8 July 2020
Your daily dose of nonsense to start the day
Cats vs cat flaps
Source: Pinterest
Source: Adam Marsh via YouTube
Source: LJ Tors via YouTube
A state-sanctioned app that shows debtors around you
If you are struggling to pay off your debt, it is very likely that you wish that nobody would find this out. Well, the Higher People's Court of northern China's Hebei Province launched an app that would show you all debtors on a map within 500 metres of you.
Here's a screenshot of it provided by the state-owned China Daily:
A lender who calls your mother-in-law if you don't pay up
Continuing the theme of using social pressure as motivation for you to pay off your loans, Okash, a Kenyan fintech, uses a mobile app to market and distribute loans. To use the app, however, you would have to agree to allow the app access to your contact list.
Most of us at this point would just probably click accept, as did many of Okash's actual customers. Well, given that, the app actually sends all your phone's contacts, and Okash will contact every single person via texts or even calls demanding that you pay up.
Here's a long but interesting write up about the whole thing. But here are some "best practices" should you ever be on the receiving of this:
To combat OKash’s debt collection practices, some people have started gaming the system. One OKash user told me that she wrote to her entire contact list to say that her phone had been stolen and that they should ignore any fraudsters who might text them. Then she deleted the app. Another posted an audio recording of himself yelling at OKash debt collectors. Others have simply refused to pay back their debts, even after their friends and relatives have been contacted.
Are SBA PPP loans distributed evenly?
(This write up is also available on Medium)
In the US, Uncle Sam distributes emergency loans to companies that need cash via the Small Business Administration’s Paycheck Protection Program. As the name implies, it’s meant to help keep Americans on the payroll in this pandemic. To incentivise this aim further, the loan is forgiven if the money is actually spent on paying employees.
But America has so many enterprises (see my previous write up). And there is about $659 billion worth of money to distribute. The US government does not necessarily have all the infrastructure or processes in place to distribute this much in such a short time span.
Well, guess who already has some infrastructure to process applications and have the pipelines built to shovel money? The banks! That’s who!
On Monday (6 July 2020), the numbers of the PPP loans above $150,000 were released. So let’s have a look at how the banks have distributed this lifeline. Figure 1 below is a pie chart showing the breakdown of loans distributed by loan size.
Figure 1: Distribution of SBA PPP loans by loan size. Numbers for loans smaller than $150,000 are not available. (US Department of the Treasury)
We can see that a good majority (57%) of loans are in the $150k to $350k range. Only 0.7% are loans in the largest category - the loans of $5mil to $10mil. Figure 2 shows the actual absolute number of loans by size.
Figure 2: Absolute numbers of loans disbursed by loan size. (US Department of the Treasury)
In my previous write up on US firm sizes, firms of 20 employees or fewer represent 89.04% of all firms in the US. Assuming that the loan size is a function of number of employees (it is not, but let’s assume this for this example), we should be seeing a good 90% of loans would be smaller loans that would go to the smaller firms. Well, given that the numbers for loans below 150k are not released, there is no way to tell.
But we can, however, judge how well each individual bank distributes loans. Those numbers are available. Assuming the same assumption of loan size vs firm size holds, let’s see how the bank that issued the most number of loans (JPMorgan Chase) and the median bank (Pacific Western Bank) distributes loans. Also, let’s compare these numbers to the total population. Would we see a bias? Would larger banks who bank larger clients give out a larger number of large loans? Let’s take a look at Figure 3 which shows this distribution.
Figure 3: loan distributions by the bank with the most loans issued, the median bank, and the total population. (US Department of the Treasury)
We can see that the bank with the most number of loans issued is actually pretty close to the total population. This bank has only distributed about 5% of the total number of loans, so it’s not like its numbers are influencing the population numbers that much. The median bank that we have picked out seems to be the one who is more skewed towards larger loans.
Table 1 shows the top 10 banks by number of loans issued.
Table 1: top 10 banks by number of loans issued. (US Department of the Treasury)
So how effective is this loan in its stated goal of protecting people’s pay cheques? And does the assumption that we have used so far (that the more employees you have, the more money you’ll get) actually hold water? Of course not! Don’t be naive. Take a look at these two loans:
THESTREET, INC - loan of $5-10 mil; number of jobs retained: 15.
OYO HOTELS, INC - loan of $5-10 mil; number of jobs retained: 500.
And here is a list of loans that I find noteworthy (both positive or otherwise):
Table 2: Loans I find noteworthy (positive or otherwise) (US Department of Treasury)
Sunak drinks from a £180 cup
The Chancellor has released a photo of himself working on the deal that would lift the UK out of economic trouble. That same photo has him drinking from a £180 cup that warms itself. Here's the mug used: the Ember Travel Mug².
(HM Treasury)