Peer-to-Peer Lending

  • P2P lending is a form of crowd-funding used to raise loans which are paid back with interest.
  • It enables individuals to borrow and lend money – without use of an official financial institution as an intermediary.
  • It can use an online platform that matches lenders with borrowers in order to provide unsecured loans.
  • P2P lending gives access to credit to borrowers who are unable to get it through traditional financial institution.
  • It boosts returns for individuals who supply capital and reduces interest rates for those who use it.
Why needed?
  • P2P lending is one of the crowd-funding business model that has gathered momentum globally and is taking root in India.
  • It promotes alternative forms of finance, where formal finance is unable to reach.
  • It has potential to soften lending rates as result of lower operational costs and enhanced competition with traditional lending channels.
  • If properly regulated, P2P lending platforms can do this more effectively.
  • Though it is in nascent stage but it is not significant in value yet, but it promises potential benefits to various stakeholders (borrowers, lenders, agencies etc).

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