P2P-Banking.com

Zopa.it goes live: 16th January 2008*
Average gross return on money lent-out through Zopa.it: 7.66%
Average annual cost on loans (APR) borrowed through Zopa.it: 9.45%
Registered members of Zopa.it: 23,242
Total loan volume since launch: €2,787,090
Number of loans: 535
Loan volume currently under evaluation process: €336,690
Average loan amount: €5,210
Average loan duration: 31 months
Amount rate late:€6,622.24 (percentage amount late: 1.88%) = 6 loans (this fig. as of end of Aug.)
Demographic characteristics of the Zopa users:
Female:     15%
Male:         85%
18 – 24 years old:      5%
25 – 34 years old:     32%
35 – 44 years old:     35%
45 – 54 years old:     19%
55 – 64 years old:      7%
65+  years old:     2%
First 3 regions by number of registered members: Lombardia (18%), Lazio(13%), Campania(9%)
The most popular uses for the money borrowed from lenders through Zopa.it:
Home improvement /furniture: 28%
Debt consolidation / pay off loan from relatives: 26%
Car / motor bike: 12%
Unexpected expenses / Repairs: 9%
Family events (wedding, school fees, medical expenses…): 7%

All data as of Sep. 3rd, 2008 (Source: Zopa Italy management, Zopa blog)

*public launch; there was a 2 month period before, that was open by invitation only since Nov. 14th

Eight months* after the launch of Zopa Italy the p2p lending service says it is the fastest growing in Europe (2.79 million Euro = approx 4.075 million US$ cumulative loan volume as of Sept. 3rd).

And Zopa Italy is the first social lending service with an active secondary market, called Rientro Rapido (fast-track withdrawal).

Rientro Rapido offers the lenders - who have a sudden need of liquidity -  the possibility of recovering their funds instantly by transferring loans made to borrowers to other active lenders in the community.
It is the Zopa market who determines the possibility to transfer a loan to other lenders: in order to withdraw money, there has to be in the market at least one offer from a different lender with compatible  rating, interest rate and duration.
“We are very proud to be the first Social Lending world-wide to launch a service such as RientroRapido, but we have not done this for the sake of establishing a record – Maurizio Sella, CEO of Zopa Italy, declares - . Since we opened our market, several lenders have asked for a tool that would allow them to withdraw rapidly the cash lent-out through Zopa. And with this new service we fulfill their desire. This is the value of Zopa: we are a community that grows, evolves and improves especially thank to the pro-active participation of its members.”

Lenders who sell their loans through Zopa to other lenders pay 0.8% of the loan value plus 15 Euro commission to Zopa. Only loans that have never been late may be sold.

Since June borrowers can select optional payment protection insurance (Rata Protetta) against unemployment, illness or injury. Zopa states that 57% of borrowers bought the insurance (69% in September). The insurance covers the total amount of the loan.

(Source: Zopa Italy management)

*counted from the public launch on January 16th, 2008, there was a 2 month period before, that was open by invitation only.

Updated: Just after I wrote this, access to the Loanio website has been restricted again.

Finally! After more than a year of anticipation and announcements Loanio has entered the p2p lending stage. When I looked there were no loan listings yet, so let’s have a look on the concept in the meantime.

Borrowers

US residents with a VantageScore (Experian) of 569 or with a Co-Borrower with a higher score can borrow at Loanio, provided Loanio is licensed in their state. Currently this is not the case everywhere (e.g. when I looked today, it was not available to California or Florida borrowers). The maximum loan amount is dependant on the state limits (e.g. 25.000 US$ in New York).
Terms are 36, 48 or 60 months. Borrowers can repay the loan early without penalties.
Borrowers pay a origination fee of 1 to 4% of the loan amount (dependant on credit grade). Borrowers can opt for platinum verification which costs 35-45 US$. If chosen, Loanio verifies photo identification, proof of income, bank account, employment, salary, postal address and homeownership.

Second loans are possible if the first loan has been paid at least 6 months on time.

The initial interest rate is set by the borrower. If the listing ends with less then 100% but more then 35% funding, the borrower can elect to accept a loan for the funded amount (partial funding).

Lenders

All US residents can lend. Lenders are charged a 1.25% annual servicing fee. Lenders bid at the interest rate they want, lowering the interest of fully funded loans in an auction based style.

Co-Borrowers

Co-Borrowers have so far not been used often in peer to peer lending.  To make loans to users with lower credit grades more secure for lenders Loanio introduced this feature, which might be used by close relatives or friends of the borrower.

