Social Finance arranges p2p student loans from alumni investors to graduate borrowers in the US. Currently students from 78 schools are eligable to apply for a Sofi loan in order to refinance their student loan debt. Social Finance says that it has generated more than 60 million US$ in loan applications and is on track to commit more than 200 million US$ in 2012.
Social Finance was founded only one year ago and now receives a staggering 77 million US$ series B funding from Baseline Ventures, Renren and DCM.
Today Kiva expanded its service to borrowers in India. India is the second most populous country and the largest democracy in Asia. India is an emerging economy (part of the aspiring fast growing so-called BRICS countries), but growth has slowed over the past years.
India is still country with large differences. Kiva states that ‘With more than 32% of India’s population falling below the international poverty line and 68% living on less than US$2 a day, the country is in dire need of responsible, affordable sources of capital. But India has a complex history with microfinance, leaving many financial institutions unable or unwilling to serve poor and socially-excluded borrowers. Recognizing this need and opportunity, Kiva wanted to give the global lending community a simple, ethical channel to support India’s most geographically-isolated, underserved and vulnerable groups. These groups include widows, the disabled, leprosy-affected families and many more who have had virtually no chance at making a sustainable living for themselves before now.‘
To start its p2p microfinance for India Kiva has partnered with 3 MFIs: People’s Forum, Mahashakti Foundation, and WSDS.
To comply with regulation in India loans will have a minimum term of 3 years and there will be no repayments to the lender during the 3 years. More details on Kiva’s country page.
VVSSB Shankar, founder & director of i-lend, answers the questions of P2P-Banking.com.
What is i-lend about?
i-lend is an Internet based P2P lending platform in India which went live two months ago. Presently this service is available in Hyderabad, Andhra Pradesh. The portal connects the two sets of customers i.e. borrowers and investors who register online, undergo a verification process, list their requirements on the portal and agree for a mutually beneficial financial transaction.
Tell us about how your target customers traditionally seek loans?
Typically most of our borrowers have recourse to either personal loans from banks or resort to credit cards usage. These personal loans are available only to a selected segment working in some top 500 companies. Most people who are not a part of the above mentioned segment have to resort to private borrowings on which interest rates are very high more like 21 to 28%. Moreover a vast majority of urban India who otherwise are gainfully employed are denied credit for various reasons. Personal loans are also very expensive in India attracting rates between 16% – 24% by banks.
Is there a reliable credit scoring model in India?
CIBIL – a credit rating institution was established a few years ago and today it is the de facto body which maintains credit scores. However the credit rating eco system is evolving.
What other challenges did i-lend face to introduce p2p lending in India?
Before establishing a P2P model in India, it was essential that we understand the complex regulatory environment. We had ensure that we were following various laws governing the banking sector, financial institutions and other state laws with respect the money transaction. With this information, we then worked on a viable business model for P2P lending in India.
We also had to modify the model such that both borrowers and investors found it attractive. For instance, i-lend does 100% physical verification of all details provided by the borrowers at both his residence and workplace reference. We also collect Post-dated cheques from borrowers for the loan tenure.
What are the three main advantages for lenders?
– Higher returns (at least 3 times more) on idle money compared to Saving Account – The return on savings account in India is 4% while i-lend offers a minimum returns of 12% on loans given to borrowers.
– Monthly returns on money invested through borrower EMI payment – While other investment options have a lock-in period, p2p loans will give investors monthly returns i.e. liquid cash
– A new investment option – where investors can decide whom they wish to invest in, their desired interest rate and spread their risk by investing in multiple borrowers – Min. investment amount is Rs.5,000.
What are the three main advantages for borrowers?
– Lower interest rates starting at 12%. Typical bank rates are anywhere between 17-19% and offered to select few
– No prepayment charges – Banks charge anywhere between 2-4% of the principal outstanding as pre-payment charges
– Flexible loan amounts – Rs.25,000 – Rs.300,000: Banks typically offer loans from Rs.100,00 only.
What interest rates do you expect to see on the marketplace?
