Skip to main content
UploadLanguage (EN)Support
BusinessMobileSocial MediaMarketingTechnologyArt & PhotosCareerDesignEducationPresentations & Public SpeakingGovernment & NonprofitHealthcareInternetLawLeadership & ManagementAutomotiveEngineeringSoftwareRecruiting & HRRetailSalesServicesScienceSmall Business & EntrepreneurshipFoodEnvironmentEconomy & FinanceData & AnalyticsInvestor RelationsSportsSpiritualNews & PoliticsTravelSelf ImprovementReal EstateEntertainment & HumorHealth & MedicineDevices & HardwareLifestyle
AR
Uploaded byAmeet Roy
6,522 views

Presentation on Peer 2 Peer Lending

Crowd funding is the process of raising funds from a large number of people who each contribute a relatively small amount. Peer-to-peer (P2P) lending, where individuals lend money to unrelated borrowers without banks, is a major type of crowd funding. The document discusses the emergence, advantages, and types of crowd funding as well as P2P lending models, activities of P2P platforms, and examples of major crowd funding markets and platforms in regions like Europe, America, and others.

Business◦
By- Ameet Roy
The contents of the presentation are intended solely for the use of the client to whom the same is marked by us. No circulation, publication, or unauthorised use of the presentation in any form is allowed, except with our prior written permission No part of this presentation is intended to be professional advice, or solicitation of professional assignment. 2 Disclaimer
OVERVIEW OF CROWD FUNDING 3 Crowd Funding & P2P Lending
WHAT IS CROWD FUNDING? 1. Accumulating funds for business/ ideas through multiple avenues that involves networking in any possible way. 2. It is the process by which a group (the general public) collectively provides money for artists, researchers, businesses and more. 4 Crowd Funding & P2P Lending
EMERGENCE OF CROWD FUNDING Crowd funding as a concept pre-dates the internet, The earliest reference of crowd funding can be traced back to time during the construction of one of the world’s most famous landmarks – “The Statue of Liberty”, which was partially funded by the people of America when the committee set up for arranging funds for the Statue failed. It was the people of America who funded the construction of the Statue of Liberty. 5 Crowd Funding & P2P Lending
ADVANTAGES OF CROWD FUNDING It provides access to capital. Crowd funding is a great alternative way to fund a venture, and it can be done without giving up equity or accumulating debt It hedges risk. Launching a crowd funding campaign hedges the risks associated with start up ventures and serves as a valuable learning experience. It serves as a marketing tool An active crowd funding campaign is a good way to introduce a venture’s overall mission and vision to the market It gives proof of concept. A good way to gain some respect and credibility is be able to show the market that the proposed venture had a successful crowd funding campaign. 6 Crowd Funding & P2P Lending
ADVANTAGES OF CROWD FUNDING It allows crowdsourcing of brainstorming. By having a crowd funding campaign, the entrepreneur has the ability to engage the crowd and receive comments, feedback, and ideas for his proposed enterprise. It introduces prospective loyal customers.  People who view the entrepreneur’s campaign and decide to contribute are ones that believe in the success of the company in the long run. It’s easier than traditional applications. Applying for a loan or pursuing other capital investments are very cumbersome and painful, but with crowd funding the entrepreneur will have the essential start-up capital much easily. It provides the opportunity of pre-selling. Launching a crowd funding campaign gives an entrepreneur the ability to pre-sell a product or concept that they haven’t yet taken to market. 7 Crowd Funding & P2P Lending
Risk of fraud Funds raised may not be used for the purpose as disclosed on the platform Single transaction Crowd funding is mostly a single transaction rather than continuous like other forms of financing Theft of idea One’s business idea may picked-up and capitalized by others Limited follow-up mechanism No mechanism to follow-up the performance of the borrower 8 ISSUES RELATED OF CROWD FUNDING Crowd Funding & P2P Lending
TYPES OF CROWD FUNDING 9 Crowd Funding & P2P Lending
10 Typesofcrowdfunding DONATION BASED REWARD BASED PRE-SALES BASED LENDING BASED (P2P) INVESTMENT BASED Crowd Funding & P2P Lending
CROWD FUNDING WORLDWIDE 11 Crowd Funding & P2P Lending
12 Source: Crowd Funding Industry Report, crowdsourcing.org
LENDING BASED (P2P) - MOST POPULAR FORM OF CROWD FUNDING 13 Crowd Funding & P2P Lending Peer to Peer lending is:-  Practice of lending money to unrelated individuals, or "peers“;  Without going through banks or other traditional financial institutions;  Lending takes place online on peer-to-peer lending companies' websites;  Various different lending platforms and credit checking tools are used;  Many also the abbreviation "P2P" when discussing the peer-to-peer lending generally;  Also known as crowd lending.
