A few years ago some west coast techies sang Cumbia and came up with the idea to bring together lenders and borrowers without the insidious over-lording of a big bank by using the internet.
All things progressive went into the idea, no double-dealing middleman, no high interest rates, no big down payments, and (best of all), no dead behind the eyes businessmen. Nope, the point with Person to Person lending was to reintroduce the social aspect back into financial transactions by linking together friends, family, and people of a generally similar mindset so that they could tell their story, give a little and get a little.
Well, when Person to Person (P2P) lending debuted it was seen as a somewhat far out idea by gushy liberal progressives who had no idea how ‘serious’ financing worked. But, to their consternation, P2P lending has only become steadily more mainstream.
In fact, the recent death rattle of the big banks and ensuing credit crunch, has driven average non-far out people to look at P2P lending as a viable credit alternative and has even become a form of protest over the bailout-hoarding behavior of the banks who were supposed to continue lending at pre-crunch rates (no sir, can’t give up my company Concord).
Although some companies have come under scrutiny by the SEC for not registering (a technicality), other websites like Lending Club are still going strong. These websites run by different models, friends and family or Marketplace, which both put strong emphasis on the personal story of the buyer.
Recently, P2P lending has branched out into even more groovy niches. In 2007, the website GreenNote.com, setup an online P2P platform to link college students with their friends and family via Facebook so that those invested in the student’s future can contribute to his/her college education at a low interest rate.
P2P lending was also picked up in 2005 by the famous Nobel-prize winning micro-financing juggernaut Grameen Bank to create their website Kiva.org. Kiva links lenders in developed countries with borrowers in the developing world. Small loans (average $25) are contributed until the lender reaches his/her stated goal and transmitted via PayPal to a microfinance lending institution (MFI) in the borrower’s country. The MFI coordinates the distribution and repayment of the loan while the lender gets to see their money put to good use by deserving people thousands of miles away.
The rumblings of a little revolution can be heard with the increasing kineticism of P2P lending. It has limitless implications, one of which could be the undermining of the insidious corporatization of western culture, pulling one more Jenga piece out of the bottom of its precarious tower of greed and deceit, and making it, if not obsolete, at least aware that we the people can take back power.
What do you think are some other implications for P2P lending to affect social change?
This post was written by Leah Bush, a freelance writer, volunteer blogger for Make Social Change A Reality, and aspiring Guru whose past involvement includes the American Red Cross Hurricane Katrina Recovery Project and volunteerism in Honduras and the Dominican Republic. Questions regarding this post may be forwarded to ultraEchelon@gmail.com.