P2P-Banking.com

One of the downsides of p2p lending service Prosper.com are high default rates. Results from collection attempts are low.

In an attempt to test alternatives to the existing collection process Prosper in January selected 66 cases of nonpaying borrowers and turned them over to the law firm Hunt & Henriques to pursue these cases in court.

Fred 93, one of the lenders on these loans researched the status of the court cases himself, dissatisfied that Prosper did not inform him on the status, which he says Prosper initially promised to do monthly.

According to Fred93’s findings, Prosper.com so far lost 6 cases and won 1 case.

The Industrialisation Fund for Developing Countries (IFU) and CSR Capital have decided to invest a total of DKK 15 million (approx. EUR 2.2 million) in Africa through MYC4. The Danish Development Minister Ulla Tørnæs supports the decision.

“This is an extremely important milestone for MYC4. That IFU and CSR Capital now invest through MYC4 is an endorsement of our initiative as a serious tool in the fight to eradicate poverty in Africa through the marketplace myc4.com,” says CEO of MYC4 Mads Kjær and continues:

“We hope this will inspire financial institutions, pension funds and companies to invest in Africa through MYC4. We are already well under way, but to make a significant difference for the development in Africa, this kind of investors play an important role.”

Political support
Danish Development Minister Ulla Tørnæs warmly welcomes IFU’s initiative to invest in Africa through MYC4.

“Danida has been the facilitator for MYC4. Through the Public Private Partnerships, Danida has supported the development of MYC4. I am glad to see the interest and support for the new marketplace. It shows the economic potential for investments in Africa,” says Tørnæs.

DKK 10 million from IFU, 5 from CSR Capital
IFU is an independent fund under the Danish Foreign Ministry. IFU’s purpose is to promote economic development in developing countries in partnership with the Danish industry, and now the fund invests DKK ten million in Africa through MYC4.

“With the investment IFU wants to contribute to poverty reduction and business development of small and medium enterprises in Africa,” says Investment Manager Kasper Svarrer from IFU.

In addition, the private investment firm CSR Capital invests DKK five million through MYC4. CSR Capital focuses specifically on social and environmentally sustainable investments:

“Good investments and development can and must go hand in hand in order to create the basis for sustainable economic, environmental and social growth and welfare in any society”, says CEO of CSR Capital Sven Riskær.

(Source: MyC4.com)

Loanland launched last December as the first p2p lending company in the swedish market (see ‘Loanland launches peer to peer lending in Sweden‘). Since then about 5.7 million SEK (approx. 0.75 million US$) loan volume has been funded .

Ville Vesterinen has published more information about Loanland in the ArcticStartup blog:

The company is currently providing unsecured loans to the Swedish market. The Swedish market for unsecured loans to households amount to around 160 billion SEK (around 16 billion EUR or 20 billion USD) at present and with unsecured loans to SMEs the figure is about 500 billion SEK (around 50 billion EUR or 63 billion USD). The market has grown 15% annually during the last few years.
…
Loanland is using an open source platform that it has developed, automating most of the processes. The technology is based on Java, J2EE, MySQL, Tomcat, Spring and Hibernate. The platform and auction engine allows individual and automatic bidding, electronic signatures, integrated credit scoring and efficient payments.

The company … has already over 10 000 members and 5 000 registered borrowers and lenders. They have 6 million SEK (600K EUR or 750K USD) deposited out of which 95 percent is lend out as loans. Quite significant number considering that the startup operates currently only in Sweden.

ABC interviewed Renauld Laplanche of Lending Club on ABC Money Matters. Laplanche says in the last 10 days over 1 million US$ in loans were funded and states that the default rate has been lower than 2% over the last 18 months. Watch the video.

P2P lending is spreading internationally. While the biggest loan volumes are generated in the US market, many p2p lending websites have been established in other international markets.

The services can be divided in three categories:

1. p2p lending marketplaces (e.g. Prosper, Zopa, Lending Club, Smava) - participants driven mainly by economic motives
2. social lending services enabling micro financing (e.g. Kiva, MyC4) - participants driven mainly by social motives
3. other concepts (e.g. Virginmoney which is special in the way that it does not do the matchmaking between borrowers and lenders, but supports the process between persons that already had offline relations- slogan “We manage loans between family and friends“)

Sites funding student loans can fall into any of these three categories or combine motivations.

P2P-Banking.com has created the following overview table listing services that are in operation and ranked them by loan volume. The loan volumes are not directly comparable for they are cumulative since launch of each service and represent different time spans.

Asked for a figure, a Microplace spokesman pointed out “…it is important to note that MicroPlace is not a P2P site.  We are a platform that offers investments to the retail public.“. No loan volume was quoted, but he stated “investments purchased on our site have enabled over 26,000 microfinance loans.”

In total approx. 685 million US$ have been funded through peer to peer lending/social lending services so far worldwide.

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Source: P2P-banking.com

If you are a representative of a p2p lending service and want your service to be included in the next update of this table, please send me an email with information about your company.

No, not talking about fruits or birds here. Nexx.co.nz develops a p2p lending service in New Zealand. Nexx now succeeded in raising 600,000 NZ$ (approx 330.000 US$). Quite an achievement in the surrounding conditions of the credit crunch.

Nexx, an on-line social lending business being developed by four young entrepreneurs at business growth centre The ICEHOUSE, has raised $600,000 in funding from a group of angel investors including the ICE Angels, Venture Accelerator from Nelson and Sparkbox.

Nexx co-founder Ben Milsom says the funding will pay for development and promotion of the business which is currently awaiting regulatory approval. Milsom and his partners Glenn Riddell, James Wallace and Mark Catley expect to be able to launch their operation in early 2009.

