Services (microfinance)

P2P lending trends to expect in 2009

wiseclerk

As last year I’ll again attempt some predictions on what trends and developments can be expected in peer-to-peer lending 2009.

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers. In other markets, where there is no national p2p lending service active yet (e.g. Canada, New Zealand), p2p lending will be introduced by the launch of a service. Possible candidates include Communitylend and Nexx.
It is hard to predict when the dormant US players (e.g. Prosper, Loanio) will overcome the regulatory hurdles and if that step is lasting.
The British market which has (compared to other markets) rather low regulatory barriers so far is dominated by a single player -  Zopa. I wonder if we’ll see the launch of a competitor there.

Boom of social lending services/p2p microfinance (probability 100%)
2008 saw the launch of Babyloan, Veecus and Wokai. Kiva funded more the 1 million US$ new loans in a single week in the end of December. The steep growth of Kiva, MyC4 and other services will continue and new p2p microfinance platforms will launch.

First Banks experiment with own p2p lending applications (probability 50%)
While p2p lending volumes are far from being a business threat to banks – banks do watch the developments. Possibly in 2009 a bank will launch its own p2p lending application. The principal aim will not be to generate revenue, but rather to collect experience and to gauge acceptance by the bank’s customers. It will be interesting to see banks testing the water on their path to implement a p2p lending concept that supplements their core business.

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Review of peer to peer lending developments in 2008

wiseclerk 3 Comments

As the end of 2008 approaches here is a look back on the highlights of peer to peer lending news in 2008:

Babyloan microfinance

wiseclerk 2 Comments

Launched in summer French Babyloan.org has about 1750 lenders financing peer to peer micro-loans to entrepreneurs in developing countries. I signed up yesterday when I found the service (thanks to Jean Christophe Capelli for the pointer) and helped to fund 5 loans to borrowers in Benin, Cambodia and Tajikistan. One of them is Kheav Sitha who runs a small restaurant stand at her house in Phnom Penh, Cambodia. She wants to borrow 140 Euro for 6 months.

Signing up went smoothly. I liked the user interface for selecting the loans. It features summaries of the loan detail that are shown with AJAX on the right side of the screen while moving the mouse over photos of the borrowers seeking loans on the left side. The website is in French and English, but on some points the English translation seemed to be missing. Funds are transferred in via credit card payment – I have not yet found out how they can be transferred out after the loan term ends if they are not re-lend.

Like other platforms Babyloan partners with local microfinance institutions (MFIs). The MFIs screen the borrowers and handle the payout to the borrowers – in the case of Babyloan the payout has actually taken place BEFORE the loan is placed on the platform – and the MFI takes the sum to refinance the loan.
Unlike at MyC4 lenders do not receive interest. While Kiva asks for voluntary donations to fund its operations, at Babyloan a fee of 1 Euro per 100 Euro funded is compulsory . (Minimum a lender can lend is 20 Euro).

Babyloan is backed by Acted (a NGO), Bred (a regional bank in France) and Credit Cooperatif.

The following presentation explains what Babyloan does for MFIs:

Babyloan MFI Presentation (EN)

Are Kiva and MyC4 p2p lending services?

wiseclerk 3 Comments

In this post Netbanker questions, if MyC4 and Kiva are offering p2p lending. He argues they are “not really peer-to-peer”.

Let’s have a look, if these microfinance models can fit under the definition of peer to peer lending. One aspect of p2p lending is, that the lender can select individual borrowers, which he wants to lend money to. Kiva and MyC4 offer this choice. A p2p lending platform usually allows search parameters to narrow the search for matching borrowers (e.g. by credit grade). Both have this function allowing to search by country, gender, industry and more.

A possible argument against classifying MyC4 and Kiva as p2p lending companies is the fact that they use local microfinance institutions as intermediaries acting between lender and borrower and charging fees. That is true, but several other p2p lending services (e.g. Prosper, Lending Club and Smava) use banks as intermediaries (for legal reasons).

So where exactly is the divide seperating MyC4 and Kiva from other p2p lending services. They differ especially on the factor that:

  1. Borrowers can not sign up themselves (so one side is really offline); borrowers are selected and screened by the MFIs
  2. Business model
  3. Lenders receive no interest at Kiva
  4. Lenders and borrowers do not reside in the same country.

I still think that MyC4 and Kiva can be defined as p2p lending services. With Microplace the case is different, because no individual borrowers can be identified; therefore Microplace could be excluded form p2p lending (Microplace states that it is not a p2p lending site).

(Photo credit: Stig Nygaard)