tim hassett, obtaining funds from new financial instruments and mechanisms for commercial and...
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INDIRECT PERSON TO PERSON (P2P) PLATFORMS
Tim Hassett
VP Kiva
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• 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
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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
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“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
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Connected Capital
Photo Credit: Connecting Dotz
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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
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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
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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)
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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
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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
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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
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• 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