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Ama Kiana
Noneuclidean Logistical Investigation
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Posted - 2009.03.12 18:21:00 -
[1]
Recently I started looking into the various banks and their loan terms. It didn't particularly surprise me that everyone in the loan business wants collateral; in a world with no civil law system (and a damn limited criminal law system) this makes perfect sense. I'm left with a question I can't answer, however: why does anyone use these loan services?
Most items in EVE can be sold fairly quickly for a minimal loss, and nearly everything is fungible. What benefit is there to taking out a collateralized loan when you can just sell the item and re-purchase it later for a lower effective interest rate? Yes, some banks offer to put a BPO into production for you, but that solution runs into obvious scaling problems pretty quickly. With the current collateral requirements, "banks" more closely resemble pawn shops than their real-world namesakes.
The problem is that this creates a clear disincentive for small-to-medium sized borrowers. The overhead of dealing with arrangements to maintain the utility of items being held as collateral is fairly constant regardless of the size of the loan, and for large loans the banks obviously need some kind of security. But where does that leave the hundreds of smaller corporations/businesspeople out there looking for a loan? The ones who're running a profitable business but simply don't have the time available to expand their operations without a cash injection? Current "loans" simply don't provide what most businesses need to expand. It's like a [url=http://www.youtube.com/watch?v=VUhHl2TG4vs]CapitalOne commercial[/url].
EVE at least attempts to have player-driven justice systems, it seems like this is exactly the kind of problem those systems should be applicable to. Are the current mechanisms simply insufficient to make some kind of loan collection work? What would need to be added? What other kinds of options are there that could potentially lower the trust barrier?
It's not like we need a micro-loan system or something, but EBANK's stats page currently lists that their average loan is for over 14B isk. That's a huge amount for most of people. EVE's secondary markets are extremely nifty (this is just a video game after all), but their current utility to the average player seems fairly low. Can that be changed?
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Arous Drephius
Perkone
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Posted - 2009.03.12 18:24:00 -
[2]
 Originally by: Ama Kiana
Are the current mechanisms simply insufficient to make some kind of loan collection work?
Pretty much. There's almost nothing you can do against an industry/trade character that never undocks.
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Kazzac Elentria
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Posted - 2009.03.12 18:34:00 -
[3]
I wonder if a system like Kiva (http://www.kiva.org/) would do well in EVE |
Ama Kiana
Noneuclidean Logistical Investigation
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Posted - 2009.03.12 18:59:00 -
[4]
Originally by: Kazzac Elentria
I wonder if a system like Kiva (http://www.kiva.org/) would do well in EVE
Prosper would be more applicable I think, since there's really no necessity for micro-loans in EVE. Micro-loans strike me as being more akin to a charity than a business.
Of course, any C2C lending operation runs into the same problems that a traditional Savings & Loan operation would have regarding securitization.
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Valandril
Caldari
Ex-Mortis
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Posted - 2009.03.12 19:07:00 -
[5]
This actualy got me wondering for quite some time, why the hell would you need a loan if you got assets ?
Please reaize sig to a maximum of 400 x 120 - Mitnal
Please stop messing my sig - Val |
720
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Posted - 2009.03.12 20:45:00 -
[6]
I agree with most of your points. And I think the solution you are looking for is actually the secondary market which is located in this forum.
The collateral tends to be a audit and some sort of credible plan. If it is your first time and you are looking for a small loan there are players willing to invest trifling sums (to them) in small business enterprises. In fact, they seeming more willing to help small (less than 5b ISK), unknown investors than unknown investors looking for large sums (12B+).
But you are correct, it would be nice if there was some sort of ingame mechanic that allows you to do a sort tax on their future income if the scam. Ultimately, capitalism is built on trust, and here there is very little of that to go around, but enough to function.
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Kwint Sommer
Caldari
XERCORE
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Posted - 2009.03.12 20:52:00 -
[7]
Originally by: Valandril
This actualy got me wondering for quite some time, why the hell would you need a loan if you got assets ?
If you have illiquid assets and there's a short term opportunity in front of you then using those assets to collateralize a loan is your best bet.
Back in the days before I could just ask and receive tens of billions of unsecured ISK, I had an opportunity present itself but I short on cash so I handed a JF over to EBANK in order to secure a loan. The interest was less than what I would have lost had I tried to sell the JF on such short notice.
