Services

Globefunder announces launch of peer to peer lending in India

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Globefunder announced the launch of Globefunder India, which it claims is the first p2p lending service in India.

GlobeFunder India is now up and running, making us the first online lending marketplace to establish operations there. If you are a lender in India, the good news is that you will soon have a way to capitalize on one of the most vibrant and fastest growing economies in the world.

I checked the website. "Up and running" does not mean that you can register as a lender or request a loan so far. In fact borrowers will not use the website in the Globefunder India process:

While in the U.S. lenders can access borrowers directly, in India the sheer size of the lending market and the regulatory environment necessitate a slightly different approach. In partnership with global managed services provider Intellecap and some of the leading banks in India, GlobeFunder India links lenders and borrowers through a network of well-established Micro Finance Institutions (MFIs).These MFIs are rated based on their credit worthiness similar to individual borrowers on the U.S. GlobeFunder marketplace, and these MFIs in turn work with individual borrowers through their extensive on-the-ground networks.

According to Globefunder there is an unmet loan demand in India of 40 billion US$.

If you are an Indian resident and use Globefunder India, please share your experiences in the Globefunder forum of Wiseclerk.com Thank you.

P2P lending trends to expect in 2008

wiseclerk 4 Comments

2007 was a year of launch and growth for most players. What trends in peer to peer lending can be expected in 2008?

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers, especially in the largest market: In the United States Globefunder.com and Loanio.com will launch. In other markets, where there is no national p2p lending service established yet (e.g. Canada, New Zealand, Spain), p2p lending will be introduced by the launch of a service.

Insurance against defaults (probability 75%)
Not totally new, since Boober.nl and Smava.de already offer some protection of the loan principal. Insurance can be implemented as a classical insurance product (supplied by an insurance company) or as a market mechanism, spreading the risk over multiple loans.

Secondary market (probability 25%)
One of the disadvantages for lenders currently is that on all p2p lending platforms, the invested money i locked in for the duration of the loan term. Prosper.com has allready announced that it plans a secondary market, enabling lenders to sell and buy loans any time. Depending on the market there are huge regulatory hurdles to allow trading of loans. For example German executives told P2P-Banking.com that on the German market a secondary market is unlikely for years to come.

Cross-market lending (probability <25%)
Aside form the social lending approaches (Kiva, MyC4, Microplace) so far all service are open only for lenders and borrowers that live in the same market. If lenders could lend to borrowers in markets with higher key interest rate than the market the lender lives in, the advantages could outweight the risks. In the European Union due to the Euro zone there would be no currency exchange risk. Again there are steep regulatory hurdles to be taken.

Variable interest loans (probability ?)
So far all loans are for fixed terms (prepayment allowed) with fixed interest rates. Variable interest loans could add flexibility. The interest rate could rise or decline following an indicator (e.g. market prime rate). Another possibility would be a mechanism where the variable interest rate would rise or fall as a result of the level of defaults of the credit grade. This could protect lenders, if the actual default ratio is higher then the forecasted default ratio.

Third party bidding management (probability?)
Just a thought. Lenders could allow a third party to manage their portfolio. Like an investment funds the lender would invest an amount of money, while the funds manager does the actual selection of loans. This could possibly be done by a sophisticated software (would you trust this?) selecting loans by statistical analysis of performance of loans with similiar parameters or by a fonds manager. The later is unlikely because the amount of time needed for each loan is too high to be covered by fees.

I'll check at the end of 2008 to see how these trends developed.

Classifying p2p lending services

wiseclerk

More and more p2p lending services are launching, each catering to different markets and different target audiences. Some derive more features from "ancestors" Prosper or Zopa, some less.

All follow the aim to allow lenders to directly lend money to borrowers without a bank acting as intermediary. This aim is sometimes not pursued strictly to the point. Smava actually partnered with a bank to comply with regulation, Zopa US partnered with credit unions, but nevertheless it serves as comprehensive definition.

Dividing p2p lending services in categories could follow several possible factors:

  • price building mechanism (auction/non-auction; interest set by platform/by borrower/by lender)
  • purpose of loan (private/business/both)
  • social lending vs. lending for profit

I think the last factor is most useful for the definition of categories. It affects all parts of the service from marketing to operations. The differentiation is in the objective the majority of the lenders had when selecting the platform. Were they attracted by the motivation to help an individual through a loan or by the motivation to earn interest? Continue reading →

Globefunder opens for borrower’s loan applications

wiseclerk

Globefunder is now open for loan request by borrowers (minimum credit score of 640 required). The signup for individual lenders at Globefunder is still "coming soon". 

A Columbus Business First newspaper article gave more details a few days ago: 

Interest rates for borrowers on GlobeFunder range from 8 percent to 20 percent. GlobeFunder makes its money by charging a onetime 1.75 percent fee to borrowers on their loans, and charging lenders 50 to 100 basis points of their investment over the 24- to 60-month loan term, Decio said.

A basis point is one-100th of a percent.

GlobeFunder is responsible for servicing, collecting and, if necessary, selling nonperforming loans to debt collection firms, Decio said. Continue reading →

Prosper raises fees

wiseclerk

Effective today Prosper.com has raised the closing fees for borrowers:

…The rationale behind this increase is to enable us to better cover our administrative costs and bring our fees more in line with the market. We have endeavored to continue to keep the fees very straightforward for our borrowers.

The origination fee schedule for borrowers of first and second loans will be as follows:

AA 1.00% (no change)
A 2.00%
B 2.00%
C 3.00%
D 3.00%
E 3.00%
HR 3.00%

…

Origination fees paid by existing borrowers and for listings that have already been created will not be impacted.

 

 

First loans default at Smava

wiseclerk

As P2P-Kredite.com reports the first 2 loans at German p2p lending service Smava.de have defaulted. Since the Start in March 2007 a loan volume of 1 million Euro (approx. 1.4 million US$) has been funded at Smava. The amounts of the two defaulted loans are 4,000 and 6,000 Euro resulting in a default rate of about 1%. At Smava loans default 40 days after they are late and are sold in a debt sale for a fixed rate of 25% (22% on lowest credit grades) to a collection agency.
2007 has been a very good year for Smava lenders as defaults (and late payments) have been significantly below expected rates.