Facebook offers loans to people in emerging markets through Lenddo

Facebook Inc. (NASDAQ:FB) is now able to offer loans! No, the company has not suddenly got a banking license, but instead the loans are from a startup called Lenddo. Lenddo provides loans to people living in emerging markets by using their social media presence as the criteria for granting a loan. This is a revolutionary new way of providing financing and could provide capital for millions of people who otherwise have virtually no access to capital.

This project is going to work hand in hand with Internet.org, the non-profit foundation started by Facebook’s founder, Mark Zuckenberg. The foundation is partnering with cellphone operators in developing countries to promote free, or low cost, mobile data plans to people living there. This means that people without traditional internet connections will be able to go online through their cellphones.

Loan Approval Road Sign IllustrationLenddo has been working on this new loan model since 2011, when the company was founded. Co-founder Jeff Stewart, had the idea when he was visiting developing countries, and noticed how quickly everything was progressing. What he spotted was emerging middle class that did not have easy access to capital, as they had little experience with credit.

Lendo uses these people’s social networking connections to act as references for the granting of a loan. They are then putting their own chance of getting a loan at risk by recommending another person, so there is additional pressure for repayment, not only from Lenddo, but also from their social media connections. It is a very clever way of verifying someone’s creditworthiness. For now. this loan service is only available in the Philippines, Columbia and Mexico. Nonetheless, Stewart has big plans for the future.