Microloans?

About two months ago, Philip Linden did an interview with Adam Reuters where he suggested the possibility of microloans within Second Life.

http://secondlife.reuters.com/stories/2006/10/12/philip-rosedale-on-the-grameen-model-for-sl-social-contracts/

It seems like a wacky idea, and interest rates would have to be on the high side. And would people really pay interest on a, say, L$ 1000 loan when they could just charge their credit card or charge it to PayPal and not pay any interest? However, there is an odd resistance among some residents to spending any RL money at all, a purist streak or point of honor, so who knows?

In RL, microloans work without collateral but with significant social pressure and peer pressure. If there was a circle of friends who all co-signed the loan as guarantors, and in event of non-payment the entire group of friends ended up on some global ban lists and would be ineligible for any future loans, would that be sufficient?

What sort of thing would people need a microloan for within SL? Perhaps a "payday" loan to tide them over until the next weekly stipend, or something similar?




As a separate issue, larger (non-micro) loans might conceivably work, particularly in cases where a person owned land on a private island and put that land up as collateral and (this would be key) the land baron in question was willing to cooperate in enforcing foreclosure. In this case, the land baron is the "government" and can reclaim parcels and, in the case of land as collateral at least, provide the enforcement of contracts that Linden Lab refuses to do.

I set up an ATM to do just that at my script shop. My plan is to distribute these ATMs so that others can provide microloans to other residents and to share credit risk as well as info on deadbeats with others.

Well my first thought was that with linden dollars all loans are micro loans.

The only thing I can think of that might need a microloan is for a startup business owner who does not want to invest any of their real world dollars but does not want to wait on building up enough money to pay for upload fees and store rent. I had to wait about six months before I had enough slexchange sales to cover store rent for a few months. I'm not sure I'd try a microloan if it was available.

I guess maybe land owners could use loans to cover them when renters dont pay? Seems too risky.

Sounds like he might be having second thoughts about the banking ban.

Entirely possible. But presumes that the land has either a) strong emotional attachment for the person making the loan or b) intrinsic resale value, which is iffy considering land valuation/tier ratio's lately.

Also presumes that the person getting the loan can't afford $L 1000 or whatever it is, but still would be able to afford $L 500 or 1000 a week for land rental (if not ten times that).

The other issue is this: some estates (including mine) won't recognise offshore contracts by default. If there is any dealmaking to be done, it would be under review by myself and witnesses within Caledon's borders, must be verifiable, immune to nonsense by alts, &c &c.

And finally, it scares the crap out of residents if land barons try to play 'king' on their estates.

The proper business angle is that a land baron offers himself as 'leverage' for the citizen on levels he couldn't easily otherwise deal with, such as estate banning a griefer, or technical issues, or concierge access. Once a land baron is primarily a stick instead of a carrot, the advantages of renting diminish.

This thread predates the banking ban by more than a year.

What about nano-loans? I might be willing to lend someone L$1 if they have the right credentials

Ack!

Hank got us with a necropost!

laughs

*falls over laughing* Good going, Hank!

Though your ATM plan does sound more like a pyramid scheme, except you don't exactly promise any payouts to, anyone? Well, other than yourself, that is.

No; no ; no. Not a pyramid scheme.

Each owner of the ATM decides on how much money they want to let people borrow. They set their own interest rates, terminal fees, late fees. They loan their own money to avatars, and receive payments + interest and fees (reasonable interest and fees, nothing above 30% and more like < 20%), and take the risk. They share their information with others on accounts that are late with payments. They decide on who to loan their money to based on risk.

There is no "deposits", interest earned on accounts, or a pyramid scheme. It is basically an ATM that you plunk down, and you decide on all the numbers, and start loaning money out. It keeps track of all the calculations and reminders about payment, and communicates with the main server to share credit information with other owners of ATMs.

How would I make money? By selling the ATM itself, of course. Also by charging to be part of the network that shares credit information.

There also might be an insurance option that will pool insurance premiums from lenders to cover losses.

Have you ever looked at other services that lend money? They want like 90% APR plus outrageous fees. Usury!