How far do you expect systems to go to ignore real-world associations? What if it is coming down to personal safety? Would you object to a self-driving car that routes itself around more dangerous neighborhoods? What about a model that predicts that unknown men on the street at night are more dangerous than unknown women?

I wonder how big the set of people is for whom it holds that:

1. Income > Expenses

2. They make good financial decisions

3. They decide they need a small loan

You’ll always have a selection bias towards people who do 3, but not 2 or 1. Thus you’ll be forced to price the high default rate into your product or use predatory practices to squeeze peoples payments when they cannot afford them.

> We are looking to build a product that isn't predatory towards the people that need help the most.

I think the main problem with small loans is that they are almost never used for investment. They are used to buy stuff for consumption.

If you’re just barely cash flow positive, buying a TV on credit is not a good long term choice, and the loan that enables it feels predatory.

Last, I am not sure if giving up all privacy is the kind of “future of credit” that we should applaud.

These loans don't cause unemployment. Those same people would be unemployed even if those same businesses didn't apply for the loan.

We are only a few months into a multi year pandemic, so even if a company isn't suffering yet, they most likely will be soon. Getting a loan while it is available to preserve jobs as long as possible as the pandemic gets worse sounds like a sensible and ethical thing to do.

Maybe from some kind of loanshark, but no bank is going to give someone a loan, especially if they don't have the means to make the payments, to go out and buy a new MacBook.

There are a lot of important points in the thread, such the difficulty of enforcing terms compared to traditional loans, and the amount of cash needed up front which can only be made back over time -- but solving those problems wouldn't fix the fundamental problem that it's hard to succeed in lending when your target market is comprised of people who are unlikely to pay you back.

The ISA startups learned that the traditional lenders were right, including in their use of credit scores to evaluate applicants -- a lot of people ignored by traditional lenders really just aren't people you want to lend money to.

It's not based on "basically nothing" - at least from the banks perspective as originators in this case - it's based on which corporate accounts are deemed to be of greatest financial value to them. They can, will, did pick and choose loan beneficiaries in their portfolio based on how it will benefit them - nothing less. This means that business customers with big debts to the bank were a priority. It's absolutely a bailout of the banks in a difference scheme, albeit a bit more blatantly nepotistic than we're used to seeing so far.

And yes, they get a point in services for treating themselves too...

All that said, your gist is correct in that it's basically free money benefiting some at the expense of others which is why personally, morally, I am not in favor of corporate welfare under any circumstances - impossible to do so "fairly".

Bank do refuse to lend to large segments of the population which can be lent to profitably.

In China, part of the reason is caps on loan interest rates.

But banks in developed countries, like the US and the UK, also fail to serve a large segment of the population. Those underserved by banks have limited options to get loans for emergencies etc., and difficulty building their credit history to gain access to cheaper credit in future.

If you're based in London and are a software engineer or data scientist interested in solving this problem, please email me (personal address in profile) and I can tell you about what we've built so far and what's ahead.

Yes, because of the obvious ramifications, as you've alluded to.

No, because it's a private company you're asking the loan of. If they don't want to lend to you, then they don't have to lend to you. I believe they should be able to come to this conclusion however they like, except based on the obvious factors like culture, gender (or lack/fluidity of), etc.

but mostly yes. I think the credit economy is an important thing to understand and people should be able to access credit so they can actualise their lives.