Peer-to-peer lending gains prominence http://www.business-standard.com/india/storypage.php?autono=339431
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Peer-to-peer lending gains prominence
Press Trust Of India / New Delhi November 07, 2008, 0:10 IST
As the financial turmoil rages on , a relatively new practice of lending and borrowing without intermediaries such as banks
is emerging through online sharing of money.
According to a study by market intelligence and data analysis services
provider Grail Research, ‘peer-to-peer lending’, which refers to an individual or Business Banking
a group lending money to a person in need without any intermediary, is fast Get a Business Checking
emerging and may reduce dependence on banks. Account & Check Card That
Save You Money.
The market size of the country’s informal lending market is estimated to be www.BankofAmerica.com/SmallBusiness
$90-100 billion (Rs 4-5 lakh crore), with rural areas accounting for bulk of the
market. Of this, just 30-35 per cent is supposed to be managed through friends
and family networks including the emerging new platform of ‘peer-to-peer’ Islamic home financing
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This new form of loan is more popular among people, belonging to low-income www.mifc.com Most Popular
groups, who do not have easy access to bank loans.
“P2P lending is one of Web 2.0’s less-appreciated applications. By eliminating Read E-Mailed Commented
intermediaries such as banks, it creates better outcomes for both borrowers Also Read
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banks in the long term,” Grail Research Country Head Amit Kumar said. Paper Specials - Road mobility gives Agni-5 global reach
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While the lack of a fully-functional credit bureau inhibits its application in
traditional form, it is also leading to innovations such as use of micro-finance markets NEWSALERT: Indiabulls Power IPO
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institutions (MFIs). “We consider its potential impact to be on a par with other - I&B Ministry compendium on subscribed 2 times
innovative models such as ITC’s e-choupal,” Kumar added. policies, programmes
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Unlike traditional banks, which are governed by the Reserve Bank of India talent, says Ficci More
regulations, P2P lending is more independent and flexible on various points. - GSM operators post lower
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“In the P2P system, the rate of interest at which one takes loans is negotiable.
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Unlike regulated banks’ practice, paper work and credit checks of borrowers
Rs 300 cr via IPO
are not so important here, which ultimately saves time,” Kumar said.
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These firms mainly target poorer segments as they do not have access to
formal banking. Moreover, a host of micro-credit institutions operating in India are unable to meet the entire demands of
the country.
Traditionally, people prefer banks and other similar institutions as they are considered more reliable than lesser-known
financial firms.
However, a number of P2P lending firms, such as dhanaX, Range De and GlobeFunder, have emerged in recent times but
are in initial stages and need protection and support from the government for accelerated growth, the study said.
The internet plays a major role in the fledgling industry as P2P lending through portals of such companies involves online
sharing of money between users.
“Borrowers put up their profiles and make requests for loans on the portals, which the lenders can view. The entire
process helps the borrower and the lender gets interest rates that are acceptable to both parties,” Kumar said.
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