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There is a new concept is called social lending and the idea is to introduce people who need money to people who want to lend some - cutting out the middlemen like banks and mortgage companies.
Zopa is a pioneer in this space. For the past two years it has allowed members to borrow and lend on their own terms.
Jane Bennett, Lender, Kiva wrote:
You do feel a connection to the people you are loaning to
They are simply using the Web to allow personal lending on a massive scale. This peer to peer money lender must be a disruptor to the traditional banks. The idea is simple. People join Zopa online as either borrowers or lenders. The lenders proffer money not to individuals but to a pool of people grouped together because of similar credit
James Alexander, CEO of Zopa wrote:
We risk assess, identity and credit check every individual that comes to Zopa," he said. "So it's a community of known individuals and what Zopa does is connect these people so they can borrow and lend money on their own terms."
To minimize risk Zopa will spread your loan among a few borrowers. So if are lending £500 ($993) then your money will automatically go to 50 different people.
The social lending site Kiva allows lenders to give to a specific entrepreneur in a poor or developing world country.
http://www.kiva.org/
Here's an example from Kiva:
Quote:
Entrepreneur: Orepa Tila
Location: Nuusuatia, Samoa
Activity: Bakery
Loan Request $1,000.00
Repayment Range: 16 - 16 months
Loan Use: Buy ingredients for her muffins and cement for making a new oven.
Kiva.org About Page wrote:
Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.
http://www.kiva.org/about/
What is your view? So, is social lending set to be the next big thing? Could it replace High STreet Banking, or will it remain a nieche?