A couple of peer-to-peer (p2p) lending articles came out in major publications over the weekend… Enjoy…
The ChicagoTribue: Peer-to-peer lending helpful, but know rules
Sometimes you have to take matters into your own hands.
At least that’s the mind-set of individuals who lend and borrow money from each other online, known as peer-to-peer lending. In this virtual community you may stand a better chance of obtaining a loan for your start-up business or earning an attractive return.
But though based on self-rule, peer-to-peer lending is not without its conditions. Consider the following before you forgo the bank entirely. [...]
The Washington Post: You Can Lend P2P, but Can You Collect?
In the wake of the subprime mortgage meltdown, traditional financial institutions have tightened up on who gets to borrow money. But some people are still finding ways to borrow what they need, thanks to another area of lending that is booming.
Person-to-person lending, or “social” lending, is growing at a phenomenal pace on the Internet as consumers look for an alternate way to pay off debt, according to new research by Javelin Strategy & Research. Javelin predicts that the demand for person-to-person lending services, or P2P, to pay off credit card debt may grow from $38 billion to $159 billion over the next five years. [...]
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MicroPlace, an Ebay company just launched. It is kinda like kiva.org, except that you invest in securities which pay interest (1%-3%) and the companies offering the notes handle the individual investments. So you are purchasing a pool of investments were the actual investments are made companies on the ground.
The sign up was painless and easy. Like Kiva they use paypal (duh ebay) to handle payment processing. I really like paypal as the payment processor as I can get cash back by using my credit card on my charitable lending. I also really like that I am making some return while helping the less fortunate in the world.
After, signup I made a $100 3% investment in “FUNDESER via Calvert Community Investment Note” which means that Calvert Community is raisng the funds for FUNDERSER, FUNDESER will make and process loans, returning the some proceeds to Calert Community, whihc will pay the principal and interest to me.
Here is more on FUNDERSER (country Nicaragua, est 1997):
Overview
We are a micro-finance institution that specializes in rural financial services, with a social focus. We are affiliated with the Nicaragua Association of Micro-Finance Institutions and through it with the Central American Micro-Finance Network.
FUNDESER was formed in an institutional process that has been going on for 10 years. It started as a small farming and fishing development project, linked to the Catholic Church and a Nicaraguan charitable organization, then became a financial services and technical assistance program, and finally to what it is now, an institution specialized in rural financial services with a social focus.
We operate through a wide network of branches throughout the country. We have agencies and offices at key points in rural areas to be close to rural customers, who are poorer and more isolated.
Mission
To permanently and effectively meet the demand for financial services by small and medium-size farmers and fishermen, proprietors of micro-enterprises and wage earners, in rural or urban environments, with fairness and equality of opportunity for men and women.
Message to investors
Investors and Friends!
Nicaragua, located in the middle of Central America, is considered to be the second poorest country in Latin America, right behind Haiti. Here poverty wears a woman’s face and is basically found in the rural areas of the country where FUNDESER has a presence.
As you know, the great merit of micro-finance has been the integration of two worlds that until recently seemed incompatible with each other: the world of poverty and the world of finance. The role of micro-finance is therefore to help democratize capital.
With your investment, FUNDESER can increase the scope of its micro-credit and thus help hundreds of families to rise above poverty the same way Auxiliadora Soza, Nora Guadalupe Hernández Pérez and Arcia del Socorro Blanco Guadamúz did.
Together we can make a change!
Here is more on Calvert Foundation:
Calvert Foundation professionally manages a portfolio of loans to over 200 leading microfinance institutions, nonprofit organizations and social enterprises working to alleviate poverty around the world. Calvert Foundation brings over a decade of experience monitoring these organizations in order to effectively manage the risk and return of your investment dollars.
By purchasing the Calvert Community Investment Note on MicroPlace, the full value of your principal is lent out to the lending organiation you select. Calvert Foundation exercises prudent portfolio management through diversification and a protective layer of loss reserves to minimize the risk of your investment in the Calvert Community Investment Notes.
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What opinions do you guys have on how the sub-prime mortgage meltdown will affect peer to peer lending? I’ll confess I’m still spooked at the moment and working to draw down my balance at Prosper. From things I’ve been reading, it would appear that the worst is still yet to come, what with a large chunk of ARM borrowers set to reset between now and mid 2008. What do you guys think? Will p2p lending suffer when a lot of these people default?
This was posted by Jimmy211 at the P2P No Bank Forum… here is a link: Sub-Prime Mortgage Meltdown
RateLadder responded with
I have read 2 schools of thought. 1 is that it will as you are saying. The other is that people do everything possible to cut a deal with their mortgage provider and protect their consumer credit.
As an unsecured loan we are last in line in bankruptcy and that is why loan rates are higher on unsecured loans.
Personally I have always been chasing the highest rates. But I have recently be focusing on the cleanest of the clean credit (flight to quality.)
What do you think? Come join the discussion at the P2P No Bank Forum!
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