14 FEATURES OF P2P LENDING • Conducted for profit; • Intermediation by a P2P lending company; • Transactions takes place on-line; • Lenders uses own discretion to lend; • Unsecured and are not protected by government insurance; • Loans can be sold to other lenders, like securities. • No pooling of funds • No entry in books for client funds • Multiple lenders to one borrower and vice versa Crowd Funding & P2P Lending
15 ADVANTAGES OF P2P LENDING (FOR BORROWERS) • Easy Application  Application can be made on-line by putting in a few pieces of personal information. • Speed of Funding  Loans can be raised in matter of weeks, whereas the banks and other institutions takes over a months time to sanction a loan. • Funding for all kinds of loans  P2P loans can be raised for any amount, even amount which are small/ large enough for banks to reject them. Crowd Funding & P2P Lending
16 ADVANTAGES OF P2P LENDING (FOR LENDERS) • Spreading Risk  A single P2P loan may be funded by a number of lenders, leading to distribution of risk among the borrowers • Higher Earnings  The lender uses his/her own discretion to finance a loan request, so he/she decides on the interest component of the loan • Choice of borrowers  Lenders have the full knowledge of the parties to which his/her fund goes, unlike banks where the bank lend out the funds and the individual depositors have no knowledge where there funds are invested by the bank. • Lower rate of interest  Interest rates of P2P loans tend to equal or lower than bank and other traditional financing institutions. Crowd Funding & P2P Lending
17 Investor Investor Investor Investor Investor Investor Borrower Borrower Borrower Borrower Borrower Borrower Banks/ Financial Institutions Capital adequacy Reserve ratios Asset provisioning Overhead Cost Profit Investing Lending Crowd Funding & P2P Lending
18 Crowd Funding & P2P Lending Lender Lender Lender Lender Lender Lender Borrower Borrower Borrower Borrower Borrower Borrower P2P Platform Financial Intermediation Direct lending Direct borrowing No Capital adequacy requirements No Reserve ratios requirements No Asset provisioning Minimal Overhead Minimal Cost Fixed Intermediation Charges
19 FORMS OF P2P BUSINESS Crowd Funding & P2P Lending
20 TypesofP2PBusiness Client Segregated Model Notary Model Crowd Funding & P2P Lending
21 CLIENT SEGREGATED MODEL Client Account Borrower Lender P2P Lending Company Underwriting servicing Investor Sub-Account 2. Identification 3.LoanPayout 4.LoanPayout 6. Loan Repayment 7. Loan Repayment Crowd Funding & P2P Lending
22 NOTARY MODEL Lender P2P Lending Company Underwriting servicing Commercial Bank Borrower 3. Origination of Loan 5. Purchase of loan Crowd Funding & P2P Lending
ACTIVITIES CARRIED OUT BY THE P2P LENDING PLATFORMS 23 Crowd Funding & P2P Lending Activities performed by the platform Borrower info validation Data Gathering Credit Scoring Loan Funding, Investing, Servicing Regulatory Compliances and Fraud Detection
24 0 50000 100000 150000 200000 250000 36 months 60 months TENURE OF LOANS Crowd Funding & P2P Lending A case study on Lending Club, worlds largest P2P platform
25 Debt Consolidation Credit Card Refinancing Auto Loans Business Loan Home Loan Home Improvemrnt Green Loan 1754786 69064 2340 2239 1022 16992 147 NO OF LOANS TAKEN FOR DIFFERENT PURPOSES Crowd Funding & P2P Lending Purpose of loans Debt Consolidation Credit Card Refinancing Auto Loans Business Loans Home Loans Home improvement Loans Green Loans A case study on Lending Club, worlds largest P2P platform
