Is Financial Democracy a click away? This is the name of a new USAID report on peer-to-peer (P2P) lending commissioned under USAID’s Financial Services Knowledge Generation task order.
Investors Without Borders (IWB) is profiled in the USAID report along with pioneering services such as Prosper and Kiva. IWB Board member and Live Green GEO, Steve Ma, participated in a USAID Microfinance and Learning Innovations After Hours Seminar panel, along with Harvey Grasty of MicroPlace, on October 20, 2008 in Washington, DC, to discuss the opportunities and challenges ahead in the growing world of P2P lending.
Check out the other exciting topics offered through the Microfinance and Learning Innovation After Hours Seminar Series in DC – audio recordings of most programs are available for free online!
Steve shared insights on how P2P lending will make it possible to fuel IWB’s small business lending pilot in Ghana, West Africa. He highlighted how a P2P model is ideal for the formal sector businesses IWB is targeting that have a proven track record, but are not established/collateralized enough to be prime investments for traditional institutional lenders – especially in countries where credit ratings and contract enforcement is lacking!
IWB will allow “regular” people to become pioneer lenders and take the leap of faith in extending credit to underserved businesses in developing markets. These pioneers can begin to unlock the potential of promising small to medium-sized businesses that the Harvard Entrepreneurial Finance Lab estimates to represent $3.5T of potential additional revenue worldwide.
P2P lending has been around for thousands of years in a variety of forms – from Mediterranean trading groups in the 11th century to Rotating Savings and Credit Associations in a number of modern-day developing markets. Simply put, it involves “regular” people lending to one another outside of traditional financial institutions. This informal method of allocating resources through relationships, reputation, and future expectations has survived the test of time.
Now that the world is “going global” and “getting wired” person-to-person lending has reemerged with magnified potential. Can’t wait to see what’s coming! Any thoughts or insight on P2P lending? Let us know!
