INDIRECT PERSON TO PERSON (P2P) PLATFORMS

Tim Hassett

VP Kiva

• Crowd Funding has Arrived

• Crowd Funding Microfinance

• Indirect P2P Market

• Global Impact of Indirect P2P Market

• Advantages & Disadvantages with Platforms

• Future of Indirect P2P Market

• Questions to Consider

Overview

Raising large amounts of social capital through small sums from many people

• Network for Good has raised over $500M

• Direct P2P has raised over $500M • Zopa

• Prosper

• Lending Club

• Indirect P2P has raised over $250M

Crowd Funding has Arrived

“Person to Person Lending, Is Financial Democracy a Click Away?” USAID Sept 2008

• Direct – Borrower posts loans directly to platform

• Indirect – Borrower is posted by a Field Partner

• Microplace – Notes from Issuers Sold

Crowd Funding Microfinance

Connected Capital

Photo Credit: Connecting Dotz

Indirect P2P Market

Platform Loans Funded ($000)

Q1/2011

Kiva $210,000

MyC4 18,000

Babyloan 2,300

RangDe 1,000

MyELEN 900

TOTAL $232,200

Financial Returns for Lenders

– 20 provide no return to lenders

– MyC4 is largest platform offering returns

Regional Focus

– 11 are global (Kiva) & 13 regional (Wokai)

Specialized Loan Products

– 6 specialize in certain loan products

• Vittana for Student Loans

• Energy in Common for Green Energy Loans

Different Models From Survey of 24 Institutions

Different Models From Survey of 24 Platforms

Borrower Risk

Pa

rtn

er

Ris

k

Yes

Yes No Deki

Energy in Common

Good Return

Kiva

MyC4

Vittana

Babyloan

MicroWorld

United Prosperity

Xetic

No

Lend for Peace

Zafen

Rang De (proportions of defaults covered by a

Contingency Fund)

Provide early capital to help Field Partners scale

– Tier 2-4 MFIs

– Risk Transfer allows for product innovation that may not be possible with commercial capital

Stimulate product innovation

– Risk Tolerant and Low Cost Capital

– Vittana and Energy In Common

Education Vehicle for Lenders

– Connection Caring Engagement

Global Impact of Platforms

Advantages & Disadvantages

Advantages

• Attractive Source of Funding – Low cost

– Risk Transfer

• Public Relations and ability to share best practices

• Ability to innovate when borrower risk is transferred to lenders

Disadvantages

• Foreign Currency Loans – 9 of 24 Platforms lend in

foreign currency

• Higher Operating Costs

• Challenges to Borrower Privacy

• Liquidity Concerns – Many Platforms require

monthly repayments

Larger SME Loans

– Able to finance the “missing middle”

Insurance Products

– Risk Transfer already entails credit insurance

– Crop or Business Interruption Insurance could be appealing to lenders

Individual Development Accounts

– Lenders could match savings after pre-determined criteria were achieved

Future Evolution of Sector

• How large will this market sector grow in the future?

• Does differentiation among platforms add benefit for MFIs or does it create confusion?

• Should there be an accreditation of Indirect P2P Platforms?

– Protecting Lenders

– Providing information to Field Partners

Questions