P2P LENDING IN EUROPE 26 Crowd Funding & P2P Lending
P2P LENDING SCENARIO IN EUROPE 27 European Commission is set to unleash the power of crowd funding in Europe The European Crowd funding Network helps advise and influence the European Commission in policy building for the sector Countries most active in P2P Lending: United Kingdom France Spain Crowd Funding & P2P Lending
P2P PLATFORMS IN EUROPE Zopa – UK CrowdCube – UK Funding Circle – UK Our Crowd – Israel KissKissBankBank – France Goteo – Spain Seeders – UK 28 Derev – Italy Booomerang – Denmark Symbid – Netherlands MyMicroinvest – Belgium Companisto – Germany Invesdor – France Crowd Funding & P2P Lending
P2P LENDING IN AMERICA 29 Crowd Funding & P2P Lending
P2P LENDING SCENARIO IN AMERICA In America, US crowd funding industry sums up to 80-90% of the continent’s crowd funding Other countries allowing crowd funding in America are: Canada Mexico Brazil 30 Crowd Funding & P2P Lending
P2P MARKETS OF AMERICA The US crowd funding market grew by 167% in the year 2014 as compared to 2013 Funds raised through P2P platforms in the year 2014 was over USD 16 billion Title III of the JOBS Act deals with Crowd Sourced equity Funding (CSEF) in America 31 Crowd Funding & P2P Lending
32 CONSUMER CREDIT ORGINATION LOAN TRUST 2015 (CCOLT), CARRIED OUT WORLDS FIRST RATED SECURITISATION OF P2P LOANS Crowd Funding & P2P Lending On January, 2015 USD 344.85 million, loans securitsed Securitisation of unsecured consumer installment loans Originated and serviced through Prosper Funding LLC Black Rock Financial Management Inc. floated the SPV – CCOLT Moody’s Investor Service rated the transaction
RATINGS OF WORLDS FIRST P2P LOAN SECURITISATION 33 Crowd Funding & P2P Lending Clan Ratting Loan Amount A (P) Baa3 (sf) USD 281.32 millions B (P) ba3 (sf) USD 45.38 millions C NR USD 18.15 millions Baa3 – Moderate Credit Risk Ba3 - Not considered to be investment-grade bonds NR – No Rating
P2P LENDING PLATFORMS IN AMERICA LendingClub.com - US Kickstarter – US Prosper – US GoFundMe – US LendingLoop – Canada 34 Crowd Funding & P2P Lending
35 Crowd Funding & P2P Lending 0 200 400 600 800 1000 1200 UK 2013 2014 2015 2016 in USD millions 0 50 100 150 200 Isreal 2013 2014 2015 2016 in USD millions 0 50 100 150 200 250 Australia 2013 2014 2015 2016 in USD millions 0 200 400 600 800 1000 1200 Canada 2013 2014 2015 2016 in USD millions 0 500 1000 1500 France 2013 2014 2015 2016 in USD millions 0 10000 20000 30000 40000 USA 2013 2014 2015 2016 in USD millions P2P LENDING VOLUMES WORLDWIDE
36 Crowd Funding & P2P Lending P2P LENDING VOLUMES WORLDWIDE 0 10 20 30 40 50 60 70 2010 2011 2012 2013 2014 2015 In USD billions US UK China Australia
37 Crowd Funding & P2P Lending EXPECTED P2P LENDING VOLUMES WORLDWIDE 0 20 40 60 80 100 120 140 160 2016 2017 2018 2019 2020 In USD billions US UK China Australia
38 Crowd Funding & P2P Lending DEMOGRAPHY OF P2P LENDING 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Age 18-34 Age 34-55 Age 55+ Used Aware but not used Unaware
CROWD FUNDING IN INDIA 39 Crowd Funding & P2P Lending
CROWD FUNDING IN INDIA Crowd funding is not a new phenomenon for India, Temple and mosques are being built by accumulating funds from the public from the ancient era 40 Crowd Funding & P2P Lending
