IsePankur, the Estonian P2P banking site, this recently added three innovations to their platform:

1. Loan auctions that end immediately when the loan request is 100 percent funded
2. Business accounts enabling Business-to-Business, Consumer-to-Business and Business-to-Consumer lending and borrowing
3. An arbitrage court that will be in charge of solving disagreements coming from the loans, incl. defaulting loans

isePankur decided to add a new auction type based on requests from the borrowers that allows the borrower to choose if the auctions ends after a set time period or when its fulfilled 100 per cent. The borrowers currently have an alternative to borrow from banks, pay-day loan companies or isePankur. The two former institutions provide the loan to the customer with-in 1 to 3 days from the application. Hence some of customers asked to implement a system by which they would be able to choose between a quick financing or a low interest rate in order for them to be more willing to use the peer-to-peer platform.

isePankur also launched an important new feature allowing legal entities to register, lend and borrow on the site. The maximum loan amounts (only for companies) have been increased to 150,000 EEK (approx. 13,175 US$), approx 15 times higher than the loan limit for individuals. There were three major reasons for the addition: (a) small companies lack financing opportunities as the banks have stopped providing credit whilst there are no official debt markets in Estonia; (b) companies with excess funds do not have simple investment opportunities that would provide them with returns of over 3-4 per cent per annum; and (c) there is a 0 per cent corporate tax in Estonia hence most of individuals with excess capital keep it in their companies’ accounts. isePankur aims to increase the loan volumes on the site multi-fold after the public and companies have had enough time to get familiar with the benefits provided by the business services.

Finally isePankur has launched an unique Arbitrage court that gives the power to solve issues with problematic loans and issue court orders to the site’s users themselves. The court works in the following way:

(1)    The borrowers and lenders agree in their loan contracts to solve all of the disagreements arising from the loan agreement in the isePankur Arbitrage court;

(2)    When the loan defaults, a lawsuit is filed in the Arbitrage court;

(3)    Thereafter the Arbitrage court chairman and the isePankur system select the judges for the case from a pool of customers who have agreed to participate;

(4)    They give both sides a chance to explain the situation and thereafter make a decision;

(5)    The decision is binding, cannot be overruled by other courts (unless the process is deemed to have not been objective) and can be sent to the bailiffs for execution.

Although the Arbitrage court will not be able to reduce bad debts, it is predicted to expedite the processes regarding defaulted loans. So far the company has been using normal courts, which are effective, however slow.