P2P Finance
P2P Finance = generally refers to person to person lending without the intervention of banks.
Examples are Zopa and Prosper. Kiva is a P2P-version of microfinance.
Description
By Melanie Swan at http://www.melanieswan.com/social_finance.html
"Online lending marketplaces like Prosper and Zopa are taking advantage of social networking to virtually aggregate lenders to fund loans, a model which could replace traditional financial institutions. This new “eBay of loans” concept is the biggest breakthrough in credit products since junk bonds. The ease and immediacy of obtaining sizeable web loans, essentially “Get Money Now!” cannot be overstated.
Lender capital can be directed to specific loans based on recipient profile attributes (geographical, gender-specific, political, economic, race, ideological, commercial affiliation, alumni, etc.), for example, lending to African American single mother Katrina-displaced entrepreneurs or libertarian vegan senior citizens in Vermont or NRA member males in Oklahoma; any and every affinity profile is supported." (http://www.melanieswan.com/social_finance.html)
How it Works
Detailed description via these entries:
Examples
Zopa
Zopa (Zone of Possible Agreement): the new company is an amalgam of a number of business philosophies. It is where eBay meets credit unions by way of easyJet, the peer-to-peer movement and Betfair. You can lend up to £25,000 through Zopa and your money is divided among 50 borrowers (who have already been screened to ensure they have good credit ratings) to minimise risks of default. (http://www.guardian.co.uk/economicdispatch/story/0,12498,1435623,00.html}
Zopa is at http://www.zopa.com/ZopaWeb/.
Prosper.com
The new kid on the block, in the U.S. is Prosper.com. There is an interesting discussion on Omydhyar Net about the potential for charitable giving of Prosper-based lending groups, as well as of the market-driven practices, at http://www.omidyar.net/group/foodchain/news/124/
Melanie Swan explains more at http://www.melanieswan.com/social_finance.html
"Prosper loans are unsecured, and have a $25,000 maximum amount ($4,000 average) and a three-year term. The interest rate is set by lenders bidding down from the borrower’s maximum acceptable rate. Borrowers list their loans for free, agreeing to have their credit ratings posted publicly (an interesting proof of utility triumphing over privacy in transparency matters). If the loan is funded, Prosper takes 1% of the proceeds from the borrower and 0.5% per year of the average balance from the lender, substantially shrinking the 10% spread in traditional bank lending and borrowing. Borrower defaults are reported to credit bureaus and a collection agency is hired but lenders main default risk strategy is diversification and small investment amounts ($50 minimum). As of October 2006, approximately $15 million has been borrowed on the Prosper platform.
Groups are a feature of the Prosper marketplace, in hopes of stimulating low default rates through social pressure like the Grameen Bank and other micro-finance models, but Prosper’s groups are bit more like multi-level marketing than full affinity financial communities in their current implementation." (http://www.melanieswan.com/social_finance.html)
An analysis of the first nime months of Prosper, good for $20m in loans, at
http://futurememes.blogspot.com/2006/11/p2p-finance-does-it-work.html
Infoliberalism
The infoliberalism project presents a (mathematically sophisticated) solution to make a complete P2P finance and money system that will be both secure and self-sufficient, with anonymous members only know by some peers, with no need either of official information (like official identity), nor of any legally enforceable contract, so that it can work without any consideration of the members'nationality or location in the world (provided there is internet access).
More Information
See the related entries on