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Khrillian
Minmatar
Sebiestor tribe
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Posted - 2009.03.12 21:14:00 -
[8]
Originally by: Kwint Sommer
Originally by: Valandril
This actualy got me wondering for quite some time, why the hell would you need a loan if you got assets ?
If you have illiquid assets and there's a short term opportunity in front of you then using those assets to collateralize a loan is your best bet.
Back in the days before I could just ask and receive tens of billions of unsecured ISK, I had an opportunity present itself but I short on cash so I handed a JF over to EBANK in order to secure a loan. The interest was less than what I would have lost had I tried to sell the JF on such short notice.
The JF market was younger then; now you can sell an Anshar immediately for its sell order value minus 2.5%, much easier than getting a 4bil ISK loan.
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Valandril
Caldari
Ex-Mortis
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Posted - 2009.03.12 22:06:00 -
[9]
Also JF is not your only assets, you got those megas/ravens/ishtars whatever and your loss will be margnial and definitly lower than a loan
Please reaize sig to a maximum of 400 x 120 - Mitnal
Please stop messing my sig - Val |
Xeoniya
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Posted - 2009.03.12 22:22:00 -
[10]
A contactable lien system would work nicely if implemented by EVE, essentially you pay by a certain date or the item linked to the lien is transferred by game mechanics from the current item owner to the lien holder. If the item is sold, any income from the sale passes to the lien holder. The lien contract would be set up just like any other contract expect it would be a category of contract like courier, item trade, or auction.
Using an item for the lien object would allow ship and pos sales on credit, while allowing isk to be used would allow safer loans.
Could additionally have 2 parts - the initial isk or item given by the person setting up the lien, and a completion time part which killed the lien when the item or required isk was given to the lien owner through the contract.
Question would be whether to have the added security of moving a wallet into negative, or the risk that there is no isk in their wallet.
For objects could only have 1 lien on the same exact item, and for isk the oldest lien gets payed off first.
Eventually could even make the liens themselves salable.
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Kwint Sommer
Caldari
XERCORE
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Posted - 2009.03.13 00:42:00 -
[11]
Originally by: Valandril
Also JF is not your only assets, you got those megas/ravens/ishtars whatever and your loss will be margnial and definitly lower than a loan
It was an example. I'm not proclaiming that situation to be universally representative or anything to that affect, I was just illustrating my point with a nice little situational example.
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Ricdic
Caldari
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Posted - 2009.03.13 02:09:00 -
[12]
A lot of people have idle assets all over eve they can't be bothered selling or keep in case they use them again. Our most common collateral receipts are things like faction items and T1 ships. For example I actually got a loan myself last month for some funds for 0.0 pvp. I used my faction fit golem in empire as collateral. Obviously whilst I am out in 0.0 that Golem is sitting idle and I didn't want to sell it as I wanted something to get back to some time in the future when I returned to empire.
Not that it matters too much anyway, I am stuck deep in a wormhole and my prober can't find a wormhole to get me out of the system. I have made great friends with the sleeper locals but have very little ammunition left so could be kinda screwed if I don't get a lucky hit soon 
The raven is cheap but I have never been a fan of self destructing ships. |
LadyOfWrath
Caldari
One Stop Mining Shop
One Stop Research
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Posted - 2009.03.13 03:19:00 -
[13]
Many times BPO collateral works two ways in the form of both insurance against said loan and allowing continued operations by said owner.
T2 BPOs are the most common item used in this particular instance however capital BPOs are on the same level. Say for instance player A decides he/she wishes to do a rather large expansion to double or even triple his/her current output. In this case player A takes a loan form EBANK at 90% of his assets value. His/her BPOs are then locked down by an EBANK alt insuring the value of the loan to EBANK and allowing said player to expand his/her business in the process.
This is one of many ways assets can be used to regulate a business. This is done in RL everyday for major businesses. Everything has a value people. Learning how to use that value I leave up to you.
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Ama Kiana
Noneuclidean Logistical Investigation
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Posted - 2009.03.13 03:39:00 -
[14]
Edited by: Ama Kiana on 13/03/2009 03:40:04
Originally by: LadyOfWrath
Many times BPO collateral works two ways in the form of both insurance against said loan and allowing continued operations by said owner.
