Peer to Peer Lending

A friend showed me this site the other day - Zopa.com - which is a P2P lending group with no bank in the middle. You can be either a lender (and you get the interest paid) or a borrower.

Here is part of Zopa's pitch:

Zopa though lets people who have spare money to lend it directly to people, like them, who want to borrow it. No bank in the middle, no huge overheads, no unethical investments.

To minimise any risk, the money each lender puts in is spread amongst at least 50 borrowers (and likewise each borrower gets their money from a number of different lenders).

Zopa is, therefore, for people who want to be a part of something new. Who want to join a community of like-minded individuals and lend to them and borrow from them in a trusting but secure way.

Zopa is for people who are looking for a better rate of return. Zopa’s interest rates aren’t squeezed by middlemen (the banks) because there are no middlemen - that’s the Zopa idea.

To me, it seems to be part of the democratization process. We are seeing democratization of media, where the media is no longer centrally controlled, we are seeing the p2p adoption of the music industry. Here is another step in that process - peer to peer lending.

There seems to be some interesting parallels to Microlending. Microcredit takes banking to the lender (instead of the lender going to the bank). Microcredit doesn't require collateralization, it uses social collateral as a payback motivator. Zopa uses things like your eBay rank as part of your credit score.

Interesting concept. I think it will catch on.