How to Get a Loan Without Leaving Facebook

Facebook is already a place where people can catch up with old friends, share music, read the latest news, and even tend to virtual farms. And now, it can also help them get a loan.

This is thanks to a startup called Lenddo, which extends loans to people in emerging markets based on their social media presence. On Thursday, Lenddo announced that it will launch its first app for Facebook, meaning people no longer have to leave Facebook to apply for and get access to Lenddo loans. It’s a seemingly small development, and yet, it could have big implications for people who don’t have access to capital – and maybe even for those who don’t have access to the internet.

>It could have big implications for people who don’t have access to capital – and maybe even for those who don’t have access to the internet.

That’s because Internet.org, the non-profit founded by Facebook CEO Mark Zuckerberg, is working to bring free or low-cost mobile data plans to people around the world. To do that, Zuckerberg explained earlier this year at Mobile World Congress, Internet.org has been partnering with telecom companies to offer people living in the developing world free access to basic services like Facebook and Facebook Messenger.

What that means is a vast number of people may soon have access to free data plans through Facebook, and what that means is that Facebook will likely be their first, if not only, point of contact with the internet. Lenddo wants to help these people get loans. “If you’re making $250 a month, not having to pay for data is a big deal,” says Lenddo CEO and co-founder Jeff Stewart. “What we’ve done is make sure our service is compatible with Facebook so it’s easier to access.”

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Social media has been core to Lenddo’s business model ever since the company launched back in 2011. At the time, Stewart and his co-founder Richard Eldridge were running a number of big data companies with offices around the world. Stewart says each time he visited one of these international outposts, he was stunned by how fast these cities were growing. “I’d get to my hotel at 11:30 pm and there’d be construction across the street. I’d wake up at 6 am and there’d be the same thing,” he remembers. “I’d come back three months later, and the building’s already full and there’s another right next to it.”

But what surprised Stewart more than the rate of development was the fact that many of his international employees, who were all part of the so-called emerging market middle class, couldn’t get access to loans. “It made no sense to us,” Stewart says.

The problem is, many of these people were what banks would refer to as “thin file” applicants. That means they didn’t have much transaction history on which to base their credit scores. “To a bank, you don’t exist,” Stewart says. And yet, these same people had an average of 800 connections on social media. Stewart reasoned there had to be a way to make lending decisions based on an applicant’s standing in his or her social network.

Stewart and Eldridge started with a group of 300 people they already knew and worked with in Manila, Philippines. They offered them loans on the condition that they could provide references from their social networks. As it turned out, many of the people listed as references were also seeking loans, so they joined Lenddo’s network, invited their own references, and so on.

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