The Nexx team started in 2007 and won the University of Auckland Business School’s Spark Entrepreneurship Challenge in September 2007. The prize was 20,000 NZ$ in seed funding and a nine-month tenancy in the Icehouse business incubator.
Ben Milsom, writes about the pre-launch process of Nexx at the Startup-Blog.

Nexx is developed based on an open-source ERP and accounting package Adempiere.

(more…)

Californian non-profit United Prosperity developed a new twist to social lending - it is a peer to peer guarantee website. Instead of lending money directly and thus needing to transfer it internationally the “social guarantor” provides a cash collateral. This enables the small entrepreneur in the developing country to get a loan from a local bank, which he otherwise would be unable to obtain.

Bhalchander Vishwanath, founder and CEO of United Prosperity answered my questions on the new service.

P2P-Banking.com: What makes the guarantee model better then other lending models (e.g. Kiva or MyC4)?

Bhalchander Vishwanath:

1. Maximum impact: Due to United Prosperity’s innovative guarantee model which involves risk sharing with the bank, $1 in guarantee by the social guarantor could lead to $2 to $5 in loan to the borrower thus maximizing their dollar’s impact.
2. Local linkages: Our guarantee facilitates the creation of local linkages between domestic banks, MFIs and poor entrepreneurs. In the course of repaying the loan, both the entrepreneur and the MFIs develop credit histories that will enable them to access more funds at a later date with a lower guarantee percentage, or even without a guarantee. MFIs also get to form relationships with banks and offer other products like savings, insurance, money transfer etc. through the bank.
3. No foreign exchange risk: Since the loans from Bank to MFI and MFI to entrepreneur are in local currency, there is no foreign exchange risk involved. Most of the smaller MFIs do not have forex hedging capability and our model overcomes that.
4. Reduced interest: Our guarantee reduces the interest the bank will charge the MFI since the bank’s risk is lower. Some of the interest benefits get passed on to the borrower.
5. Scalability:  There is enough money available in the developing countries. Our guarantee frees up those funds. It  utilizes capital available effectively and in the long term it is a more scalable model.
6. Manages risk better: We get the additional benefit of monitoring of the loan by the bank which is not available with other person to person models.

P2P-Banking.com: How does “$1 in guarantee by the social guarantor could lead to $2 to $5 in loans” work? What determines the applicable ratio?

Bhalchander Vishwanath: The ratio is dependent on several factors. These include the MFI’s or borrower’s prior credit history with the bank or other banks, various banks internal guidelines, their focus on lending to Microfinance institutions and so on. For example for a given MFI we have seen two different banks asking for different guarantee  percentages.

P2P-Banking.com: Does the Guarantor earn any interest?

Bhalchander Vishwanath: Guarantors do not earn any interest on their guarantees for two reasons:

1. It is legally complex.
2. We see ourselves as a ’social business’. Nobel Laureate Mohammad Yunus states that a social business is ‘designed to be both self-sustaining and to maximize social returns’. We have only one objective: to combat global poverty. As a result, we do not provide any financial returns or interest to our social guarantors and hope to attract social guarantors who share our objective.

P2P-Banking.com: Does the Guarantor actually have to pay money into an account, or does this only occur if the borrower fails to pay back the loan?

Bhalchander Vishwanath: The guarantee we offer to banks is a cash secured guarantee. Thus the guarantor has to pay the money upfront. Once the loan is paid back, the money can be withdrawn. (more…)

Polish p2p lending service Kokos.pl recently added insurance options for borrowers. Kokos offers the insurances in cooperation with Cardif Polska S.A and Cardif Assurances Risques Divers S.A.. Insurable risks include death, disability to work and unemployment. There is a choice of 8 different insurance packages.

via antyweb

Non profit Wokai.org will allow contributers to donate to give microfinance loans to borrowers in China. Like Kiva and MyC4, Wokai partners with local MFIs which identify and screen potential microentrepreneur clients. Selected clients are then posted on the Wokai website through profiles that outline their business ventures and loan request. Contributers can select borrowers to fund and pay via Google Checkout, the money is then transferred to the MFI who disperse the capital to the microentrepreneurs. Field partners charge interest rates typically ranging from 8-20% to cover the high costs associated with providing loans, training, monitoring and support services to our borrowers. At the end of the loan-cycle the money is collected and re-issued by the MFI for new loans - so there is no payback to the contributers.

See this video for a good overview on Wokai.

The name “Wokai” means “I start” in Chinese.

Wokai has not launched yet, but I could participate in a pre-launch test drive. The platform has more social networking features then other platforms allowing for discussions and users asking questions to the MFIs/borrowers.

Wokai began in the fall of 2006 when Wokai co-founders Courtney McColgan and Casey Wilson met while studying advanced Chinese at Tsinghua University. The idea of Wokai gradually transformed into a plan of action and, with the help of a team of supporters, evolved into a startup nonprofit.

Wokai screenshot (pre-launch 10/20/08)

Asked by Netbanker whether Loanio.com will face an SEC filing process and a quiet period like Prosper and Lending Club, Loanio CEO Michael Solomon answered:

“…from the perspective of (Prosper) going silent, it is actually great for us as I think we will quickly gain lots of lenders and hopefully we can wow them into sticking around. From a regulatory standpoint, we believe that at some point we will seek to introduce a secondary market platform, but we will focus the greater part of the next 12 month on building our platform and seeking out a national bank partner to cover the rest of the U.S. Our plans for a secondary market are too far ahead for me to contemplate at this time.”