On-time repayment rate improvement over time

Discussion in 'Announcements' started by Julia Kurnia, Jan 5, 2014.

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  1. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Dear all,

    I'd like to share our most recent analysis of how the on-time repayment rate of Zidisha members has evolved over time.

    The following graph tracks the on-time repayment rate for members who joined Zidisha during the weeks tracked on the lower axis. The on-time repayment rate is defined as the percentage which were paid on time of all installments that have fallen due from the time the member joined up until today's date.

    The on-time repayment rate of the set of members who joined one year ago has ended up being around 50%. Since then, we have made a series of changes, including reducing the starting loan amount and requiring Facebook online identity authentication for most countries. As a result, the members who joined more recently have exhibited higher on-time repayment rates of around 75%.

    I am attaching the spreadsheet that was used to generate the graph. Questions and comments are welcome, and I look forward to discussing further the details that interest you.

    Best,

    Julia

    upload_2014-1-5_18-58-22.png
     

    Attached Files:

    KirstenShute and Sverre like this.
  2. Mandy

    Mandy Forum Member

    Hi Julia

    Do you know whether, for the average loan, the on-time repayment rate tends to fall over time? That is, is the average member more likely to make his or her payments on time at the start of the loan period with performance declining somewhat over time?

    If the age of the loan affects the on-time repayment rate, could this be contributing to the higher repayment rate on the right half of the graph? If I understand the graph correctly, the loans depicted on the right side are not as old as the loans on the left side.
     
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  3. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Hi Mandy,

    That is a good question. If on-time repayment rates tend to decline with time, then that would indeed account for some of the variation in the graph.

    What we found in our analysis is that the timeliness of the first loan installment is a strong predictor of both the long-term on-time repayment rate, and whether the full loan is repaid on time. It would be interesting to filter the results such that they track the evolution of on-time repayment rates for the first installment only.

    Best,

    Julia
     
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  4. Sverre

    Sverre Forum Member

    I think its a good signal that the new loans are repaying 75% on time. I would expect a on time repayment rate of at least 75% , and I think that the new default way to sort loans, also will help to improve repyament rates.
     
    KirstenShute likes this.
  5. Sverre

    Sverre Forum Member

    Very interesting, and I think this also means that it was a good move of Zidisha to take away the possibility to reschedulee loans without repaying for some months, just postponing repyament and increasing debt.,
     
    Jean Wendpanga likes this.
  6. Jean Wendpanga

    Jean Wendpanga Gold Member Volunteer Mentor

    good idea Sverre.Thanks

    KABORE
     
  7. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Our lending model is improving with time, as we learn from experience and adapt accordingly.

    That is one reason that our lending policies do not remain as static as those of traditional microfinance organizations, which mostly follow established models. We are innovating via a continuous learning process. The goal is to facilitate loans in useful amounts for as many deserving entrepreneurs as possible, while limiting credit risk for our lenders.

    As soon as we have enough data from actual user behavior to evaluate how well the current policies are achieving this goal, we are able to make a decision of whether to keep the policies as they are, or adjust them to improve performance.

    One of the benefits of the recent transition to weekly repayment schedules (besides convenience for borrowers) is that we will have much more immediate and frequent data on how any modifications to our lending criteria impact repayment performance.

    Best,

    Julia
     
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  8. Sverre

    Sverre Forum Member

    How late repayment is now "repayment on time" with weekly repayment?
    I assume money travels very fast with mpesa?
    I would prefer if it was the correct date given on repayment plan.
     
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  9. Sverre

    Sverre Forum Member

    I read some place in volunter section that Zidisha is removing the need to prove identification for for facebook borrowers?
    IS this really wise? Why the need to take away identification?
    Its very easy to make a "false" facebook account ?
     
    mewesten likes this.
  10. Sverre

    Sverre Forum Member

    https://www.zidisha.org/index.php?p=43
    Why are the definition of repaying on time:
    Loans that are less than 31 days late?

    Why not be more accurate and use the date on repayment schedulee? I think lenders need to see the accurate picture.
     
    mewesten likes this.
  11. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Dear Sverre,

    That is correct, we are no longer requiring borrowers to upload scans of their national identity cards in order to join Zidisha. The reason is that having to scan documents proved to be a significant barrier for most prospective applicants, as most of them do not have their own computers, and live in communities where most public cybercafes do not have scanners.

    Checking a national identity card ourselves is largely redundant, because the local banks and mobile payment services we use to disburse loans check members' national identity cards at the time they open an account. We verify the identity of the recipient with the local payment services before disbursing loans.

    It is certainly possible that the local payment services' identity verification process could fail, and in such an event our own check of a new member's identity card would provide a safeguard. We estimated, though, that this additional security benefit is not worth the cost of requiring scanned documents from all applicants.

    One feature we would like to add is an option for members who have joined without scanned ID cards to provide them at a later date. In the meantime, loan profile pages now include a note indicating whether or not the member has provided a scan of an ID card, so that lenders who prefer that additional security may take that into consideration in their lending decisions.

    Best,

    Julia
     
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  12. KirstenShute

    KirstenShute Gold Member

    I am also concerned about this. With weekly repayments, I think the leeway offered borrowers should be 7 days at most. That is, if a payment is more than 7 days late, it shouldn't be counted as "on time." What do others think, and are there plans to change this in the future?
     
    Kjartan and mewesten like this.
  13. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

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