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The study “What’s in a Picture? Evidence of Discrimination from Prosper.com” by the economic professors Devin Pope and Justin Sydnor finds:

We analyze discrimination in a new type of credit market known as peer-to-peer lending. Specifically, we examine how lenders in this online market respond to signals of characteristics such as race, age, and gender that are conveyed via pictures and text. We find evidence of significant racial disparities; loan listings with blacks in the attached picture are 25 to 35 percent less likely to receive funding than those of whites with similar credit profiles.  conditional on receiving a loan, the interest rate paid by blacks is 60 to 80 basis points higher than that paid by comparable whites. Though less significant than the effects for race, we find
that the market also discriminates somewhat against the elderly and the overweight, but in favor of women and those that signal military involvement.
Despite the higher average interest rates charged to blacks, lenders making such loans earn a lower net return compared to loans made to whites with similar credit profiles because blacks have higher relative default rates. This pattern of net returns is inconsistent with theories of accurate statistical discrimination (equal net returns) or costly taste-based preferences against
loaning money to black borrowers (higher net returns for blacks). It is instead consistent with partial tastebased preferences by lenders in favor of blacks over whites or with systematic underestimation by lenders of relative default rates between blacks and whites.

Their conclusion:

Yet the data tell a very different story that suggests that this peer-to-peer lending market actually treats the races more equally than would be expected in a market with accurate statistical discrimination.

I would interpret this conclusion as a negation of p2p lending leading to racial discrimination. However Ron Shevlin at MarketingROI comes to different conclusions.

Indian non-profit RangDe.org attempts to bridge the gap between the developed and the developing India. To fight poverty it wants to make microcredit available to everyone at affordable rates. Individual lenders (investors) can lend as little as 1,000 Indian Rupees (approx. 21 US$).

Lenders can select a borrower by browsing profiles. RangDe’s field partners receive and disburse the loan to the borrower, which pays a fixed interest rate of 8.5%, of which the field partner receives 5% and the lender receives 3.5%. Lenders need an Indian bank account to participate.

According to their blog, RangDe evolved over the past 7 months and launched the current version of the website in August.

RangDe aims to finance itself by generating advertising revenues.

RangDe was financed by a 6,000 US$ investment of the founders along with a 33,000 US$ loan by a group of engineers. Additionally India’s ICICI Group’s Foundation for Inclusive Growth has agreed to pay for RangDe’s operations for a year. (Source: Microcapital.org)

Meanwhile Indian p2p lending startup dhanax, which was covered earlier (see: dhanax brings p2p lending to india). received funding from Morpheus Ventures. (Source: WatBlog)

Zopa reached 25 million pounds in loans. Zopa states cash depositers received an average 8.3% return after charges at a default rate of 0.04 percent. (Sources: Zopa, Financial Times)

About a year ago I started lending money to African entrepreneurs via MyC4.com.  So far it did meet my expectations. The process of uploading money worked without problems, there were always enough loan applications to select from and the offered interest rates were high enough to allow for good returns despite the risks. The only point, where the usability need to be vastly improved is a better status overview for the payment status of all loans in the portfolio. MyC4 does show the payment status in detail for each loan, but its hard to get an aggregate overview.

I invested at 13.8% average nominal interest rate. 194 loans are currently running, 29 are repaid in full, 12 are open/pending (not yet disbursed), 1 defaulted and 4 were cancelled.

To roughly calculate estimate my ROI I looked at my account display at MyC4

About 12-13 months ago I uploaded 1,506.94 Euro. Now my account value is 1,625.24 Euro (9,09 Euro available + 124,62 Euro pending bids + 1.491,93 Euro Outstanding principal). That results in an ROI of 7.9% so far. Naturally it would drop, if the outstanding principal is not repaid in full due to defaults.

The ROI is much lower then the average interest rate, since it does take weeks before an investment in a loan becomes active - and unlend money does not yield interest. A further point is that several late loans affect the ROI.

Read all MyC4 posts from the past months.

UPDATED: Kiva states in an email that this action returned 10 million US$ from partially repaid loans to lender accounts - available now for re-lending.

In the past Kiva used to credit repayments to the lender accounts only after a loan was repaid in full.

That changed last week when I received the following email from Kiva:

We are happy to announce that Kiva will now return repayments to lenders
as soon as those repayments are received by Kiva. Because of this
change, you’ll be able to re-lend funds right away instead of waiting
until the end of the loan term. We hope you enjoy this new feature!

As a result of this change, $231.44 in Kiva Credit has been released to
you and is now available for you to use. You can re-lend these funds,
donate or withdraw them.

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