So I have to admit that the Web 2.0 phenomenon of 'social lending' all sounds very nice but is it really working? I am all for cutting out the middle man and stiffing the banks that rip us off but I can't help thinking that this type of lending must only be any good for people that can't get loans the conventional way. Call me old fashioned but I wouldn't lend anyone money over the Internet no matter what interest rate they signed up to. And If I wanted a loan I would shop around on the Internet to get the best deal from a bank.
The people that are going to social lending sites like Zopa and Prosper are surely just those people that can't get credit elsewhere? i.e. The Adverse selection of customers. But it is happening to a degree. There are certainly some (if not as many as the hype would have us believe) social loan transactions taking place so borrowers and lenders must be getting something out of it. So i guess that the returns can outweigh the risk and follows the proven Nobel prize winning concept of micro-credit...but I am still a skeptic.
The people that are going to social lending sites like Zopa and Prosper are surely just those people that can't get credit elsewhere? i.e. The Adverse selection of customers. But it is happening to a degree. There are certainly some (if not as many as the hype would have us believe) social loan transactions taking place so borrowers and lenders must be getting something out of it. So i guess that the returns can outweigh the risk and follows the proven Nobel prize winning concept of micro-credit...but I am still a skeptic.
2 comments:
I am sceptic too ... but only here and now.
The developing countries dimension is very interesting: would you lend if you were sure your money was being well-managed and you could see who you were helping? I would.
For the West, we need to look for the niches where it may start and thence develop. Might this apply to student debt? I am not sure. Then what about first-time buyers? Again, I am not sure (the £quantities would be an issue). Maybe, we fund migrant workers establishing businesses in the country. Again, I don't know. But as Christensen says, if we can find the niche, maybe we generate the energy that transports this into the mainstream.
Dave from Zopa here - it's interesting that everyone assumes that our borrowers are people that can't get a loan from a bank! In fact, Zopa has the lowest APR for borrowing in the UK right now - but only for our very lowest risk borrowers - and in general we serve the 'prime' market.
Zopa takes all the precautions (and more!) that a bank does before lending your money out to borrowers - and you can choose how much risk you want to take by choosing different credit grades of borrower. In over 18 months of lending we've only had 1 default - so we're pretty confident it's safe.
If you're in the UK - come have a go, you can lend as little as £10!
Cheers
Dave
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