We expect the interest rate to be anywhere between 14-16%. Continue reading →
Today Rainfin launched the first p2p lending service in South Africa, which to my knowledge is the first national p2p lending service operating in an African country. Based on a sophisticated technology founders Sean Emery and Hannes van der Merwe launched the service after more than a year of implementation. Borrowers can apply for loan amounts between 1,000 and 75,000 ZAR (approx. 125 to 9,250 US$). Rainfin expects to reject as much as 80% of the applications. Rainfin charges 3% in transaction fees (2% to borrowers plus 1% to lenders). Rainfin uses an auction systems with the borrower setting the maximum interest rate he is willing to pay. Current listing are for nominal interest of about 15%. Continue reading →
French p2p lending service Prêt d’Union raised 3.3 million EUR (approx. 4.2 million US$) in a new funding round from new investors (including Weber Investment, the holding of the two founders of la Financière de l’Echiquier and AG2R La Mondiale) and from its previous shareholders. The company has raised a total of 8.1 million EUR since its inception in October 2009. Along with PRÊT D’UNION’s founders, employees and private investors, the company shareholders are CREDIT MUTUEL ARKEA (34.9%), KIMA VENTURES (5.2%), Xavier Niel and Jeremy Berrebi’s fund (4,2%), Weber Investments (6.4%) and AG2R La Mondiale (2.9%).
“The launch phase was successful. With more than 2.5 million EUR of loans granted in less than six months, we are currently at a rate of over 1 million EUR of credit granted per month, which amounts to a monthly growth of 40%. This new round of financing, … , is an important milestone for PRÊT D’UNION. It will enable us to accelerate our business development through new recruitments, improve our customer service and reach for new customers,” explained Charles EGLY & Geoffroy GUIGOU, respectively CEO and COO at Prêt d’Union.
On Wednesday the new p2p lending marketplace Squirrl.com launched. For an introduction on the concept read the article ‘Squirrl Launch – Secured Loans to Suppliers‘. Now Sophie Coles, Squirrl’s Director of Business Development answers my questions.
What is Squirrl about?
Squirrl.com provides an online finance platform for well established commercial organisations (Suppliers) that have a business model where assets are provided to their customers and paid for over a period of time through Pay for Use Agreements. Examples are the motor industry, industrial machinery, office equipment etc…. If this type of organisation has no other financial arrangements it must pay for the assets at the start of the contract, and only receive its money back over the life of the agreement. Few commercial organisations can suffer the impact of this negative cash flow, yet customer demand for this service model is growing. Investors using the Squirrl.com platform can lend money to this type of Supplier in return for higher interest rates than they would get from the high street banks and have their loans secured.
How did you get the idea for Squirrl?
Since the banking crisis of 2007/2008 the flow of money available to commercial organisations to finance Pay For Use Agreements has almost dried up yet there is a huge demand from all sectors for such contracts. Traditional funders have become increasingly inward looking and preservation of their balance sheets their primary concern. There had to be another way to fund these contracts that are often underwritten by high quality customers and supported by highly reputable Suppliers. If someone was prepared to lend to another person on an unsecured basis as demonstrated by the P2P marketplace then surely that same person would lend to a good quality business secured against the cash flow of the Pay For Use Agreements. That was the trigger moment that occurred in 2011 and for the last year the site has been under development.
What are the three main advantages for lenders?
Squirrl savers can achieve higher interest rates than saving through high street banks typically between 5-15%.
Loans are made to established commercial organisations and then secured against the cash flow from a pool of a minimum of at least 20 Pay For Use Agreements. There is always a substantial buffer built into the security so that on average there is £2 of cash flow available to repay £1 of loan.
A 13 point risk mitigation programme is designed to reduce risk to the investor as much as possible.
What interest rates do you expect to see on the marketplace?
Typically the interest rate savers receive will reflect the level of risk associated with the investment opportunity. Initially Squirrl.com will only accept the lowest risk organisations so interest rates will vary between 5-7%, which is still a great return compared to what the high street banks are currently offering.
Which marketing measures do you plan to attract lenders?
Initially we are planning a very soft launch for Squirrl.com and will not be over promoting the concept. Savers do not have to pay any fees to join and start bidding apart from a one off £5 fee to cover the costs of user identification to comply with Squirrl.com security and Money Laundering Regulations. We want to stick closely to the community feel of social saving so we want to make the user experience as good as possible and Squirrl.com will continue to evolve through user feedback. After the initial launch we will start to seek other suppliers who could benefit from gaining finance using Squirrl.com, but we will only work with reputable companies who have high quality, structured Pay for Use Agreements in place. We can also act on a consultancy basis to help companies develop their structure to meet our criteria. Ultimately we want Squirrl.com to represent high quality, low risk, high return saving for the community so finding suitable suppliers to fit the bill will be crucial in maintaining this quality and reassurance to our squirrl savers. Continue reading →
