Hello, world!
We’re Arboreum, and we’re changing the way that people borrow and lend money to each other.
All over the world, hundreds of millions of people slip between the cracks of a financial system that doesn’t adequately address their financial needs, either refusing to offer credit due to a borrower’s lack of financial history, or offering them finance on terms which they cannot meet given their circumstance.
As a result, people are often forced into the so-called ‘informal sector’ to meet their needs — a catch-all term that encompasses everything from friends and family to predatory payday lenders, microfinance institutions to peer-to-peer lending platforms. This sector — whilst often well-meaning — suffers from several problems that result in it acting as a crab bucket: once you’re in, you’re very likely not going to be able to get out.
We’re going to talk about these issues in some depth in later posts, but for now, we’ll ask you a question.
What if 1.8 billion people demanded better?
That number seems excessive, but it’s the number of people worldwide who are currently unable to access traditional (read: formal, with friendly bank-tellers involved) finance. In some cases, this is due to geographic distance between potential clients and financial institutions; in others, it’s because the credit score of the borrower isn’t up to par in the eyes of the lender.
Thing is, credit scores are tricky, nebulous things that very often don’t tell the full story. Never applied for a credit card? That’s a black mark. Not on the electoral register? Black mark. In regular employment and paying a mortgage, but living in a country where records are sparse? Black. Mark. Credit scores are highly time-sensitive, favouring the elderly simply by virtue of the fact that they’ve had more opportunity to apply for things. They aren’t infallible, and more often than not plain inaccurate.
So, what are we going to do about it?
At Arboreum, we’ve been working on a lending model that places the reputation of a borrower at it’s heart, rather than their credit score. When someone applies for a loan with us, they have the option of asking friends and family to ‘support’ their loan by acting as a co-lender.
Bringing more supporters to a loan reduces the interest rate we ask for, as we treat them as a first-loss guarantee against the funds loaned by our wider lending pool. In exchange for taking on this risk, the interest that supporters receives is greater than that received by those who act as generic lenders.
If a supporter isn’t comfortable receiving interest on funds that they’ve loaned you, that’s fine too! We can either reduce the overall interest required on your loan, or increase the relative amount received by other loan participants, depending on your circumstance.
Importantly, we’ll be logging each step of the way. Not for nefarious data-mining purposes, mind, but rather in order to make this information available should a borrower choose to as evidence of a financial history that they can use to eventually get themselves into a position where they can apply for traditional finance if they need/wish.
What have we done so far?
We’re currently focusing on India as our target market — a country where 70% of households don’t have access to formal credit, and where the informal sector is booming. Mobile access and digital payments are on the rise at a rapid clip, and we’ve been getting good traction.
Our solution is still quite young — we’ve been live for three weeks now, piloting a product within company networks that allows employees to take out emergency loans that are supported by the company itself and any colleagues that wish to contribute.
We’re currently available to roughly 150 people across three companies, with another ten or so pilots in the pipeline. Last week we received — and are processing — our first loan request.
We have a demo platform for people to look at (insofar as ‘how does it actually look for users?’), available here.
Okay, so what’s next?
At present, our focus is on growing our customer base — both in terms of pilots/users and funds disbursed as loans.
In terms of this blog, we’ll soon be talking about the state of informal financing in the developing world (and elsewhere — the problem that we’re trying to solve is very much global!), doing a deep-dive into our risk underwriting model, discussing how a cryptocurrency-centric variant of our platform might look, and generally showing off what we’ve been working on and what we’re currently up to.
If you’re interested in talking with us rather than just reading, fire us a message at enquiries@arboreum.dev. We like the curious ones. :)
Thanks for your time — we hope you’re interested! This isn’t a small problem we’re trying to solve, so we need all the support we can get.
Together, we can all Invest In Someone Good.
/ Team Arboreum
