page, which currently has over 32,000 followers. “We post three or four snippets every day of tips and tricks on how to save money, what a good investment is, and on top of that we have our blog where we lay out articles,” shares Eldridge. Outside of Facebook, there are also events—“we call them ‘meet-ups’,” says Eldridge, “and we invite guest speakers to come in and talk about financial education. We found that while people do have the knowledge on financial planning, there is still that lack in motivation. Our talks are 70 percent motivational and 30 percent informational, because more than anything, we want to inspire behavioral change.”

Published April 19, 2012 in the Business Agenda section of the Manila Bulletin