The Rise and Rise of the European Micro Lending Internet Platform Market

Is there enough space for all of us and just how easy is it to set up shop?

In a span of just under 3 years, 3 new micro credit platforms have taken shape in the European micro lending P2P context:  MyC4, Babyloan and the soon to be launched myAzimia.org (Azimia means to borrow and lend in swahili). These platforms are all aligned to a specific domestic market thanks to the way such businesses are regulated in Europe ; Myc4 is based in Denmark, Babyloan in France and myAzimia in the UK.

These are platforms all with varying business and revenue models but all with one key objective; to channel the capital of private and institutional investors in Europe to small businesses based in a emerging economies in sub saharan Africa and Asia. In achieving this objective, these young businesses get a life line of capital that they badly need, finally get an opportunity to enter the formal financial sector and the economic and social fabric of the countries that they operate in are significantly improved and ultimately the quality of life of these individuals is upgraded. I don’t need to to reinvent the wheel here, we all know about the fantastic tool that microfinance can be in helping to alleviate poverty and helping to improve lives, but the innovative element of these platforms takes microfinance as a financial tool to a new level as it uses the internet as a linkage between the entrepreneurs in developing economies and social investors in Europe.

As I mentioned already the business models of these platforms are all different, and one platform in particular has suffered significant reputational damage within the last 6 months as a result of selecting MFI partner institutions in Africa, that for one reason or another, turned out completely unable to deliver what they had promised. This is a challenge that any platform of this nature faces, the questions that need to be thoroughly explored before selecting partner institutions responsible for loan selection and assessment are:

1. who are the partners in the developing country?

2. Are they regulated locally?

3. Do they understand our process?

4.Do they already have a quality loan book?

5.Do they have high standards in their credit approval procedure?

6. Do they understand the local market and how it operates?

7. Do they have a good track record?

The identification and marketing to social investors is also an important aspect but to my mind has been highly overrated by some commentators. My motto is, get the right partners to work with, understand the market that you plan to disburse loans in and everything else will follow. Continue reading

Vittana Credit

Education microfinance service Vittana.org (see earlier coverage about Vittana) now enables lenders to relend directly. Lenders no longer need to go through Paypal for  every payment and repayment.

CEO Kushal Chakrabarti says: “Today, I have the honor of announcing that, as of last week, Vittana lenders had given over 200,000 US$ in loans to hundreds of young people who want to become engineers, policemen, biologists and much more.”

P2P Lending Topic in German Parliament

In German the “green” party has initiated a parliament inquiry asking the government to ask 25 questions regarding it’s position towards p2p lending. While the party in the preamble describes p2p lending as a chance for consumers potentially offering them more choices, the wording of most of the questions exhibits that the green party is mostly concerned about the risks and implies that p2p lending is not enough regulated.

(Source: P2P-Kredite.com)

P2P Lending With Cars as Collateral

German p2p lending service Auxmoney.com has introduced a new feature this week. Borrowers can now offer a car as collateral for a p2p loan.

The user pays a fee of 9.95 Euro to document this in his loan listing. Pictures of the car, the model and the mileage and the estimated price a car dealer would pay for car are displayed in the listing. In this example listing, the borrower puts up his BMW as collateral. The estimated value covers 101% of the loan amount requested. In general the car can cover any percentage of the loan amount – it does not need to cover the full amount. Furthermore there is information on the type of insurance coverage.

If the loan is funded, then a contract defines the terms of the assignment as security. The borrower continues to drive the car (obviously he is not allowed to sell it without the consent of Auxmoney), but needs to deposit the certificate of ownership (motor vehicle registration certificate) at Auxmoney. This arrangement costs the borrower 2 Euro per month.

Should the borrower fail to repay the loan, then Auxmoney has the right to sell the car.

While a car as collateral does in not provide fail-safe security (many things can happen), it will be probably perceived by lenders as one feature for higher security against defaults.

The Wiseclerk Auxmoney stats page will in future track the performance of p2p loans secured by cars.

This is a first for p2p lending – but soon another p2p lending service will follow. Pärtel Tomberg, CEO of Estonian p2p lending service Isepankur told P2P-Banking.com earlier this month, that Isepankur will introduce cars and real estate as collateral for p2p loans in the second half of 2010.

(Photo by pedrosimoes7)