• By
  • Deborah Gage

Companies like Facebook, Twitter and LinkedIn have made social networks central to the way people communicate. A start-up called Lenddo wants to make them central to the way people borrow money in the developing world.

The company, backed by Facebook investor Accel Partners, provides small loans to people based on the strength of their social contacts, believing that having online friends vouch for a person’s trustworthiness increases the odds a person will pay back a loan.

Lenddo’s algorithm considers how many social media accounts applicants have linked to their loan application, how long those accounts have been active, and how many friends or followers they have on their social networks.

The company’s algorithm also evaluates an applicant’s “trusted network”—the people in an applicant’s social network that are closest to them and will vouch for their reputation and character. If a person is approved for the loan, the trusted network is kept informed of a person’s payment history, and paying back a loan on time improves a person’s “Lenddo score,” as well as the score of their trusted network. The transparent, peer-based system encourages repayment, the company says.

Lenddo loan amounts can be up to around one month’s salary, to be paid back within three to 12 months. Loans must be taken for the purposes of life improvement–borrowers have sought to move closer to a job, send relatives to school and help their families with medical treatments.

If a debtor can’t make a payment, they’re supposed to contact Lenddo to work out a solution. If Lenddo can’t contact them or can’t come to an agreement, the company pursues legal action to recover the money. The company says it charges interest rates that are generally below what local credit card companies charge.

The company is targeting countries where access to traditional financial services is slim. So far it’s operating in the Philippines and in Colombia and has identified 35 countries where people are heavy users of Facebook and are part of the emerging global middle class. Chief Executive Jeff Stewart estimates this group at 1.2 billion people.






This month the company raised $8 million in funding from investors including Accel, Blumberg Capital, Omidyar Network, iNovia Capital and Metamorphic Ventures.


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