Wonga is an ethically bankrupt investment. Venture investors have a duty to create value for their limited partners - but not by subtracting value from others. Think piracy’s theft? What about usury? Though Wonga argues that it tries to help lenders, it can never do so sustainably. Why? The problem is in the DNA - Wonga’s incentives are perverse. The less you can pay off your original loan, the more we profit. In turn, Wonga cannot act for the common good - whether it wants to or not.
via Umair http://bit.ly/m1DwE (via kortina)
I’m fine with companies acting in a market. I’m fine with venture capitalists investing in them.
But if Wonga is in your portfolio, it turns me off. I won’t be inclined to have you as an investor. [yes, I know TAG, a Tipjoy investor, is a Wonga investor]
This might be a quick judgement, as I’ve only heard a few anecdotes of bad behavior and haven’t looked into it myself.
The argument is pretty strong that a service like Wonga helps people who aren’t served by current banks. I think that argument is trumped by pointing out that a small amount of education would solve the problems for which the need for payday loans is a symptom. Investing in a solution to a problem is a better bet than investing to a symptom of a problem.
Opening up a savings and checking account is a start. Getting direct deposite is a good step. Recording what you spend and deriving an effective budget is actually really easy if you have a bank statement.
I’d like to start a financial education and outreach not-for-profit site eventually, I think. The marketting strategy will be to setup a brick & mortar with a big “payday loan” sign outside, and instead setup a reasonable financial configuration for those poor souls that walk in.
