My friend Gustav and I laid out the hottest new place to get a payday-style loan, sometimes in just minutes: Reddit. In The Atlantic, we explain how an ad-hoc community of online lenders Paypal money to strangers based on their forum posts, and most of them get repaid.
When asked if they’d be able to cover a $400 emergency expense, Neal Gabler’s recent Atlantic cover story noted, nearly half of all respondents to a 2014 Federal Reserve study said that they wouldn’t have enough cash on hand.
So how would they scrape the money together? Most told the Fed they would try for a bank loan, use a credit card, or make a potentially embarrassing request to family and friends. Two percent of respondents said they would take out a payday loan.
To avoid this suite of unattractive choices, some borrowers are asking strangers for money on Reddit instead. Since 2011, a section of the site, r/borrow (and its predecessor, r/loans), has matched users looking for quick credit with lenders willing to put up cash. Most loans on r/borrow charge very high interest rates—usually between 10 and 25 percent, to be paid back over weeks or months. Per data collected by one r/borrow user, the subreddit facilitated 3,473 loans totaling over $780,000 in 2015. According to a moderator of the subreddit, r/borrow users, like Redditors at large, skew young, white, and male. Loans tend to range from $100 to a few thousand dollars, and cover the gamut of emergency financial needs, including car repairs, debt consolidation, medical bills, or unexpected travel costs.
Relatively speaking, these aren’t huge numbers—the consumer-credit market handles trillions of dollars each year—but they do highlight the ways in which traditional lending options can fail to give some people what they need. “It’s not surprising that borrowers are looking for alternative ways of getting access to credit,” says Paul Leonard, the former director of the California office of the Center for Responsible Lending.
When Americans need money, they often turn first to banks for a loan, but their options there are only as good as their credit. If their credit score—a figure that can be calculated incorrectly and yet is often taken as the sole indicator of a prospective borrower’s reliability—is low, they often turn to loans with much higher interest rates. Take Justin O’Dell, a cable technician living in Dexter, Michigan. He says his mother took out several credit cards in his name while he was in college and racked up about $40,000 in debt. “My choices were to press charges for credit fraud or eat the debt,” he said. “I ate the debt.” No longer able to get student loans, O’Dell was forced to drop out of college.
When O’Dell later needed some cash to pay his cellphone bill after his wife lost her job, he briefly considered a payday loan—an extremely high-interest alternative that is known to catch consumers in cycles of debt and is mostly unregulated in 32 states. (Payday loans are not equal-opportunity debt traps, either: “There is some evidence that lenders have concentrated themselves in communities of color,” said Joe Valenti, the director of consumer finance for the Center for American Progress.) But after deciding against that option, and against the embarrassment of asking his father, O’Dell ultimately opted for the comfortable distance of a Reddit loan. “You don’t have to walk back to dad with your tail between your legs and ask for help,” he said. Now, he turns to Reddit when surprise expenses arise.
The full story here.
Versión en español aquí. Written with Gustav Cappaert. Published at IPS. (Photo: El Palomar, an agricultural community in Bolivia, one of over a thousand rural communities to which the Bolivian government plans to expand internet access with national satellite Tupac Katari 1.
– Maria Eugenia Calle, a local official in this Andean agricultural community, recently saw the Internet for the first time.
Her hometown of El Palomar will host one of about 1,500 telecommunications centres that the Bolivian government plans to open this year in rural areas. They will be served by Tupac Katari 1, a Bolivian satellite launched from China late last year.
Socialist President Evo Morales claims that the satellite will make Internet, cell phone service, distance education programmes and over 100 television channels available to everyone in this vast, sparsely populated country.
In El Palomar’s yet-to-be-opened telecom centre, Calle and a small group of onlookers watched as a reporter booted up a computer to test the signal.
“Go to the United States. Show us the White House. Search for Toyota. Search for Real Madrid,” they suggested.
Bolivia is the poorest country in South America, and also among the least connected. Only 7.4 percent of inhabitants have access to the Internet at home, by far the fewest on the continent. Because Bolivia is landlocked, undersea fibre optic cables do not reach the country, so Bolivians settle for some of the lowest speeds and most expensive connections in the world. Hopes for the satellite are high.
“It’s a dream, isn’t it?” said Calle, 40, El Palomar’s secretary of education. “I’m happy that my children are going to be able to communicate with the United States, other countries – or here in Bolivia, with La Paz, Cochabamba,” she said.
With a population of just 10 million and a modest national budget, Bolivia is a strange fit among the 45 nations with their own communications satellite, which are typically either wealthy, heavily populated, or both. However, an increasing number of developing nations are making the investment. In the next two years, Angola, Nicaragua, the Democratic Republic of the Congo, Turkmenistan and Sri Lanka will launch their own satellites.
Rural areas bring special challenges for Internet expansion. The cost of installing and maintaining equipment and training people to use new technology is higher farther from cities, said Francisco Proenza, an ICT scholar and visiting professor of Political Science at Pompeu Fabra University in Barcelona.