CROWD FUNDING IN INDIA An age old form of Crowd funding practiced in INDIA 41 Crowd Funding & P2P Lending
HURDLES OF MODERN CROWD FUNDING FORMS IN INDIA • People’s mindset • Lack of knowledge • Limited reach of technology • Disparity of Income distribution • Governmental regulations 42 Crowd Funding & P2P Lending
LEGALITY OF CROWD FUNDING IN INDIA Crowd funding is devoid of any regulations or regulatory authority in the country. In the absence of any regulations there are many dilemmas regarding crowd funding in India  Registration requirements for the platform  Will cash collected from clients be regarded as deposits under the RBI’s “Acceptance of public deposit” directions?  Will the loans funded by multiple lenders be regarded as collective investment scheme?  Will lenders have recourse on the platform in the event of default by the borrower? 43 Crowd Funding & P2P Lending
REGULATIONS FOR CROWD FUNDING IN INDIA • No specific regulation for crowdfunding. • The only piece of document in relation to Crowd funding issued by the authorized source is the consulting paper by Securities and Exchange Board of India, which was issued in the year 2014. 44 Crowd Funding & P2P Lending
45 REGULATIONS TO BE KEPT IN MIND BY THE P2P PLATFORM Crowd Funding & P2P Lending Regulations Compliance Requirement Deposit Regulations x Section 45 (S) of Reserve Bank of India x Collective Investment Scheme of SEBI x Alternative Investment Funds Scheme of SEBI x Portfolio Management Scheme Regulations of SEBI x The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 x Chit Fund Regulations x State wise money lending laws 
SEBI CONSULTATION PAPER ON CROWD FUNDING • Overview of crowd funding scenario world wide. • Covers prevalent regulations governing fund raising for start ups and SMEs in India. • Points out the judicial and regulatory challenges for crowd funding in India. • Proposes crowd funding as an additional channel for an early stage of funding via access to the country’s capital markets • Asks for public comments and suggestion on crowd funding 46 Crowd Funding & P2P Lending
47 Crowd Funding & P2P Lending P2P VOLUME IN INDIA 0 100 200 300 400 500 600 700 800 900 2013 2014 in USD thousands
48 Crowd Funding & P2P Lending P2P MODEL IN INDIA Client Account Borrower Lender P2P Lending Company Underwriting servicing Investor Sub-Account 2. Identification 3.LoanPayout 4.LoanPayout 6. Loan Repayment 7. Loan Repayment
FUTURE OF P2P LENDING IN INDIA  Crowd funding will be lucrative in near future only if S.E.B.I comes up with a framework which is Broad Extensive Flexible  with regulations coming into place it would become the highly sought out platform for raising money. 49 Crowd Funding & P2P Lending
CROWD FUNDING PLATFORMS IN INDIA • Fair Cent (www.faircent.com) • Lend Box (www.Lend Box.in) • I-lend (www.i-lend.in) • Rupiya Exchange (www.rupaiyaexchange.com) • Loan Meet (www.loanmeet.com) • Lenden Club (www.lendenclub.com) • We Care India (www.wecareindia.org) 50 Crowd Funding & P2P Lending
THANK YOU Kolkata: 1006-1009, Krishna Building, 224, AJC Bose Road, Kolkata – 700017 Ph: 033 2281 1276/3742/7715 Mumbai: 601-C, Neelkanth, 98 Marine Drive Mumbai – 400002 Ph: 022-43472206 Delhi: B-49, Panchseel Enclave, New Delhi – 110017 Ph: 011 41315340 51 VINOD KOTHARI CONSULTANTS PVT. LTD.