P2P Lending Service Ppdai growing in China

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The Chinese p2p lending service Ppdai.com announced that over 2.5 million RMB (approx. 365,000 US$) in loans were facilitated since it’s launch.

“We witnessed strong growth in 2008 and incredible growth in the first quarter of 2009. In less than one year we have achieved over 2 million RMB in loans with roughly half a million RMB in March 2009 alone. … . What we realized was that we were able to provide a solution that has gained popularity as the global credit crisis worsened and left many borrowers with little alternative for funding.” Said Jack Gu, PPDai’s CEO and Founder.

Being that China does not have a robust credit rating system for consumers, the company developed its own proprietary credit system to filter potentially good borrowers from bad borrowers. This system creates a unique profile for each borrower and leverages other Chinese platforms such as TaoBao to accurately project whether a borrower has the financial ability to pay back a loan. PPDai’s credit rating system has helped achieve loan default rates of less than 2% for 2008.

“PPDai’s core value is to create a well customized credit scoring system for Chinese borrowers,” said Tony Li, PPDai’s Director, “We believe that this is the main reason why investors have been willing to lend money to borrowers on the PPDai network.”

PPDai closed an initial round of financing from Essentia Equity in March 2008 and is about to raise an additional round in the third quarter of 2009.

“We were attracted to PPDai because it offers a unique opportunity to benefit from the extraordinary growth being witnessed in China,” said Roy Sebag, Managing Partner at Essentia Equity, “There are currently 298 million internet users in China and an offline non-banking lending market that is said to be in the range of over 1 Trillion RMB per annum.”

(Source: press release)

List of P2P Lending Forums

wiseclerk 2 Comments

Peer to peer lending is innovative and new. New users usually have lots of questions when grasping the marketplace mechanisms. Beyond the FAQ of the p2p lending service, a great place to learn is usually a forum, where users (mostly lenders) exchange experiences and post and answer questions.

There are “official” forums provided by the lending services and independent ones. One of the first ones, the official Prosper forum, became one of the most notorious ones. After Prosper “moderated” negative and critical posts it later deleted the initial forum in total. When a copied version of the forum’s archive was made available on seperate internet site Prosper tried to  shut the site down, but failed.

But this is an extreme example. I found that on nearly all other forums a very helpful and supportive attitude rules.

List of p2p lending forums

General

Focus on one p2p lending service

If I have missed any great p2p lending forum, please comment with the URL and I will add it to the above list. Thank you.

(Photo credit: wili_hybrid)

Dutch P2P Lending Site Boober Fails

wiseclerk 1 Comment

In the Netherlands p2p lending service Boober apparently has ceased operations. The website Boober.nl has been inaccessible for days and no one was available for comment as the phone went unanswered.

There are reports by lenders, who complain that loans are not serviced as usual. Even one borrower is seeking help, because he cannot get the monthly payment through to Boober.

As of the moment it was not possible to determine how outstanding loans will be dealt with.

Lend4Health

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Inspired by Kiva.org, Tori Tuncan set up a non-profit peer to peer lending for alternative treatments of autistic childs. Functioning on a blog and by using Paypal for payments, Lend4Health facilitated more then 30 loans so far. Loan requests are described online, lenders can contributed via ChipIn widgets (Paypal based) and Tori Tuncan posts updates on the progress and how the loan was used.

Companies can help Lend4Health by sponsoring the Paypal fees.

From the site:

What Is “Lend 4 Health”
Lend4Health facilitates community-based, interest-free “micro-loans” as a creative funding option for individuals seeking optimal health.

Currently, Lend4Health is facilitating loans for the biomedical treatment of children and adults with autism spectrum disorders. Other health issues may be included on Lend4Health in the future.

2nd birthday of Smava

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German p2p lending service Smava.de launched two year ago. Since the launch of Smava 1350 loans were funded for a total loan volume of about 7.9 million Euro (approx. 10.7 million US$).

Lender’s viewpoint

So far lenders on Smava did well. There are approx. 2500 lenders active on Smava. Despite the credit crisis, 99% of the lenders earned a profit in 2008 (total 210,861 Euro), while the 1% who did incur a loss, lost only 60 Euro.

So far ROI in the range from 5-10% have been realistic. As of today 75 loans have defaulted, which is (in percent) more then was originally predicted. The Anleger-Pool mechanism spreads the losses of a default across all loans of a credit grade, which prevents total losses of investments. Therefore when 3 in 100 loans in credit grade X default, the lenders invested in the defaulted loans still receive 97% of the principal, while for lenders in the current loans returns are lowered by 3%.

Technically and on the process level Smava functions as promised.

Borrower’s viewpoint

Provided the borrower has a credit grade of at least ‘H’ (95% of the German population have credit grades between ‘A’ and ‘H’ so about 5% are excluded) and he has a sufficient income, chances for obtaining a loan through Smava are good. About 60 percent of the listings were funded. In February 2009 Smava raised the fees for borrowers from 1% to 2-2.5%.

Marketplace development

Smava shows continuous growth, with the volume of new loans per month approaching 1 million Euro (see chart)


(Source: smava loan stats, Wiseclerk.com, 03-26-09)

Despite extensive and positive press coverage Smava is still a niche market with less than 5000 active users. Looking at the distribution of lenders by amount invested, the top 50 Smava lenders funded about 1,690,000 Euro (or about 21% of total loan volume). Currently lenders are limited to a maximum of 100,000 Euro investment.


(Development of Smava average nominal interest rates for new loans; Source: smava loan statistic, Wiseclerk.com, 03-21-08)

I would estimate that the increased fees allow Smava to cover the variable costs. But to cover fixed operating expenses Smava needs to multiple its volume. First priority of Smava must be to accelerate growth.

Lending Club Introduces Self-Directed IRA to Enable Investments in P2P Lending

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P2P lending service Lending Club, today announced the availability of the first Self-Directed Individual Retirement Account to enable investments in peer lending. EntrustCAMA, part of the Entrust Group,  serves as the administrator for these accounts.

This new Self-Directed IRA investment choice gives individuals the ability to build a portfolio of Lending Club notes and hold that portfolio in a tax-free or tax-deferred account. To meet the Federal deadline for this tax season, applications must be completed online, printed and postmarked before April 15, 2009. The account application is available at https://www.lendingclub.com/sdIRA/registerIRA.action

Key benefits stated:

  1. Potential for high returns. Choose from a diversified group of hundreds of qualified borrowers.
  2. Tax advantages. Investments in a Self-Directed IRA can grow tax deferred until retirement age.
  3. Flexibility.
    Select the type of IRA which is right for you:
    Individuals: Traditional or Roth
    Small businesses: SIMPLE or SEP
    Fund the IRA directly with a check or an existing account (IRA or 401K) to transfer or rollover.
  4. A Diversified Retirement Portfolio. This Self-Directed IRA gives your portfolio access to Lending Club Notes, going beyond traditional stocks, bonds and mutual funds.

Fees:

  • No account opening fees
  • One flat 250 US$ annual account maintenance fee starting in 2010 when you open an account before April 15, 2009
  • No other fees
  • Low minimum starting contribution of 5,000 US$

Sources: press release, Lending Club website