While the use of mobile phones has increased dramatically, the Internet has lagged behind. In rural Peru, for example, 62 percent of rural households own a mobile phone, while just 7 percent of those living in rural areas make use of the Internet
After a 2009 revision, Bolivia’s constitution guaranteed access to basic services including water, electricity, and telecommunications. In addition to the satellite, the Bolivian government has opened over 300 rural telecentres and offered incentives to telecommunications companies willing to build infrastructure in rural zones.
According to Ivan Zambrana, director of the Bolivian Space Agency, a national satellite is the most cost-effective way of providing access across Bolivia’s diverse rural terrain, which includes mountains, tropical rainforest and desert. It is also a means of protecting Bolivia’s communication infrastructure from political factors that could restrict access, like the United States’ embargo against ally Cuba.
Bolivia’s Ministry of Communications has marketed the satellite aggressively. The agency created a television advertisement, a Facebook and Twitter campaign, and an Android app to promote the project. In the months surrounding the satellite’s launch, billboards reading “Tupac Katari, Your Star” and “Communications Decolonized” were placed in major urban areas throughout the country.
“When we think of Bolivia, we don’t think of technology, we think of rural poverty, but Bolivia has changed,” said Robert Albro, an anthropologist at the American University in Washington who focuses on Bolivia.
Despite the fanfare, skeptics of the satellite argue that Bolivia’s priorities are misplaced, especially with alternatives available.
Many other countries, including neighbouring Peru, have extended access to rural areas by subsidising the use of existing satellites. Google and Facebook are each considering a fleet of low-flying drones that would provide worldwide Internet connectivity. Until now, Bolivia has spent 10 million dollars annually to lease satellite capacity from foreign providers.
To finance Tupac Katari, Bolivia took out a 300 million dollar loan from the Chinese Development Bank, which the government claims will be repaid by satellite revenues within 15 years.
“It puzzles me that countries like Bolivia are launching their own satellites,” said Heather Hudson, professor of public policy at the University of Alaska. According to Hudson, existing satellite coverage could meet rural Bolivia’s needs. “It’s like 20 or 25 years ago, when there was a wave among other countries, you had to have your own airline,” she said.
Meanwhile there are concerns about misplaced priorities. “Our priority is improving the conditions of nutrition, water and the environment,” said Isidro Paz Nina, national coordination secretary of the Movimiento Sin Miedo, a party looking to unseat President Morales in November elections. “The satellite isn’t bad, but we want people to not have to worry about suffering for lack of food.”
Delays and miscommunication have also brought frustration. “The government said that with the Tupac Katari satellite antenna, cell phones, television, the channels and all that would improve. Up until now, it hasn’t been seen,” said Victor Canabini Quispe, a 51-year-old in El Palomar. “I hope the government doesn’t deceive us,” he added.
Meanwhile, the public opening of the telecentre in El Palomar has been postponed due to delays in training a community member to run the centre and disputes over who will pay for the inauguration ceremony.
If the satellite project succeeds, it could have a big impact on life in rural Bolivia. The satellite will be a “window to the world” for children in rural areas, according to Zambrana, the Bolivian Space Agency chief. He said that many Bolivian children living in high altitude climates have never seen a tree in their lives, and will see one for the first time through satellite-delivered images.
In five years, Bolivia “will be more modern, better connected, with more educated citizens. We’re going to be a little richer – or a little less poor,” he commented.
The message is one that is resonating in at least one remote part of Bolivia – San Juan de Rosario, a small community in Bolivia’s arid southwest, and a planned telecentre site.
Gregoria Oxa Cayo owns a hotel here for tours visiting Salar de Uyuni, the world’s largest salt flats, but by necessity she lives four hours away in the larger town of Uyuni. She grew up in San Juan and her parents still live here, but she needs Internet access to run her hotel and travel agency, and there is none in the isolated desert town.
“If there was Internet here, I would live here,” she said.
Forgive the poor photo quality. I took it with my phone on a moving Metro train. Caption reads: “Cable. It’s more than TV. It’s how we connect.”
A bit scary, no? The ad is more than a bit hyperbolic, but there’s a grain of truth here. It’s empirically true that less human interaction these days is face-to-face; more and more is digital. For a thoughtful stab at the trouble with this trend, see Sherry Turkle in the New York Times.
In Pixar’s WALL-E, future humans live a lifestyle so technologically advanced that they rely on machines for even the simplest of life’s tasks. That’s what I thought of when I read that a third of smartphone users are online before they are out of bed. Look at that picture; I know we still do our own walking, but the resemblance is eerie.
Tony Dokoupil’s recent Newsweek piece argues that constant connectivity—emails, social media, smartphones, texts—can provoke loneliness, depression, and even psychosis. The article is sprawling and often anecdotal in its evidence, but it has a wealth of thought-provoking nuggets about the way the internet impacts our brains and our mental health. Some food for thought:
Photo from mergy.org. I don’t know if they reproduced it with permission or not.