T2 BPOs are the most common item used in this particular instance however capital BPOs are on the same level. Say for instance player A decides he/she wishes to do a rather large expansion to double or even triple his/her current output. In this case player A takes a loan form EBANK at 90% of his assets value. His/her BPOs are then locked down by an EBANK alt insuring the value of the loan to EBANK and allowing said player to expand his/her business in the process.
Imagine trying to do this for 100 different small loans. The problem is that you're limited by the overhead of these arrangements, which means that only the biggest borrowers are going to be able to command these kinds of accomodations. Putting alts into each corp requires lots of accounts, running management corps to control the assests requires lots of overhead dealing with roles/etc. Both have a fairly low practical limit in the amount of loans that can be managed this way.
For a limited number of large loans the bennifits to both lender and borrowers outweight the hassle. For smaller loans though... EBANKs stats seem to sum it up quite well actually. 14B isk average loan. There just aren't a lot of small loans going around.
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Forceflow
Center for Advanced Studies
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Posted - 2009.03.13 03:54:00 -
[15]
Originally by: Ama Kiana
Edited by: Ama Kiana on 13/03/2009 03:40:04
Imagine trying to do this for 100 different small loans. The problem is that you're limited by the overhead of these arrangements, which means that only the biggest borrowers are going to be able to command these kinds of accomodations. Putting alts into each corp requires lots of accounts, running management corps to control the assests requires lots of overhead dealing with roles/etc. Both have a fairly low practical limit in the amount of loans that can be managed this way.
For a limited number of large loans the bennifits to both lender and borrowers outweight the hassle. For smaller loans though... EBANKs stats seem to sum it up quite well actually. 14B isk average loan. There just aren't a lot of small loans going around.
Perhaps in this case the problem is the choice of assets.
larger loans can be secured by expensive BPOs but smaller loans are usually secured by other 'hard' assets. Spare ships and such. In this case, they would just be contracted over to an Ebank Rep.
Not every loan uses BPOs for collateral. And if the loan is small enough, it makes more sense to just grind abit more for that spare isk instead of taking out a loan.
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Kwint Sommer
Caldari
XERCORE
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Posted - 2009.03.13 04:05:00 -
[16]
Originally by: Ricdic
Not that it matters too much anyway, I am stuck deep in a wormhole and my prober can't find a wormhole to get me out of the system. I have made great friends with the sleeper locals but have very little ammunition left so could be kinda screwed if I don't get a lucky hit soon
I know how you feel, Admiral Kwint spent last night in one and it looks like he'll be spending tonight there to. The only wormhole I can find leads to more w space.
If it comes down to it, I'll rename my ship with the time and date then eject before I pod myself back to k space. Just think of how eerie it would be for someone to stumble onto it a month from now.
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Ricdic
Caldari
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Posted - 2009.03.13 08:11:00 -
[17]
I ended up ejecting my fully fitted and rigged Raven after renaming it to "Free to good home" .
Could be good money in a profession bouncing around W-Space looking for abandoned vessels |
Forceflow
Center for Advanced Studies
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Posted - 2009.03.13 08:12:00 -
[18]
Originally by: Ricdic
I ended up ejecting my fully fitted and rigged Raven after renaming it to "Free to good home" .
Could be good money in a profession bouncing around W-Space looking for abandoned vessels
You should have left a bookmark note for whoever comes across the vessel. 
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Thoraemond
Minmatar
Far Ranger
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Posted - 2009.03.13 20:16:00 -
[19]
Originally by: Ricdic
I ended up ejecting my fully fitted and rigged Raven after renaming it to "Free to good home". Could be good money in a profession bouncing around W-Space looking for abandoned vessels.
If you insured that Raven, and someone else finds it in W-space and boards the ship and gets it destroyed (before repackaging it, and before the insurance expires), would you still get the insurance payout?
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Emmum
Gay Love
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Posted - 2009.03.14 00:12:00 -
[20]
Originally by: Ama Kiana
Originally by: Kazzac Elentria
I wonder if a system like Kiva (http://www.kiva.org/) would do well in EVE
Prosper would be more applicable I think, since there's really no necessity for micro-loans in EVE. Micro-loans strike me as being more akin to a charity than a business.
Of course, any C2C lending operation runs into the same problems that a traditional Savings & Loan operation would have regarding securitization.
I actually ran(and still run if there's interest) a micro-loan initiative. There wasn't any interest at the time, maybe because I just didn't reach enough people?
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