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Originally Posted by Cynthetiq
in some places it doesn't take a lot to start a business... micro loans as the media has called it, less than $1,000.
interesting idea, but then how does one enforces collecting?
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They do it just like normal banks, report deliquient loans to a credit agency, send a bunch of letters, then sell the debt to a collection agency that will harrass you till you can't answer your phone or door.
It sounds like their 1% cut is for doing all the administrative parts of the loan (collecting payment, passing it back to the creditors, rating potential borrowers and going after deliquent debt).
I suppose they might not pursue bad debtors with as much vigor as a normal bank as it isn't technically their money.