Social Finance – P2P Lending

Alexander Schellong has an interesting post in the Complexity Blog about the rise of social Peer-to-Peer (P2P) Lending where, like e-bay, you can make it possible to get borrowers and lenders directly together, as opposed to typical financial institutions that generate capital from savers and then figure out who to lend the money to.

More research needs to be done to determine whether such lending is more or less efficient than having intermediaries (i.e., weighing the savings from not having intermediaries against any possible greater efficiency of such institutions in figuring out who is loanworthy).  Also interesting to see whether loan repayment rates are higher in the P2P case.  Certainly in microfinance credit circles (like the Grameen Bank) the repayment rates are higher because of the social capital among the borrowers: in other words you don’t want to let down your village-mates and fail to pay off your loans, because otherwise your lack of repayment inhibits their ability to borrow money, and they surely know where to find you…

Possible also, if repayment rates are high, that social lending, like e-bay or a transaction craigslist, does something to restore your general confidence that as Craig Newmark asserts, most people are honest and good.

One response to “Social Finance – P2P Lending

  1. hmmmm…very interesting!
    Thanks google

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