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Microlending 7 – Risks? Who Are the Lenders? How to Participate?
Continuing from the last post, Ruddy explained that most lenders are from North America, and the team managing lender relations is entirely based in the U.S., so the majority of lenders are American. Interestingly, many employees initially joined as lenders, found it profitable, and later became part of the company 😂. The founder, however, is Kenyan and splits his time between Kenya and the U.S., spending most of his time in Kenya managing the credit union and local borrowers. Therefore, while borrowers are predominantly Kenyan, lenders are primarily North American.
Since this is a lending model, not equity investment, lenders don’t need to meet any high-net-worth qualification criteria—anyone can participate, and the entry threshold is very low, with just a few thousand dollars to get started. However, to earn a return above 30%, you need to lend at least $50,000.
I said, “Given that this is about lending in Africa, my main concerns are: first, what if you guys take the money and run? Second, since it’s Africa, isn’t everyone worried about stability?”
He replied, “There’s risk in everything. The key is to look at the risk-adjusted return. If you feel the risk is acceptable, give it a try. If you can’t tolerate potential losses, don’t do it. As for the first concern, I can show you our loan tape—a record of thousands of borrowers and the amounts lent. With so many borrowers and such large amounts to manage, running off with the money would be extremely difficult. Plus, we undergo annual audits, so you can verify that the funds are genuinely being lent out. Regarding the second concern, the political situation in Africa is actually quite stable, especially in Kenya. Personally, I believe natural disasters pose a bigger risk than political instability. Most of our lenders are ordinary people from North America with some spare cash. They start small, try it out, and after 13 months, if they get their money back and feel satisfied, they may increase their lending. If they’re not comfortable continuing, they can simply withdraw their money. Right now, we have about 700 lenders, all of whom are just regular people like you and me. I’ve personally invested a six-figure sum, and for over five years, we’ve consistently paid out both principal and interest on time.”
I asked, “Can I see your loan tape?”
He said, “Sure, no problem.”
Then I asked, “How can someone participate?”
He explained, “It’s very simple. Everything is done online. You sign up, complete the necessary documents, transfer the funds, and you’re in.”
My approach remains the same as with any other opportunity. If the logic makes sense, the data looks reasonable, and the team has skin in the game, I’m willing to try. I’ll stick to my usual rule: only do an amount small enough that losing it wouldn’t affect my quality of life. If I lose it, it’s gone. If it comes back with returns, it’ll be a pleasant surprise.
I’ll continue to share updates on real progress for this one in my future weekly newsletters. As always, I’ve also made a video series of my chat with Ruddy about this project. It includes specific data and updates that I didn’t mention here. If you’re interested in learning more, feel free to check it out or reach out to us for the full set of materials. We’d also be happy to chat with you on anything, as usual 😀